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9/23/07


Mind Shadows      Nassim Nicholas Taleb & Black Swans

Before the discovery of Australia in the 17th Century, Black Swan was a metaphor for something that did not exist. Dragons, incubi, and succubi, were all Black Swans to the Renaissance intellectual. The term became established as a kind of principle for inductive reasoning. Throughout the known world only white swans could be found. This was sufficient empirical evidence to establish that black swans only occurred as creatures of fanciful imaginations. White Swans were predictable. They could be found everywhere, and so the world of inductive reasoning could conform to the prediction.

Then in Australia black swans were discovered. With that discovery, Francis Bacon (1561-1626) was posthumously proved right in his admonition to beware fallacies of reason, specifically, "Assuming more order than exists in chaotic nature."

Of course, we need to believe in White Swans, else our brain frontal lobe would become a circuitry of tension, fear, and anxiety. Certain beliefs are necessary for us to go about our daily affairs and do them effectively. As William James (1842-1910) put it, we will believe; we can't escape belief. The human mind is wired so that it cannot avoid taking a position. (See his The Will To Believe.) In short, we need to believe in predictability and we will believe in it.

Karl Popper (1902-1994) punctured the balloon of science in a certain regard when he used Black Swans to point out that scientific knowledge does not advance solely by inductive reasoning. That is, observation of data does not necessarily lead to generalizations about data so that a theory is formed. Quite simply, if a single researcher finds one black swan, then he can never make a leap to a universal conclusion. All of his research remains falsifiable, that is, disprovable, and only by this means does science advance.

Along comes Nassim Nicholas Taleb with his book, Black Swan: The Impact of The Highly Improbable, in which he develops a theme. Taleb declares that we tend to bet that past events will repeat themselves. His interest is the stock market, and he is a "Quant," a trader sharp in math and interested in the quantitative analysis of markets, by which he has laid aside wealth sufficient to make himself financially independent. Finance, he says, is for Philistines.

Taleb observes that in both the market and world events, real changes have resulted from the Black Swans, the rare and unpredictable. Neither the nation nor the market was ready for September 11, 2001. The world could not have foreseen the consequence of Martin Luther's 95 theses, and Johann Gutenberg's Bible. People today little understand that together, Luther and Gutenberg radically changed history, the one revolting against papal abuses while the other rendered Scripture out of Latin and into common languages. In 1905 an obscure young clerk in a Swiss patent office had world-shattering effect when he published in Annalen der Physik a nineteen page paper on Special Relativity.

Taleb states that "History does not crawl, it jumps." He takes aim at probability based on the bell curve, with most frequent occurrences in the middle. Common associations with the curve are IQ scores. Most of the population finds itself in the middle with less frequent outliers on either end. This kind of predictability he calls "Mediocristan." Instead, he insists that our world is shaped by Black Swans, huge, sometimes violent, swings that he calls "Extremistan."

He does not phrase it this way, but he speaks to the illusion of control. We admire the self-made man whom we regard as having made it to the top by will, ambition, determination, and, most of all, his own free choices. Instead, Taleb insists that all too often what we really admire is luck. He would put it in closely reasoned language, but here it is. Life can be a crap shoot. The dice fell sixes for one guy and for another guy equally capable they came up snake eyes. Historians use intention and design to explain a man's rise to power and influence when in fact he rolled sixes several times in a row.

Taleb has an original mind and an original approach. I must say that I will revisit his book for it offers much to think about. He is not to be brushed aside.

Evolution did not wire my brain's frontal lobe to prepare for Black Swans. Some events happening in the past are likely to happen again; that's all it sees. This seems fitting because of its need for equilibrium, not anxiety and fear. Whatever the neuroscientific explanation for its need, I want happiness. Happiness does not fit into the discourse of Bacon, Popper, or Taleb, but each would agree that it is the one thing to be desired, regardless of the form it takes. Yes, an asteroid may at this very moment be plunging through black, cold space on its way to wipe out humanity, but if I can't do anything about it, why sweat it? I am wired to worry when I should; otherwise, I want things that make me happy. While acknowledging the sometime folly, I'll settle for the probability of White Swans occurring more frequently than Black. As for the Black, as bumper stickers eloquently proclaim, Shit happens.

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