The Black Swan

by Nassim Nicholas Taleb

  The philosopher Edna Ullmann-Margalit detected an inconsistency in this book and asked me to justify the use of the precise metaphor of a Black Swan to describe the unknown, the abstract, and imprecise uncertain—white ravens, pink elephants, or evaporating denizens of a remote planet orbiting Tau Ceti. Indeed, she caught me red handed. There is a contradiction; this book is a story, and I prefer to use stories and vignettes to illustrate our gullibility about stories and our preference for the dangerous compression of narratives.*

  You need a story to displace a story. Metaphors and stories are far more potent (alas) than ideas; they are also easier to remember and more fun to read. If I have to go after what I call the narrative disciplines, my best tool is a narrative.

  Ideas come and go, stories stay.

  THE BOTTOM LINE

  The beast in this book is not just the bell curve and the self-deceiving statistician, nor the Platonified scholar who needs theories to fool himself with. It is the drive to “focus” on what makes sense to us. Living on our planet, today, requires a lot more imagination than we are made to have. We lack imagination and repress it in others.

  Note that I am not relying in this book on the beastly method of collecting selective “corroborating evidence.” For reasons I explain in Chapter 5, I call this overload of examples naïve empiricism—successions of anecdotes selected to fit a story do not constitute evidence. Anyone looking for confirmation will find enough of it to deceive himself—and no doubt his peers.* The Black Swan idea is based on the structure of randomness in empirical reality.

  To summarize: in this (personal) essay, I stick my neck out and make a claim, against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug. I also make the bolder (and more annoying) claim that in spite of our progress and the growth in knowledge, or perhaps because of such progress and growth, the future will be increasingly less predictable, while both human nature and social “science” seem to conspire to hide the idea from us.

  Chapters Map

  The sequence of this book follows a simple logic; it flows from what can be labeled purely literary (in subject and treatment) to what can be deemed entirely scientific (in subject, though not in treatment). Psychology will be mostly present in Part One and in the early part of Part Two; business and natural science will be dealt with mostly in the second half of Part Two and in Part Three. Part One, “Umberto Eco’s Antilibrary,” is mostly about how we perceive historical and current events and what distortions are present in such perception. Part Two, “We Just Can’t Predict,” is about our errors in dealing with the future and the unadvertised limitations of some “sciences”—and what to do about these limitations. Part Three, “Those Gray Swans of Extremistan,” goes deeper into the topic of extreme events, explains how the bell curve (that great intellectual fraud) is generated, and reviews the ideas in the natural and social sciences loosely lumped under the label “complexity.” Part Four, “The End,” will be very short.

  I derived an unexpected amount of enjoyment writing this book—in fact, it just wrote itself—and I hope that the reader will experience the same. I confess that I got hooked on this withdrawal into pure ideas after the constraints of an active and transactional life. After this book is published, my aim is to spend time away from the clutter of public activities in order to think about my philosophical-scientific idea in total tranquillity.

  * The spread of camera cell phones has afforded me a large collection of pictures of black swans sent by traveling readers. Last Christmas I also got a case of Black Swan Wine (not my favorite), a videotape (I don’t watch videos), and two books. I prefer the pictures.

  † I used the logical metaphor of the black swan (not capitalized) for Black Swan Events (capitalized), but this problem should not be confused with the logical problem raised by many philosophers. This is not so much about exceptions as it is about the oversize role of extreme events in many domains in life. Furthermore, the logical problem is about the possibility of the exception (black swan); mine is about the role of the exceptional event (Black Swan) leading to the degradation of predictability and the need to be robust to negative Black Swans and exposed to positive ones.

  * The highly expected not happening is also a Black Swan. Note that, by symmetry, the occurrence of a highly improbable event is the equivalent of the nonoccurrence of a highly probable one.

  * The Black Swan is the result of collective and individual epistemic limitations (or distortions), mostly confidence in knowledge; it is not an objective phenomenon. The most severe mistake made in the interpretation of my Black Swan is to try to define an “objective Black Swan” that would be invariant in the eyes of all observers. The events of September 11, 2001, were a Black Swan for the victims, but certainly not to the perpetrators. The Postscript provides an additional discussion of the point.

  * The Idea of Robustness: Why do we formulate theories leading to projections and forecasts without focusing on the robustness of these theories and the consequences of the errors? It is much easier to deal with the Black Swan problem if we focus on robustness to errors rather than improving predictions.

  * Recursive here means that the world in which we live has an increasing number of feedback loops, causing events to be the cause of more events (say, people buy a book because other people bought it), thus generating snowballs and arbitrary and unpredictable planet-wide winner-take-all effects. We live in an environment where information flows too rapidly, accelerating such epidemics. Likewise, events can happen because they are not supposed to happen. (Our intuitions are made for an environment with simpler causes and effects and slowly moving information.) This type of randomness did not prevail during the Pleistocene, as socioeconomic life was far simpler then.

  * The metaphor of the black swan is not at all a modern one—contrary to its usual attribution to Popper, Mill, Hume, and others. I selected it because it corresponds to the ancient idea of a “rare bird.” The Latin poet Juvenal refers to a “bird as rare as the black swan”—rara avis in terris nigroque simillima cygno.

  * It is also naïve empiricism to provide, in support of some argument, series of eloquent confirmatory quotes by dead authorities. By searching, you can always find someone who made a well-sounding statement that confirms your point of view—and, on every topic, it is possible to find another dead thinker who said the exact opposite. Almost all of my non–Yogi Berra quotes are from people I disagree with.

  The writer Umberto Eco belongs to that small class of scholars who are encyclopedic, insightful, and nondull. He is the owner of a large personal library (containing thirty thousand books), and separates visitors into two categories: those who react with “Wow! Signore professore dottore Eco, what a library you have! How many of these books have you read?” and the others—a very small minority—who get the point that a private library is not an ego-boosting appendage but a research tool. Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the currently tight real-estate market allow you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menacingly. Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.

  We tend to treat our knowledge as personal property to be protected and defended. It is an ornament that allows us to rise in the pecking order. So this tendency to offend Eco’s library sensibility by focusing on the known is a human bias that extends to our mental operations. People don’t walk around with anti-résumés telling you what they have not studied or experienced (it’s the job of their c
ompetitors to do that), but it would be nice if they did. Just as we need to stand library logic on its head, we will work on standing knowledge itself on its head. Note that the Black Swan comes from our misunderstanding of the likelihood of surprises, those unread books, because we take what we know a little too seriously.

  Let us call an antischolar—someone who focuses on the unread books, and makes an attempt not to treat his knowledge as a treasure, or even a possession, or even a self-esteem enhancement device—a skeptical empiricist.

  The chapters in this section address the question of how we humans deal with knowledge—and our preference for the anecdotal over the empirical. Chapter 1 presents the Black Swan as grounded in the story of my own obsession. I will make a central distinction between the two varieties of randomness in Chapter 3. After that, Chapter 4 briefly returns to the Black Swan problem in its original form: how we tend to generalize from what we see. Then I present the three facets of the same Black Swan problem: a) The error of confirmation, or how we are likely to undeservedly scorn the virgin part of the library (the tendency to look at what confirms our knowledge, not our ignorance), in Chapter 5; b) the narrative fallacy, or how we fool ourselves with stories and anecdotes (Chapter 6); c) how emotions get in the way of our inference (Chapter 7); and d) the problem of silent evidence, or the tricks history uses to hide Black Swans from us (Chapter 8). Chapter 9 discusses the lethal fallacy of building knowledge from the world of games.

  Chapter One

  THE APPRENTICESHIP OF AN EMPIRICAL SKEPTIC

  Anatomy of a Black Swan—The triplet of opacity—Reading books backward—The rearview mirror—Everything becomes explainable—Always talk to the driver (with caution)—History doesn’t crawl; it jumps—“It was so unexpected”—Sleeping for twelve hours

  This is not an autobiography, so I will skip the scenes of war. Actually, even if it were an autobiography, I would still skip the scenes of war. I cannot compete with action movies or memoirs of adventurers more accomplished than myself, so I will stick to my specialties of chance and uncertainty.

  ANATOMY OF A BLACK SWAN

  For more than a millennium the eastern Mediterranean seaboard called Syria Libanensis, or Mount Lebanon, had been able to accommodate at least a dozen different sects, ethnicities, and beliefs—it worked like magic. The place resembled major cities of the eastern Mediterranean (called the Levant) more than it did the other parts in the interior of the Near East (it was easier to move by ship than by land through the mountainous terrain). The Levantine cities were mercantile in nature; people dealt with one another according to a clear protocol, preserving a peace conducive to commerce, and they socialized quite a bit across communities. This millennium of peace was interrupted only by small occasional friction within Moslem and Christian communities, rarely between Christians and Moslems. While the cities were mercantile and mostly Hellenistic, the mountains had been settled by all manner of religious minorities who claimed to have fled both the Byzantine and Moslem orthodoxies. A mountainous terrain is an ideal refuge from the mainstream, except that your enemy is the other refugee competing for the same type of rugged real estate. The mosaic of cultures and religions there was deemed an example of coexistence: Christians of all varieties (Maronites, Armenians, Greco-Syrian Byzantine Orthodox, even Byzantine Catholic, in addition to the few Roman Catholics left over from the Crusades); Moslems (Shiite and Sunni); Druzes; and a few Jews. It was taken for granted that people learned to be tolerant there; I recall how we were taught in school how far more civilized and wiser we were than those in the Balkan communities, where not only did the locals refrain from bathing but also fell prey to fractious fighting. Things appeared to be in a state of stable equilibrium, evolving out of a historical tendency for betterment and tolerance. The terms balance and equilibrium were often used.

  Both sides of my family came from the Greco-Syrian community, the last Byzantine outpost in northern Syria, which included what is now called Lebanon. Note that the Byzantines called themselves “Romans”—Roumi (plural Roum) in the local languages. We originate from the olive-growing area at the base of Mount Lebanon—we chased the Maronite Christians into the mountains in the famous battle of Amioun, my ancestral village. Since the Arab invasion in the seventh century, we had been living in mercantile peace with the Moslems, with only some occasional harassment by the Lebanese Maronite Christians from the mountains. By some (literally) Byzantine arrangement between the Arab rulers and the Byzantine emperors, we managed to pay taxes to both sides and get protection from both. We thus managed to live in peace for more than a millennium almost devoid of bloodshed: our last true problem was the later troublemaking crusaders, not the Moslem Arabs. The Arabs, who seemed interested only in warfare (and poetry) and, later, the Ottoman Turks, who seemed only concerned with warfare (and pleasure), left to us the uninteresting pursuit of commerce and the less dangerous one of scholarship (like the translation of Aramaic and Greek texts).

  By any standard the country called Lebanon, to which we found ourselves suddenly incorporated after the fall of the Ottoman Empire, in the early twentieth century, appeared to be a stable paradise; it was also cut in a way to be predominantly Christian. People were suddenly brainwashed to believe in the nation-state as an entity.* The Christians convinced themselves that they were at the origin and center of what is loosely called Western culture yet with a window on the East. In a classical case of static thinking, nobody took into account the differentials in birthrate between communities and it was assumed that a slight Christian majority would remain permanent. Levantines had been granted Roman citizenship, which allowed Saint Paul, a Syrian, to travel freely through the ancient world. People felt connected to everything they felt was worth connecting to; the place was exceedingly open to the world, with a vastly sophisticated lifestyle, a prosperous economy, and temperate weather just like California, with snow-covered mountains jutting above the Mediterranean. It attracted a collection of spies (both Soviet and Western), prostitutes (blondes), writers, poets, drug dealers, adventurers, compulsive gamblers, tennis players, après-skiers, and merchants—all professions that complement one another. Many people acted as if they were in an old James Bond movie, or the days when playboys smoked, drank, and, instead of going to the gym, cultivated relationships with good tailors.

  The main attribute of paradise was there: cabdrivers were said to be polite (though, from what I remember, they were not polite to me). True, with hindsight, the place may appear more Elysian in the memory of people than it actually was.

  I was too young to taste the pleasures of the place, as I became a rebellious idealist and, very early on, developed an ascetic taste, averse to the ostentatious signaling of wealth, allergic to Levantine culture’s overt pursuit of luxury and its obsession with things monetary.

  As a teenager, I could not wait to go settle in a metropolis with fewer James Bond types around. Yet I recall something that felt special in the intellectual air. I attended the French lycée that had one of the highest success rates for the French baccalauréat (the high school degree), even in the subject of the French language. French was spoken there with some purity: as in prerevolutionary Russia, the Levantine Christian and Jewish patrician class (from Istanbul to Alexandria) spoke and wrote formal French as a language of distinction. The most privileged were sent to school in France, as both my grandfathers were—my paternal namesake in 1912 and my mother’s father in 1929. Two thousand years earlier, by the same instinct of linguistic distinction, the snobbish Levantine patricians wrote in Greek, not the vernacular Aramaic. (The New Testament was written in the bad local patrician Greek of our capital, Antioch, prompting Nietzsche to shout that “God spoke bad Greek.”) And, after Hellenism declined, they took up Arabic. So in addition to being called a “paradise,” the place was also said to be a miraculous crossroads of what are superficially tagged “Eastern” and “Western” cultures.

  On Walking Walks

  My ethos was shaped when, at fifteen, I w
as put in jail for (allegedly) attacking a policeman with a slab of concrete during a student riot—an incident with strange ramifications since my grandfather was then the minister of the interior, and the person who signed the order to crush our revolt. One of the rioters was shot dead when a policeman who had been hit on the head with a stone panicked and randomly opened fire on us. I recall being at the center of the riot, and feeling a huge satisfaction upon my capture while my friends were scared of both prison and their parents. We frightened the government so much that we were granted amnesty.

  There were some obvious benefits in showing one’s ability to act on one’s opinions, and not compromising an inch to avoid “offending” or bothering others. I was in a state of rage and didn’t care what my parents (and grandfather) thought of me. This made them quite scared of me, so I could not afford to back down, or even blink. Had I concealed my participation in the riot (as many friends did) and been discovered, instead of being openly defiant, I am certain that I would have been treated as a black sheep. It is one thing to be cosmetically defiant of authority by wearing unconventional clothes—what social scientists and economists call “cheap signaling”—and another to prove willingness to translate belief into action.