From the book
ON THE PLUMAGE OF BIRDS
Before the discovery of Australia, people in the old world were convinced that all swans were white, an unassailable belief as it seemed completely confirmed by empirical evidence. The sighting of the first black swan might have been an interesting surprise for a few ornithologists (and others extremely concerned with the coloring of birds), but that is not where the significance of the story lies. It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans. All you need is one single (and, I am told, quite ugly) black bird.
I push one step beyond this philosophical-logical question into an empirical reality, and one that has obsessed me since childhood. What we call here a Black Swan (and capitalize it) is an event with the following three attributes.
First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability.
Just imagine how little your understanding of the world on the eve of the events of 1914 would have helped you guess what was to happen next. (Don't cheat by using the explanations drilled into your cranium by your dull high school teacher). How about the rise of Hitler and the subsequent war? How about the precipitous demise of the Soviet bloc? How about the rise of Islamic fundamentalism? How about the spread of the Internet? How about the market crash of 1987 (and the more unexpected recovery)? Fads, epidemics, fashion, ideas, the emergence of art genres and schools. All follow these Black Swan dynamics. Literally, just about everything of significance around you might qualify.
This combination of low predictability and large impact makes the Black Swan a great puzzle; but that is not yet the core concern of this book. Add to this phenomenon the fact that we tend to act as if it does not exist! I don't mean just you, your cousin Joey, and me, but almost all "social scientists" who, for over a century, have operated under the false belief that their tools could measure uncertainty. For the applications of the sciences of uncertainty to real-world problems has had ridiculous effects; I have been privileged to see it in finance and economics. Go ask your portfolio manager for his definition of "risk," and odds are that he will supply you with a measure that excludes the possibility of the Black Swan--hence one that has no better...
Author: Nassim Nicholas Taleb
Nassim Nicholas Taleb has devoted his life to immersing himself in problems of luck, uncertainty, probability, and knowledge, and he has led three high-profile careers around his ideas, as a man of letters, as a businessman-trader, and as a university professor. Although he spends most of his time as a flâneur, meditating in cafés across the planet, he is currently Distinguished Professor of Risk Engineering at New York University's Polytechnic Institute. His work has been published in thirty-three languages.
"The Black Swan changed my view of how the world works." - Daniel Kahneman, Nobel laureate
"Hugely enjoyable--compelling . . . easy to dip into." - Financial Times
"A masterpiece." - Chris Anderson, author of The Long Tail
"Idiosyncratically brilliant." - Niall Ferguson, Los Angeles Times