The Black Swan

by Nassim Nicholas Taleb

  My point, I will repeat, is not that Balzac is untalented, but that he is less uniquely talented than we think. Just consider the thousands of writers now completely vanished from consciousness: their record does not enter into analyses. We do not see the tons of rejected manuscripts because these writers have never been published. The New Yorker alone rejects close to a hundred manuscripts a day, so imagine the number of geniuses that we will never hear about. In a country like France, where more people write books while, sadly, fewer people read them, respectable literary publishers accept one in ten thousand manuscripts they receive from firsttime authors. Consider the number of actors who have never passed an audition but would have done very well had they had that lucky break in life.

  The next time you visit a Frenchman of comfortable means, you will likely spot the stern books from the collection Bibliothèque de la Pléiade, which their owner will never, almost never, read, mostly on account of their uncomfortable size and weight. Membership in the Pléiade means membership in the literary canon. The tomes are expensive; they have the distinctive smell of ultrathin India paper, compressing the equivalent of fifteen hundred pages into the size of a drugstore paperback. They are supposed to help you maximize the number of masterpieces per Parisian square foot. The publisher Gallimard has been extremely selective in electing writers into the Pléiade collection–only a few authors, such as the aesthete and adventurer André Malraux, have made it in while still alive. Dickens, Dostoyevsky, Hugo, and Stendhal are in, along with Mallarmé, Sartre, Camus, and … Balzac. Yet if you follow Balzac’s own ideas, which I will examine next, you would accept that there is no ultimate justification for such an official corpus.

  Balzac outlined the entire business of silent evidence in his novel Lost Illusions. Lucien de Rubempré (alias of Lucien Chardon), the penurious provincial genius, “goes up” to Paris to start a literary career. We are told that he is talented—actually he is told that he is talented by the semiaristocratic set in Angoulême. But it is difficult to figure out whether this is due to his good looks or to the literary quality of his works—or even whether literary quality is visible, or, as Balzac seems to wonder, if it has much to do with anything. Success is presented cynically, as the product of wile and promotion or the lucky surge of interest for reasons completely external to the works themselves. Lucien discovers the existence of the immense cemetery inhabited by what Balzac calls “nightingales.”

  Lucien was told that this designation “nightingale” was given by bookstores to those works residing on the shelves in the solitary depths of their shops.

  Balzac presents to us the sorry state of contemporary literature when Lucien’s manuscript is rejected by a publisher who has never read it; later on, when Lucien’s reputation has developed, the very same manuscript is accepted by another publisher who did not read it either! The work itself was a secondary consideration.

  In another example of silent evidence, the book’s characters keep bemoaning that things are no longer as they were before, implying that literary fairness prevailed in more ancient times—as if there was no cemetery before. They fail to take into account the nightingales among the ancients’ work! Notice that close to two centuries ago people had an idealized opinion of their own past, just as we have an idealized opinion of today’s past.

  I mentioned earlier that to understand successes and analyze what caused them, we need to study the traits present in failures. It is to a more general version of this point that I turn next.

  How to Become a Millionaire in Ten Steps

  Numerous studies of millionaires aimed at figuring out the skills required for hotshotness follow the following methodology. They take a population of hotshots, those with big titles and big jobs, and study their attributes. They look at what those big guns have in common: courage, risk taking, optimism, and so on, and infer that these traits, most notably risk taking, help you to become successful. You would also probably get the same impression if you read CEOs’ ghostwritten autobiographies or attended their presentations to fawning MBA students.

  Now take a look at the cemetery. It is quite difficult to do so because people who fail do not seem to write memoirs, and, if they did, those business publishers I know would not even consider giving them the courtesy of a returned phone call (as to returned e-mail, fuhgedit). Readers would not pay $26.95 for a story of failure, even if you convinced them that it had more useful tricks than a story of success.* The entire notion of biography is grounded in the arbitrary ascription of a causal relation between specified traits and subsequent events. Now consider the cemetery. The graveyard of failed persons will be full of people who shared the following traits: courage, risk taking, optimism, et cetera. Just like the population of millionaires. There may be some differences in skills, but what truly separates the two is for the most part a single factor: luck. Plain luck.

  You do not need a lot of empiricism to figure this out: a simple thought experiment suffices. The fund-management industry claims that some people are extremely skilled, since year after year they have outperformed the market. They will identify these “geniuses” and convince you of their abilities. My approach has been to manufacture cohorts of purely random investors and, by simple computer simulation, show how it would be impossible to not have these geniuses produced just by luck. Every year you fire the losers, leaving only the winners, and thus end up with long-term steady winners. Since you do not observe the cemetery of failed investors, you will think that it is a good business, and that some operators are considerably better than others. Of course an explanation will be readily provided for the success of the lucky survivors: “He eats tofu,” “She works late; just the other day I called her office at eight P.M. …” Or of course, “She is naturally lazy. People with that type of laziness can see things clearly.” By the mechanism of retrospective determinism we will find the “cause”—actually, we need to see the cause. I call these simulations of hypothetical cohorts, often done by computer, an engine of computational epistemology. Your thought experiments can be run on a computer. You just simulate an alternative world, plain random, and verify that it looks similar to the one in which we live. Not getting lucky billionaires in these experiments would be the exception.*

  Recall the distinction between Mediocristan and Extremistan in Chapter 3. I said that taking a “scalable” profession is not a good idea, simply because there are far too few winners in these professions. Well, these professions produce a large cemetery: the pool of starving actors is larger than the one of starving accountants, even if you assume that, on average, they earn the same income.

  A HEALTH CLUB FOR RATS

  The second, and more vicious, variety of the problem of silent evidence is as follows. When I was in my early twenties and still read the newspaper, and thought that steadily reading the newspapers was something useful to me, I came across an article discussing the mounting threat of the Russian Mafia in the United States and its displacement of the traditional Louie and Tony in some neighborhoods of Brooklyn. The article explained their toughness and brutality as a result of their being hardened by their Gulag experiences. The Gulag was a network of labor camps in Siberia where criminals and dissidents were routinely deported. Sending people to Siberia was one of the purification methods initially used by the czarist regimes and later continued and perfected by the Soviets. Many deportees did not survive these labor camps.

  Hardened by the Gulag? The sentence jumped out at me as both profoundly flawed (and a reasonable inference). It took me a while to figure out the nonsense in it since it was protected by cosmetic wrapping; the following thought experiment will give the intuition. Assume that you’re able to find a large, assorted population of rats: fat, thin, sickly, strong, well-proportioned, et cetera. (You can easily get them from the kitchens of fancy New York restaurants.) With these thousands of rats, you build a heterogeneous cohort, one that is well representative of the general New York rat population. You bring them to my laboratory on East Fifty-
ninth Street in New York City and we put the entire collection in a large vat. We subject the rats to increasingly higher levels of radiation (since this is supposed to be a thought experiment, I am told that there is no cruelty in the process). At every level of radiation, those that are naturally stronger (and this is the key) will survive; the dead will drop out of your sample. We will progressively have a stronger and stronger collection of rats. Note the following central fact: every single rat, including the strong ones, will be weaker after the radiation than before.

  An observer endowed with analytical abilities, who probably got excellent grades in college, would be led to believe that treatment in my laboratory is an excellent health-club replacement, and one that could be generalized to all mammals (think of the potential commercial success). His logic would run as follows: Hey, these rats are stronger than the rest of the rat population. What do they seem to have in common? They all came from that Black Swan guy Taleb’s workshop. Not many people will have the temptation to go look at the dead rats.

  Next we pull the following trick on The New York Times: we let these surviving rats loose in New York City and inform the chief rodent correspondent of the newsworthy disruption in the pecking order in the New York rat population. He will write a lengthy (and analytical) article on the social dynamics of New York rats that includes the following passage: “Those rats are now bullies in the rat population. They literally run the show. Strengthened by their experience in the laboratory of the reclusive (but friendly) statistician/philosopher/trader Dr. Taleb, they …”

  Vicious Bias

  There is a vicious attribute to the bias: it can hide best when its impact is largest. Owing to the invisibility of the dead rats, the more lethal the risks, the less visible they will be, since the severely victimized are likely to be eliminated from the evidence. The more injurious the treatment, the larger the difference between the surviving rats and the rest, and the more fooled you will be about the strengthening effect. One of the two following ingredients is necessary for this difference between the true effect (weakening) and the observed one (strengthening): a) a degree of inequality in strength, or diversity, in the base cohort, or b) unevenness, or diversity, somewhere in the treatment. Diversity here has to do with the degree of uncertainty inherent in the process.

  More Hidden Applications

  We can keep going with this argument; it has such universality that once we get the bug it is hard to look at reality with the same eyes again. Clearly it robs our observations of their realistic power. I will enumerate a few more cases to illustrate the weaknesses of our inferential machinery.

  The stability of species. Take the number of species that we now consider extinct. For a long time scientists took the number of such species as that implied from an analysis of the extant fossils. But this number ignores the silent cemetery of species that came and left without leaving traces in the form of fossils; the fossils that we have managed to find correspond to a smaller proportion of all species that came and disappeared. This implies that our biodiversity was far greater than it seemed at first examination. A more worrisome consequence is that the rate of extinction of species may be far greater than we think—close to 99.5 percent of species that transited through earth are now extinct, a number that scientists have kept raising through time. Life is a great deal more fragile than we have allowed for. But this does not mean we (humans) should feel guilty for extinctions around us; nor does it mean that we should act to stop them—species were coming and going before we started messing up the environment. There is no need to feel moral responsibility for every endangered species.

  Does crime pay? Newspapers report on the criminals who get caught. There is no section in The New York Times recording the stories of those who committed crimes but have not been caught. So it is with cases of tax evasion, government bribes, prostitution rings, poisoning of wealthy spouses (with substances that do not have a name and cannot be detected), and drug trafficking.

  In addition, our representation of the standard criminal might be based on the properties of those less intelligent ones who were caught.

  Once we seep ourselves into the notion of silent evidence, so many things around us that were previously hidden start manifesting themselves. Having spent a couple of decades in this mind-set, I am convinced (but cannot prove) that training and education can help us avoid its pitfalls.

  The Evolution of the Swimmer’s Body

  What do the popular expressions “a swimmer’s body” and “beginner’s luck” have in common? What do they seem to share with the concept of history?

  There is a belief among gamblers that beginners are almost always lucky. “It gets worse later, but gamblers are always lucky when they start out,” you hear. This statement is actually empirically true: researchers confirm that gamblers have lucky beginnings (the same applies to stock market speculators). Does this mean that each one of us should become a gambler for a while, take advantage of lady luck’s friendliness to beginners, then stop?

  The answer is no. The same optical illusion prevails: those who start gambling will be either lucky or unlucky (given that the casino has the advantage, a slightly greater number will be unlucky). The lucky ones, with the feeling of having been selected by destiny, will continue gambling; the others, discouraged, will stop and will not show up in the sample. They will probably take up, depending on their temperaments, bird-watching, Scrabble, piracy, or other pastimes. Those who continue gambling will remember having been lucky as beginners. The dropouts, by definition, will no longer be part of the surviving gamblers’ community. This explains beginner’s luck.

  There is an analogy with what is called in common parlance a “swimmer’s body,” which led to a mistake I shamefully made a few years ago (in spite of my specialty in this bias, I did not notice that I was being fooled). When asking around about the comparative physical elegance of athletes, I was often told that runners looked anorexic, cyclists bottom-heavy, and weight lifters insecure and a little primitive. I inferred that I should spend some time inhaling chlorine in the New York University pool to get those “elongated muscles.” Now suspend the causality. Assume that a person’s genetic variance allows for a certain type of body shape. Those born with a natural tendency to develop a swimmer’s body become better swimmers. These are the ones you see in your sample splashing up and down at the pools. But they would have looked pretty much the same if they lifted weights. It is a fact that a given muscle grows almost the same way whether you take steroids or climb walls at the local gym.

  WHAT YOU SEE AND WHAT YOU DON’T SEE

  Katrina, the devastating hurricane that hit New Orleans in 2005, got plenty of politicizing politicians on television. These legislators, moved by the images of devastation and the pictures of angry victims made homeless, made promises of “rebuilding.” It was so noble on their part to do something humanitarian, to rise above our abject selfishness.

  Did they promise to do so with their own money? No. It was with public money. Consider that such funds will be taken away from somewhere else, as in the saying “You take from Peter to give to Paul.” That somewhere else will be less mediatized. It may be privately funded cancer research, or the next efforts to curb diabetes. Few seem to pay attention to the victims of cancer lying lonely in a state of untelevised depression. Not only do these cancer patients not vote (they will be dead by the next ballot), but they do not manifest themselves to our emotional system. More of them die every day than were killed by Hurricane Katrina; they are the ones who need us the most—not just our financial help, but our attention and kindness. And they may be the ones from whom the money will be taken—indirectly, perhaps even directly. Money (public or private) taken away from research might be responsible for killing them—in a crime that may remain silent.

  A ramification of the idea concerns our decision making under a cloud of possibilities. We see the obvious and visible consequences, not the invisible and less obvious ones. Yet those unseen consequenc
es can be—nay, generally are—more meaningful.

  Frédéric Bastiat was a nineteenth-century humanist of a strange variety, one of those rare independent thinkers—independent to the point of being unknown in his own country, France, since his ideas ran counter to French political orthodoxy (he joins another of my favorite thinkers, Pierre Bayle, in being unknown at home and in his own language). But he has a large number of followers in America.

  In his essay “What We See and What We Don’t See,” Bastiat offered the following idea: we can see what governments do, and therefore sing their praises—but we do not see the alternative. But there is an alternative; it is less obvious and remains unseen.

  Recall the confirmation fallacy: governments are great at telling you what they did, but not what they did not do. In fact, they engage in what could be labeled as phony “philanthropy,” the activity of helping people in a visible and sensational way without taking into account the unseen cemetery of invisible consequences. Bastiat inspired libertarians by attacking the usual arguments that showed the benefits of governments. But his ideas can be generalized to apply to both the Right and the Left.

  Bastiat goes a bit deeper. If both the positive and the negative consequences of an action fell on its author, our learning would be fast. But often an action’s positive consequences benefit only its author, since they are visible, while the negative consequences, being invisible, apply to others, with a net cost to society. Consider job-protection measures: you notice those whose jobs are made safe and ascribe social benefits to such protections. You do not notice the effect on those who cannot find a job as a result, since the measure will reduce job openings. In some cases, as with the cancer patients who may be punished by Katrina, the positive consequences of an action will immediately benefit the politicians and phony humanitarians, while the negative ones take a long time to appear—they may never become noticeable. One can even blame the press for directing charitable contributions toward those who may need them the least.