The Black Swan

by Nassim Nicholas Taleb

  Many people labor in life under the impression that they are doing something right, yet they may not show solid results for a long time. They need a capacity for continuously adjourned gratification to survive a steady diet of peer cruelty without becoming demoralized. They look like idiots to their cousins, they look like idiots to their peers, they need courage to continue. No confirmation comes to them, no validation, no fawning students, no Nobel, no Shnobel. “How was your year?” brings them a small but containable spasm of pain deep inside, since almost all of their years will seem wasted to someone looking at their life from the outside. Then bang, the lumpy event comes that brings the grand vindication. Or it may never come.

  Believe me, it is tough to deal with the social consequences of the appearance of continuous failure. We are social animals; hell is other people.

  Where the Relevant Is the Sensational

  Our intuitions are not cut out for nonlinearities. Consider our life in a primitive environment where process and result are closely connected. You are thirsty; drinking brings you adequate satisfaction. Or even in a not-so-primitive environment, when you engage in building, say, a bridge or a stone house, more work will lead to more apparent results, so your mood is propped up by visible continuous feedback.

  In a primitive environment, the relevant is the sensational. This applies to our knowledge. When we try to collect information about the world around us, we tend to be guided by our biology, and our attention flows effortlessly toward the sensational—not the relevant so much as the sensational. Somehow the guidance system has gone wrong in the process of our coevolution with our habitat—it was transplanted into a world in which the relevant is often boring, nonsensational.

  Furthermore, we think that if, say, two variables are causally linked, then a steady input in one variable should always yield a result in the other one. Our emotional apparatus is designed for linear causality. For instance, if you study every day, you expect to learn something in proportion to your studies. If you feel that you are not going anywhere, your emotions will cause you to become demoralized. But modern reality rarely gives us the privilege of a satisfying, linear, positive progression: you may think about a problem for a year and learn nothing; then, unless you are disheartened by the emptiness of the results and give up, something will come to you in a flash.

  Researchers spent some time dealing with this notion of gratification; neurology has been enlightening us about the tension between the notions of immediate rewards and delayed ones. Would you like a massage today, or two next week? Well, the news is that the logical part of our mind, that “higher” one, which distinguishes us from animals, can override our animal instinct, which asks for immediate rewards. So we are a little better than animals, after all—but perhaps not by much. And not all of the time.

  Nonlinearities

  The situation can get a little more tragic—the world is more nonlinear than we think, and than scientists would like to think.

  With linearities, relationships between variables are clear, crisp, and constant, therefore Platonically easy to grasp in a single sentence, such as “A 10 percent increase in money in the bank corresponds to a 10 percent increase in interest income and a 5 percent increase in obsequiousness on the part of the personal banker.” If you have more money in the bank, you get more interest. Nonlinear relationships can vary; perhaps the best way to describe them is to say that they cannot be expressed verbally in a way that does justice to them. Take the relationship between pleasure and drinking water. If you are in a state of painful thirst, then a bottle of water increases your well-being significantly. More water means more pleasure. But what if I gave you a cistern of water? Clearly your well-being becomes rapidly insensitive to further quantities. As a matter of fact, if I gave you the choice between a bottle or a cistern you would prefer the bottle—so your enjoyment declines with additional quantities.

  These nonlinear relationships are ubiquitous in life. Linear relationships are truly the exception; we only focus on them in classrooms and textbooks because they are easier to understand. Yesterday afternoon I tried to take a fresh look around me to catalog what I could see during my day that was linear. I could not find anything, no more than someone hunting for squares or triangles could find them in the rain forest—or, as we will see in Part Three, any more than someone looking for bell-shape randomness finding it in socioeconomic phenomena.

  You play tennis every day with no improvement, then suddenly you start beating the pro.

  Your child does not seem to have a learning impediment, but he does not seem to want to speak. The schoolmaster pressures you to start considering “other options,” namely therapy. You argue with her to no avail (she is supposed to be the “expert”). Then, suddenly, the child starts composing elaborate sentences, perhaps a bit too elaborate for his age group. I will repeat that linear progression, a Platonic idea, is not the norm.

  Process over Results

  We favor the sensational and the extremely visible. This affects the way we judge heroes. There is little room in our consciousness for heroes who do not deliver visible results—or those heroes who focus on process rather than results.

  However, those who claim that they value process over result are not telling the whole truth, assuming of course that they are members of the human species. We often hear the semi-lie that writers do not write for glory, that artists create for the sake of art, because the activity is “its own reward.” True, these activities can generate a steady flow of autosatisfaction. But this does not mean that artists do not crave some form of attention, or that they would not be better off if they got some publicity; it does not mean that writers do not wake up early Saturday morning to check if The New York Times Book Review has featured their work, even if it is a very long shot, or that they do not keep checking their mailbox for that long-awaited reply from The New Yorker. Even a philosopher the caliber of Hume spent a few weeks sick in bed after the trashing of his masterpiece (what later became known as his version of the Black Swan problem) by some dim-thinking reviewer—whom he knew to be wrong and to have missed his whole point.

  Where it gets painful is when you see one of your peers, whom you despise, heading to Stockholm for his Nobel reception.

  Most people engaged in the pursuits that I call “concentrated” spend most of their time waiting for the big day that (usually) never comes.

  True, this takes your mind away from the pettiness of life—the cappuccino that is too warm or too cold, the waiter too slow or too intrusive, the food too spicy or not enough, the overpriced hotel room that does not quite resemble the advertised picture—all these considerations disappear because you have your mind on much bigger and better things. But this does not mean that the person insulated from materialistic pursuits becomes impervious to other pains, those issuing from disrespect. Often these Black Swan hunters feel shame, or are made to feel shame, at not contributing. “You betrayed those who had high hopes for you,” they are told, increasing their feeling of guilt. The problem of lumpy payoffs is not so much in the lack of income they entail, but the pecking order, the loss of dignity, the subtle humiliations near the watercooler.

  It is my great hope someday to see science and decision makers rediscover what the ancients have always known, namely that our highest currency is respect.

  Even economically, the individual Black Swan hunters are not the ones who make the bucks. The researcher Thomas Astebro has shown that returns on independent inventions (you take the cemetery into account) are far lower than those on venture capital. Some blindness to the odds or an obsession with their own positive Black Swan is necessary for entrepreneurs to function. The venture capitalist is the one who gets the shekels. The economist William Baumol calls this “a touch of madness.” This may indeed apply to all concentrated businesses: when you look at the empirical record, you not only see that venture capitalists do better than entrepreneurs, but publishers do better than writers, dealers do better than artists, and s
cience does better than scientists (about 50 percent of scientific and scholarly papers, costing months, sometimes years, of effort, are never truly read). The person involved in such gambles is paid in a currency other than material success: hope.

  Human Nature, Happiness, and Lumpy Rewards

  Let me distill the main idea behind what researchers call hedonic happiness.

  Making $1 million in one year, but nothing in the preceding nine, does not bring the same pleasure as having the total evenly distributed over the same period, that is, $100,000 every year for ten years in a row. The same applies to the inverse order—making a bundle the first year, then nothing for the remaining period. Somehow, your pleasure system will be saturated rather quickly, and it will not carry forward the hedonic balance like a sum on a tax return. As a matter of fact, your happiness depends far more on the number of instances of positive feelings, what psychologists call “positive affect,” than on their intensity when they hit. In other words, good news is good news first; how good matters rather little. So to have a pleasant life you should spread these small “affects” across time as evenly as possible. Plenty of mildly good news is preferable to one single lump of great news.

  Sadly, it may be even worse for you to make $10 million, then lose back nine, than to making nothing at all! True, you may end up with a million (as compared to nothing), but it may be better had you got zilch. (This assumes, of course, that you care about financial rewards.)

  So from a narrowly defined accounting point of view, which I may call here “hedonic calculus,” it does not pay to shoot for one large win. Mother Nature destined us to derive enjoyment from a steady flow of pleasant small, but frequent, rewards. As I said, the rewards do not have to be large, just frequent—a little bit here, a little bit there. Consider that our major satisfaction for thousands of years came in the form of food and water (and something else more private), and that while we need these steadily, we quickly reach saturation.

  The problem, of course, is that we do not live in an environment where results are delivered in a steady manner—Black Swans dominate much of human history. It is unfortunate that the right strategy for our current environment may not offer internal rewards and positive feedback.

  The same property in reverse applies to our unhappiness. It is better to lump all your pain into a brief period rather than have it spread out over a longer one.

  But some people find it possible to transcend the asymmetry of pains and joys, escape the hedonic deficit, set themselves outside that game—and live with hope. There is some good news, as we see next.

  The Antechamber of Hope

  For Yevgenia Krasnova, a person could love one book, at most a few—beyond this was a form of promiscuity. Those who talk about books as commodities are inauthentic, just as those who collect acquaintances can be superficial in their friendships. A novel you like resembles a friend. You read it and reread it, getting to know it better. Like a friend, you accept it the way it is; you do not judge it. Montaigne was asked “why” he and the writer Etienne de la Boétie were friends—the kind of question people ask you at a cocktail party as if you knew the answer, or as if there were an answer to know. It was typical of Montaigne to reply, “Parce que c’était lui, parce que c’était moi” (because it was him and because it was me). Likewise, Yevgenia claims that she likes that one book “because it is it and because I am me.” Yevgenia once even walked out on a schoolteacher because he analyzed that book and thus violated her rule. One does not sit idle listening as people wax analytical about your friends. A very stubborn schoolchild she was.

  This book she has as a friend is Il deserto dei tartari, by Dino Buzzati, a novel that was well known in Italy and France during her childhood, but that, strangely, nobody she knows in America had heard of. Its English title is mistranslated as The Tartar Steppe instead of The Desert of the Tartars.

  Yevgenia encountered Il deserto when she was thirteen, in her parents’ weekend country house in a small village two hundred kilometers outside Paris, where their Russian and French books multiplied without the constraints of the overfed Parisian apartment. She was so bored in the country that she could not even read. Then, one afternoon, she opened the book and was sucked into it.

  Inebriated by Hope

  Giovanni Drogo is a man of promise. He has just graduated from the military academy with the rank of junior officer, and active life is just starting. But things do not turn out as planned: his initial four-year assignment is a remote outpost, the Bastiani fortress, protecting the nation from the Tartars likely to invade from the border desert—not too desirable a position. The fortress is located a few days by horseback from the town; there is nothing but bareness around it—none of the social buzz that a man of his age could look forward to. Drogo thinks that his assignment in the outpost is temporary, a way for him to pay his dues before more appealing positions present themselves. Later, back in town, in his impeccably ironed uniform and with his athletic figure, few ladies will be able to resist him.

  What is Drogo to do in this hole? He discovers a loophole, a way to be transferred after only four months. He decides to use the loophole.

  At the very last minute, however, Drogo takes a glance at the desert from the window of the medical office and decides to extend his stay. Something in the walls of the fort and the silent landscape ensnares him. The appeal of the fort and waiting for the attackers, the big battle with the ferocious Tartars, gradually become his only reason to exist. The entire atmosphere of the fort is one of anticipation. The other men spend their time looking at the horizon and awaiting the big event of the enemy attack. They are so focused that, on rare occasions, they can detect the most insignificant stray animal that appears at the edge of the desert and mistake it for an enemy attack.

  Sure enough, Drogo spends the rest of his life extending his stay, delaying the beginning of his life in the city—thirty-five years of pure hope, spent in the grip of the idea that one day, from the remote hills that no human has ever crossed, the attackers will eventually emerge and help him rise to the occasion.

  At the end of the novel we see Drogo dying in a roadside inn as the event for which he has waited all his life takes place. He has missed it.

  The Sweet Trap of Anticipation

  Yevgenia read Il deserto numerous times; she even learned Italian (and perhaps married an Italian) so she could read it in the original. Yet she never had the heart to reread the painful ending.

  I presented the Black Swan as the outlier, the important event that is not expected to happen. But consider the opposite: the unexpected event that you very badly want to happen. Drogo is obsessed and blinded by the possibility of an unlikely event; that rare occurrence is his raison d’être. At thirteen, when she encountered the book, little did Yevgenia know that she would spend an entire life playing Giovanni Drogo in the antechamber of hope, waiting for the big event, sacrificing for it, and refusing intermediate steps, the consolation prizes.

  She did not mind the sweet trap of anticipation: to her it was a life worth living; it was worth living in the cathartic simplicity of a single purpose. Indeed, “be careful what you wish for”: she may have been happier before the Black Swan of her success than after.

  One of the attributes of a Black Swan is an asymmetry in consequences—either positive or negative. For Drogo the consequences were thirty-five years spent waiting in the antechamber of hope for just a few randomly distributed hours of glory—which he ended up missing.

  When You Need the Bastiani Fortress

  Note that there was no brother-in-law around in Drogo’s social network. He was lucky to have companions in his mission. He was a member of a community at the gate of the desert intently looking together at the horizon. Drogo had the advantage of an association with peers and the avoidance of social contact with others outside the community. We are local animals, interested in our immediate neighborhood—even if people far away consider us total idiots. Those homo sapiens are abstract and remote
and we do not care about them because we do not run into them in elevators or make eye contact with them. Our shallowness can sometimes work for us.

  It may be a banality that we need others for many things, but we need them far more than we realize, particularly for dignity and respect. Indeed, we have very few historical records of people who have achieved anything extraordinary without such peer validation—but we have the freedom to choose our peers. If we look at the history of ideas, we see schools of thought occasionally forming, producing unusual work unpopular outside the school. You hear about the Stoics, the Academic Skeptics, the Cynics, the Pyrrhonian Skeptics, the Essenes, the Surrealists, the Dadaists, the anarchists, the hippies, the fundamentalists. A school allows someone with unusual ideas with the remote possibility of a payoff to find company and create a microcosm insulated from others. The members of the group can be ostracized together—which is better than being ostracized alone.

  If you engage in a Black Swan–dependent activity, it is better to be part of a group.

  EL DESIERTO DE LOS TÁRTAROS

  Yevgenia met Nero Tulip in the lobby of the Hotel Danieli in Venice. He was a trader who lived between London and New York. At the time, traders from London went to Venice on Friday noon during the low season, just to talk to other traders (from London).

  As Yevgenia and Nero stood engaged in an effortless conversation, she noticed that her husband was looking uncomfortably at them from the bar where he sat, trying to stay focused on the pontifications of one of his childhood friends. Yevgenia realized that she was going to see a bit more of Nero.