The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology. Taleb’s “black swan theory” refers only to unexpected events of black swan nassim nicholas taleb pdf free download magnitude and consequence and their dominant role in history. The importance of the metaphor lies in its analogy to the fragility of any system of thought.
A set of conclusions is potentially undone once any of its fundamental postulates is disproved. In this case, the observation of a single black swan would be the undoing of the logic of any system of thought, as well as any reasoning that followed from that underlying logic. Juvenal’s phrase was a common expression in 16th century London as a statement of impossibility. The term subsequently metamorphosed to connote the idea that a perceived impossibility might later be disproven. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as “black swans”—undirected and unpredicted.
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. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. The event has a major effect.
The same is true for the personal perception by individuals. Taleb contends that banks and trading firms are very vulnerable to hazardous black swan events and are exposed to unpredictable losses. Taleb provides “Ten Principles for a Black-Swan-Robust Society”. Taleb’s problem is about epistemic limitations in some parts of the areas covered in decision making.
In the fourth quadrant, knowledge is uncertain and consequences are large, requiring more robustness. The central and unique attribute of Taleb’s black swan event is that it is high-profile. Taleb, is the belief that the unstructured randomness found in life resembles the structured randomness found in games. Taleb said “I don’t particularly care about the usual. If you want to get an idea of a friend’s temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life. Can you assess the danger a criminal poses by examining only what he does on an ordinary day?