blackswan

It’s close to 2 years since I read “Black Swan” for the first time. It had a definite effect on me for most of the arguments the author puts forth are very strong. One thing that propelled me in rereading this book was an article by one of my Prof’s who said that the teaching system for MFE courses should radically transform itself for it to have any use in the times to come . I was immediately reminded of Ludic Fallacy which Taleb mentions in his book. So, managed to reread the book.

Let me list my takeaways from the book

  • There are two kinds of worlds - Mediocristan and Extremistan . Dynamics are completely different in these two worlds.

  • In Mediocristan, Law of Large Numbers works. In Extremistan, you cannot estimate the probabilities of rare events

  • Many domains in our lives are increasingly falling under Extremistan

  • Beautiful example of Turkey which is fed 1000 days before it is killed .For turkey , 1001 day is a Black swan.For a butcher it is not

  • Do you want to be speculator or a prostitute in life ? This question is similar to what Mr. Nama had asked me years ago when I was doing my internship at GE ? He guided/suggested me to be a speculator rather than a prostitute. The principle is same as the cash flow quadrant idea brought out Roberto Kiyosaki

  • Beware of the Ludic Fallacy

  • Keep in mind the various types of bias - Confirmation bias, Narrative Fallacy, Silent Evidence, Tunneling in to Future

  • Beware of EXPERTS in domains where things move.

  • Melting Icecube analogy to show how complex the estimation of probability is, in real life

  • Barbell Strategy - Invest 80-90% of money in risk free securities and 10% of money in extremely high risk securities. If one thinks of this strategy and applies to real life, I think it will have tremendous implications.

  • An entire chapter which bashes Gaussian thinking.

  • Introduction to Mandelbrot’s fractal way of thinking . Such thinking makes black swans atleast gray swans , in taleb’s words

  • History Jumps, It doesn’t crawl…Just forget the geometric brownian motion, arithmetic brownian motion, etc etc…It’s all a bunch of crap as at its fundamental level, it believes in a gaussian world

  • AVOID BEING A SUCKER , by exposing yourself to a lot of blackswans instead of avoiding blackswans

  • Tinkering is the only way to know what works and what doesnt

  • Missing a train is only painful if you run after it

  • It is more difficult to be a loser in a game you set for yourself. - ( Brilliant point..Set up your own game and have fun , rather than living somebody else’s life)

The reread was as entertaining as the first time I read it 2 years back…Books are indeed man’s best friends!