Title: The Black Swan: The Impact of the Highly Improbable
Writer: Nassim Nicholas Taleb
Year of publication: 2007
Review: In this book, Nassim Nicholas Taleb attacks simplistic prediction-making prevalent in science, financial markets and everyday life by introducing the concept of black swans. Black swans are unpredictable events with severe consequences which we tend to find seemingly logical explanations for once they occur but are unable to forecast them beforehand. The current pandemic is a perfect example. Taleb divides events into corresponding to either Mediocristan or Extremistan: in Mediocristan, the Gaussian distribution is safe to use, but in Extremistan surprises occur more often, rendering statistical modelling useless. As Extremistan events like 9/11, Covid-19 or the 2007-2008 financial crisis have significant impacts while being mostly unpredictable, they serve to show that traditional statistical forecasting is largely useless in real life. With this framework, Taleb as a former option trader and risk analyst discounts most fellow traders as being purely dependent on luck and mistakenly attributing their temporary success to their apparent ability to make successful predictions. Taleb’s arrogant style of writing and his confident dismissal of counterarguments as being foolish resulted in the book’s polarised reception. While some disapprove of Taleb’s disdainful attitude, others applaud him for prompting a much-needed paradigm shift in science, finance and philosophy. Multidisciplinary and provocative, Rostra’s Choice.
It is to be underlined that Rostra was not incentivised to promote this book in any way, and this suggestion is not necessarily representative of the opinions of the Rostra team, but only of the editor of this article.