Saturday, January 29, 2011

Review: The Black Swan - the impact of the highly improbable

Having read some great reviews that this book has attracted,  it was with much delight and anticipation that I finally borrowed this this best-seller by Nicholas Nassim Taleb.

Instead of saving the summary for the end, I am going to spit it out right at the beginning.

I am glad I picked this book up from the library.

It is the kind of book that you could read once. In fact, a good summary could probably distill the essence of the book into two pages, without sacrificing much.

Once upon a time people thought all swans were white. Everything was hunky dory, until black swans were discovered in Australia. The book derives its title from this "highly improbable event". I don't know how many tectonic plates shifted after this discovery, but Taleb does make an important point.

Unfortunately, the point has been made before, and it has been made before even more eloquently. For example Einstein is alleged to have said, "No amount of experimentation can ever prove me right; a single experiment can prove me wrong."

That is really my primary grouse with the book. Most of it has been said before more eloquently.

But the book is not without its merits.

Taleb lays down the three characteristics of a Black Swan: rarity, extreme impact, and retrospective predictability.

Events like 9/11, the rise of the internet, the market crash of 1987, Harry Potter - they are all Black Swans.

By rarity he means power-law rarity, not a six-sigma type of rare event. From the linked wikipedia article
The distribution of a wide variety of natural and man-made phenomena follow a power law, including frequencies of words in most languages, frequencies of family names, sizes of craters on the moon and of solar flares, the sizes of power outages, earthquakes, and wars, the popularity of books and music, and many other quantities.
Power law distributions are scale invariant - they don't have a mean or variance, like most commonly studied distributions do. They aren't widely used in economics, and perhaps they should be, but again Taleb is not the first person to make this point. Mandelbrot did it much earlier and much better.

Extreme impact is easy to understand. Unlike height, variables that obey power law distributions can wreak havoc. If Bill Gates joins a group the average height (a normally distributed variable) does not change appreciably, but the average income goes berserk. Taleb calls the former Mediocristan, and the latter Extremistan which may be useful labels for some people. To me they were more unnecessary pompous verbiage (like Ludic fallacy, scalable, nonlinearity), that the author loves to throw around at the slightest provocation.

Narrative fallacy or retrospective predictability is the tendency of experts and media to explain unpredicted events after the fact, as if they were inevitable. I have to confess that this was the only chapter in the book that I found interesting, because I had not heard it discussed so fully before.

Where the book gets boring is when the author goes off on tangents.

Usually I like tangents. I love footnotes. But when tangents take place with reckless abandon, it results in a chaotic laser show.

But that is not all. The book gets viscerally painful, when he author stoops to cheap shots. To be fair, he may have been hurt by those who he seeks to hurt, but true generosity is the mark of a great man. For example on page 90, he rants:
Where it gets painful is when you see one of your peers, whom you despise, heading to Stockholm for his Nobel reception.
If this was an isolated sentence, it could be easily forgiven. After all, we are all works in progress. But the book is soaked in that kind of "small-think". Another annoying habit is the  castigation of the bell curve ("that great intellectual fraud"), ad nauseam. The bell curve is often inappropriately applied - we get it! But hearing Taleb go on and on, I almost felt like taking that bell curve and banging it on his head so that he would stop.

It is surprising that I found the book utterly disappointing. I actually share quite a bit of Taleb's worldview. I agree that most economists have bogus predictive abilities, that not listening to popular media is a recipe for knowledge, and that it is better to be approximately correct than precisely wrong.

As I said: I am glad I picked this book up from the library.


Anonymous said...

Yes, NNT is a very controversial and polarizing figure. There are legions of haters as well as fanboys. While few of his ideas may be novel (in my opinion), it is his ability to synthesise various pieces of pre-existing ideas into a coherent philosophical thought which I find appealing.
Another thing that attracted me was his "fearlesness" in naming names and criticizing some big guns. When I first encountered his ideas, that was something which was novel and attractive to me.
It does come across as a bit small-minded as you said though.

Sachin Shanbhag said...

@Anonymous: Many people who's opinion I respect have found the book to be an important contribution. Personally, I found the book unnecessarily incoherent, almost as if by design.

He derides experts throughout the book (which I think is completely fair). But if you listen to him wax eloquently on every subject under the sun on TV these days, I fear he has become what he told us to beware of. A pompous pseudo-expert who takes himself way too seriously.

Paavo said...

I enjoyed the book very much, when I read it the first time. I was not familiar with the topic and the book gave me a very interesting introduction. I don't care about who made the observations first. It wasn't probable that I would have read Mandelbrot, and even if I studied Mandelbrot's ideas in math, I wouldn't make the connections I was able to make reading Taleb's book.

Now I'm rereading it, because I'm hoping to study cognitive psychology In University of Helsinki, and their entrance exam is about The Black Swan.

It's intolerable to reread, and it is a horrible textbook. I don't know why they chose this book as it is not a textbook and not about cog sci.

I liked Fooled By Randomness more. They deal with same ideas, and are pretty much the same book. NNT seems to be a one idea guy, but he does make a good case, and is enough a blowhard to make himself heard.

Sachin Shanbhag said...

@Paavo: Sure, if you were reading many of the (inherently interesting) ideas presented in the Black Swan for the first time, I can imagine how one would form a favorable impression of the book.

I had heard that Casablanca was a great movie. But by the time, I actually saw the movie, I had seen too many movies that were derived too closely from the original, to find the original movie as special as I might otherwise have. This book was similar in that sense, except that I was familiar with the original work.

I have heard Fooled by randomness is a better book. But given the my experience with this book, I think I am going to pass, and pick up something else from my "antilibrary" :)