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 Good read, but fooled by randomness is better October 6, 2008
0 out of 2 found this review helpful
Black swans are rare, unpredicatable events that pack a big punch. As Teleb explains, they are not accounted for by modern financial theories. Black Swans are particularly relevant to today's market calamity...and they will likely arise many times in the remainder of our lifetimes...to our benefit...if we are prepared. The lesson is to prepare for these events...and to exploit them.
 A must-read for a quant, but... October 1, 2008
7 out of 7 found this review helpful
... but Dr. Taleb goes too far by claiming that the quantitative analysts, including statisticians, are (or even were) mesmerized by the Gaussian curve or any other quantitative concept, for that matter. Even the undergrads here at Purdue are taught to understand that the mean and standard deviation are not always descriptive of the distribution and that a single outlier can have a great impact on the fit of simple linear regression. As for PhD-level people, there are enough of us able to handle data with care and who are well aware that Pareto & Barabasi is not a cool label of Italian fashion. By the way, how come that Extreme Value Theory (at least 60 years old) is never mentioned in the book dedicated to the extreme?
I don't believe that such people as Markowitz, Scholes, or Samuelson thought even for a second that their job was to create models that would alleviate the hardship of the long-suffering investment banking community. That was never a requirement for academic promotion or the Nobel Prize, which was their ultimate goal, whether they admit it or not. Therefore, any "quant" who took those models at face value deserved all he got.
Most importantly, I believe such misguided model-worshippers have always been few in the industry, especially after 1998. MBA graduates, too, have enough sense to know what is what even after being through a Modern Portfolio Theory course. Courses like that, according to Dr. Taleb, have to be wiped out along with the academic disciples of Markowitz and Samuelson. But will that "ethnical cleansing" do any good?
Perhaps the sad truth is that in the industry both MBAs and PhDs quickly realized that claiming they can quantify any financial product generates a fat stream of immediate bonuses, although at the expense of possible (but surely very distant :) blowup. If that is the case, all those people consciously use bogus models as a front. Hence, contrary to what Dr. Taleb thinks, Nobel Prize winners and their followers in the academia are hardly to blame. So, why don't we leave the distinguished professors alone and turn to those who set the malign short-term incentives in financial institutions.
 Pompous Overbearing New York Author Writes Self-Centered Book; Film at 11 September 30, 2008
6 out of 7 found this review helpful
It takes Nassim Nicholas Taleb almost 300 pages to say the following: "$@&% happens. And if you use the classical bell curve to predict when $@&% will happen anywhere outside of a casino, extreme $@&% will happen more than you would expect and you could be hurt by it".
That's it. Read the book if you must, but I'm saving you the cost, and pain of having to find this out yourself. The rest of "Black Swan" is just pointless pontificating by an ego with a 2 book contract whose ideas ran out 3/4 of the way through his previous book.
How I got here:
Reading John Robb's excellent "Brave New War" left me with a real desire to research the references he used in its creation. Taleb's "Fooled By Randomness" and "Black Swan" articles were among the references listed. I read "FBR" first and found it very enjoyable, informative read. He introduced the black swan concept in that book, and it was self-explanatory within the context. I picked up "Black Swan" to complete the set of Robb's references.
The review:
"Black Swan" is labor to get through. I had to force myself to finish it, where "Fooled By Randomness" breezed by. Not that it is difficult or too abstract. It's just tedious. Poorly paced, loaded with filler and pointless autobiographical notes, scattered historical references without much relevance to the topic at hand.
There were exactly 2 real-world relevant points in "Black Swan". The first is that in order to protect against financial black swans, individual investors should allocate funds according to their desired risk level, with a majority in safe havens like T-bills, with a small stake in high-risk, high-yield areas. For all of his years in the finance community, Taleb spouts wisdom you can read on a brochure for Fidelity Investments.
His second piece of advice was in a foot note, that as of 2006, he thought Freddie Mac was going to fail. Again, I'm just a nobody, but I saw this in 2003.
Really, the rest of the book is an ego stroke where Taleb uses the book as a sort of "magic mirror" to ask the audience to tell him "is he not the fairest of all?".
Historical figures and movements like Sixtus Empiricus and his Pyrrhonian skepticism, Henri Poincare and Bertrand Russell are mentioned but how they are integrated into the concept of extraordinary events happening in life beyond an "it's better to reserve judgment because you just... can't... tell.. what... could ... happen". Why bring these people in? Were they the only skeptics who advocated such thoughts? Or were they chosen to emphasize a fault in the author? (Ah ha! See my "Sins of the author point #3)
The author's sins:
But really, what put me over the top was his sloppy egotism. After the success of "FBR", Taleb must've thought he could stretch the black swan concept into an entire book. But once he got into the actual job of writing, he found he had to pad the text with many of the sure signs of reading an egomaniac's work:
1. The author refers to himself in the third person. Several times, Taleb asks himself questions "If you ask me, 'NNT, what should I do?' Well, the answer is clear ..."
2.The author uses archaic terms to describe his ancestry, to enhance his social standing. Despite clearly stating growing up amid the Lebanese Civil War, Taleb insists on calling himself of "Levant origin". While this is technically true, it's an obscure term in modern language used mostly in archaeology and history to describe the region during the Crusades. It's similar to the way that modern Iranian expatriates insist they are Persian, and not Iranian, thus creating a more romantic and mysterious character. Taleb intentionally uses "Levant" to conjure up a time when the eastern Mediterranean was populated by "gentlemen of leisure" with a high social standing, and not "Lebananese" with all of the current western-associated imagery that goes with it. I see it as a pathology of self-loathing to not admit the country you came from. I don't walk around saying I'm Prussian because I find it more romantic than saying I had German grandparents.
3. The author paints himself fighting a lonely fight against "the man/the system/the machine". What a load. Countless examples in "Black Swan" of Taleb being a rebel for the sake of being a rebel grow so tiring and again, pointless. "I never wear neck ties at my job." "I don't read the newspaper." Super Taleb. Fight the power. What about black swans again? Even his historical references are chosen to be figures who were seen as rebels in their time, because they advocated a viewpoint contrary to at-the-time popular dogma. His choice may also be almost deliberately obscure, to invoke a "I know someone you don't" childishness.
4. The author goes to lengths to paint himself as a man of the people. His assertions about of his choice of friends and who he spends his time with (and thus, implicitly assures the reader that this person is therefore more worthy of success) are "Brooklyn types" rather than stuffed-shirt Ph.Ds who Taleb imagines deserving nothing better than "a rat stuffed down their collar". This seems more Homer Simpson than "Wall Street wizard". Within the context, I understand his 2-D caricatures, but where he goes at great lengths to invoke complexity into everyday life, to paint personalities with such flat, stereotypical attributes is almost insulting. It's hack writing at best.
5. But still the author is a stuffed shirt who knows much cooler people than you do, dear reader. Guess who hung out with Umberto Eco? Benoit Mandelbrot? Various Nobel laureates? Not you. Taleb. Uh huh. Taleb, can we force you to take your arm and stop patting yourself on the back and use it to write something worthwhile? Pretty please? With some Brooklyn sugar on it?
There are more, to be sure, but let's just leave this review at "Read 'Fooled By Randomness', skip 'Black Swan'"
Life is not predictable September 29, 2008
The "black swan" of the title is any of those sudden, unpredictable, and relevant events that happen. Taleb's main point, proven and repeated along the book, is that it is impossible to make predictions with any degree of accuracy. What we DON'T know is much more important than what we do know. And we'll never know how many black swans have not happened by pure chance. Taleb distinguishes between the two areas of life: Mediocristan and Extremistan. In the first one, variations occur within a recognizable range, and therefore in a large group no deviation, large as it may be, significantly alters the average (e.g. the height of people). In Extremistan, things may happen in a different order of magnitude (money or power). It is there in Extremistan that black swans appear. Taleb is very irreverent, and with reason, towards "academic" knowledge, always ossified, beaurocratized, and in the comfort zone. He also attacks the notion of something called "social" sciences, as if they could exist, not to speak of their predictive success. He also distinguishes between those fields in which legitimate "experts" exist (engineering, medicine), and those where experts can't exist (politics, economics, culture).
A following thesis is that we do not properly get ready for black swans because we make mistakes in our thinking. We are always seeking confirmations to our initial hypotheses, instead of trying to disprove them and get on the right path. We fall into the narrative phallacy, where past events look easy to have predicted, and then we look for suspects to blame. Whose fault was September 11? There has to be someone, since now it is very clear to all of us that it would have been easy to predict and prevent. Or First World War, for which any number of reasons and omens have been found. Phallacies. We can NOT predict our own lives, much less History. Another problem is silent evidence. Taleb tells us about a Roman priest who once told Cicero a story: some people who had suffered a shipwreck started to ardently pray to the gods and they were rescued. That's proof that the gods exist. Cicero answered: What about all the guys that have prayed and nevertheless have perished? When looking at that which has worked for some people, we usually ignore the many who have been left along the road ("How to become a millionaire in ten stpes"). Then comes the ludic phallacy, exemplified in game theory. Games occur within a controlled environment, with clear rules; life doesn't. Now, if we can't predict anything relevant, how are we to live? Getting ready. Preparing for black swans. Minimizing the risk of negative black swans, and maximizing exposure to positive black swans.
Very good book, iconoclastical, lucid and innovative. It reminded me of Howard Bloom and his "Lucifer Principle". Maybe the future of philosophy lies outside of cubicles and classrooms, and in the real world of business, politics, live culture. Its logical that that may be the case. Universities, institutionalized academia, the media, "experts", etc., have become murderers of free thinking, jails for rational debate.
 Too ponderous and self-centered otherwise pretty interesting September 28, 2008
1 out of 1 found this review helpful
As most reviewers have already commented there's not much wrong with the book content-wise. The problem I had with the book was the writing style (too ponderous). Also the author is somewhat too full of himself.
It's too bad that the really good and refreshing points made in the book get almost swamped by these major obstacles. These make reading the book somewhat problematic.
I managed to get through it all, but I can understand that lots of people will stop halfway through.
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