Black Swans
Elizabeth Blackney ·
September 1, 2012 at 6:26am
On my nightstand is The Black Swan: The Impact of the Highly Improbable and Fooled by Randomness by Nassim Nicholas Taleb. What a fascinating read in the midst of the campaign season. Below are two quotes for the consideration of our esteemed readers here at Ricochet.
“When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.”
And:
“Heroes are heroes because they are heroic in behavior, not because they won or lost.”
Readers....have at it.
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Sep '10
Re: Black Swans
I usually don't cite an authors biographical wiki but in this case I think certain details have a fascinating relevance to the statements at hand:
Jul '11
Re: Black Swans
I'll relate both quotes to medicine.
One common pearl is that it is usually the second mistake in response to the first that does the patient in. People often fail to question their initial diagnosis (even the broader differential diagnosis) in medicine and discard or misinterpret subsequent conflicting information. This can be lethal.
I've seen trauma surgeons and ER personnel fighting like mad to save a child, pouring every ounce of skill, stamina and determination humans can have and it just not working out. How are they not heroes?
Apr '11
Re: Black Swans
Great quote. And both great books.
The first quote brought to mind Arthur Brooks recent book, "The Road to Freedom" and his emphasis on making an emotional appeal for freedom. Since most liberal positions are made on an emotional basis, not based on looking at what works best, when you argue facts, you get nowhere. Taleb's quote ties into this, and probably accounts for the strong hold ideas like high tax rates have on the left despite their dismal record throughout the world.
Sep '10
Re: Black Swans
My impression of Taleb is that he's made a career by making the rather obvious point that probability distributions are not always gaussian. In short, this means that the chance of an extreme event was erroneously assumed to be low. This came as no surprise to anyone knowledgeable in such matters.
The only reason anyone has heard of Taleb is because The Black Swan was published in the year of the crash. All those CDS's and similar financial instruments were based on the assumption that distribution functions were gaussian. Well, they're not. It was a rookie mistake.
May '12
Re: Black Swans
I have not read the book, but am familiar with the term -- at least in finance/stock market. Of the perennial "bearish" folks that continually say the BIG crash is coming and we should sell everything and buy gold and old silver coins and lots of food and water. Of course it COULD happen -- but the markets ALWAYS recover (per Mitt Romney in No Apology -- page 144).
Anyways this is supposed to be about politics --- With there ever be a third party? Will war break out between Israel and Iran? Will the USA be pulled in? Would Obama issue Marshall law and cancel the November Elections -- all to stay in power?
One could go on and on. Still HIGHLY improbable. 99.999% of this stuff blows over/never happens. Some folks lose sleep over it. I could not live that way. Makes for great movies and small talk.
Jun '11
Re: Black Swans
1st quote: the way the left has constructed their worldview.
2nd quote: the way we on the right choose to fight a losing cause.
(I think we're REAL close to winning this Prez race however:))
May '10
Re: Black Swans
This is a major reason why kids are so much quicker than adults at discerning and learning many things, like a new language. Adults develop theories of mind to help predict events, then try to reconcile new knowledge with these models rather than look at things fresh. The greater our knowledge, the more frequent and influential our expectations become. A key to good analysis is being able to identify one's own assumptions.
Also, I vaguely recall a psychological study which concluded that optimists and pessimists (or was it happy people and depressed people?) tend to be realistic about different subjects. For example, the former tend to be more realistic about health issues, presumably because they enjoy life more and so prioritize longevity. For the same reason, they are less realistic when faced with imminent disaster, because they don't want to believe their happiness will end (whereas pessimists/depressed people just want to get it over with).
Jan '11
Re: Black Swans
The traditional coherence theory tests statements for truth based on whether they cohere with other statements already assumed to be true. It also happens to be a standard method of scientific observation.
When confronted with a statement that contradicts previous ones, you have a choice: abandon one statement or overthrow the entire system. The heroes of science and philosophy were willing to overthrow the existing system in defense of statements they were convinced were true.
How does one know when to modify the contradiction or modify the system? We don't. As Chris Berman of ESPN is fond of saying, "that's why we play the game."
May '11
Re: Black Swans
Also fascinating is Russ Roberts' interview of Taleb.
Edited on September 1, 2012 at 9:25amJun '10
Re: Black Swans
He has a great book of aphorisms - The Bed of Procrustes - designed to help you question your current heuristics.
The central thing I get from Taleb's work is that when institutions that turn a blind eye to black swan events become linked into a system, it is the compound impact of the black swan that causes the problem. I see this as extremely Hayekian (meaning insightful and to be taken seriously). When the governments legitimize and insure such issues, it encourages people to ignore the risks involved.
Mr. Robert's essay on the causes of the financial collapse is a great example of this interplay of government policy and willingness to risk a black swan. I cannot recommend it highly enough.
http://mercatus.org/publication/gambling-other-peoples-money
--
Note: his second quote works in reverse as well.
--
below are two interviews Russ Roberts with Taleb (go Ryan!) AND,
http://www.econtalk.org/archives/2009/03/taleb_on_the_fi.html
http://www.econtalk.org/archives/2012/01/taleb_on_antifr.html
Edited on September 1, 2012 at 10:08amMar '11
Re: Black Swans
Mr Eastwood at the RNC was clearly a Black Swan moment, if ever there was one.
Sep '10
Re: Black Swans
There are four Econtalk interviews...all excellent: http://www.econtalk.org/archives/_featuring/nassim_taleb/
You might find that if you haven't read a book, it could happen that you don't have a clue about its thesis.
A black swan isn't just an improbable event, but also one whose occurrence is not expected because of mistakes in logic/reasoning and interpretation of evidence.
His idea of anti-fragility is interesting; I'm not sure if this book is out yet; don't believe so. He explains it in the Econtalk interviews.
I subscribe to Taleb on FB...interesting comments from time-to-time surrounded by a lot of grumpy, old-man misanthropy.
Anyway, his ideas plus those from other of Russ's interview helped me make my family some good, "safe" (is anything safe?) returns on TIPS from 2009 to the present. tick-tock, tick-tock.... :D
May '11
Re: Black Swans
There's two opposing viewpoints on Eastwood. One is that it served the GOP well (held by Rob Long and most here at Ricochet), the other is that it was a blunder (held by Mike Murphy, judging from his Twitter feed). When will we know who was right? Will we ever?
Jul '12
Re: Black Swans
John, Marshall law?
Apr '12
Re: Black Swans
KC Mulville:
How does one know when to modify the contradiction or modify the system? We don't. As Chris Berman of ESPN is fond of saying, "that's why we play the game." · 6 hours ago
Yep.
Mar '11
Re: Black Swans
KC Mulville: The traditional coherence theory tests statements for truth based on whether they cohere with other statements already assumed to be true. It also happens to be a standard method of scientific observation.
When confronted with a statement that contradicts previous ones, you have a choice: abandon one statement or overthrow the entire system. The heroes of science and philosophy were willing to overthrow the existing system in defense of statements they were convinced were true.
Plot your points, then draw your graph. It'll save on a lot of erasing later on.
Mar '11
Re: Black Swans
Richard Feynman's lecture on Cargo Cult Science is a favorite of mine.
In it he describes the correction of a small error Robert Millikan made in his determination of the charge on an electron. Millikan used the wrong value of the viscosity of air, and as a result, his measurement was too low.
Sep '10
Re: Black Swans
Chris Matthews says your use of the term Black Swan is clearly a racist codeword.
Feb '11
Re: Black Swans
drlorentz..."My impression of Taleb is that he's made a career by making the rather obvious point that probability distributions are not always gaussian."
There is more to it than this. Taleb also demonstrates how probability distributions interact with the Agent Problem, and how a strategy having a negative expected return for the Principal can actually have a very positive return for the Agent.
Feb '11
Re: Black Swans
John Grier..."the markets ALWAYS recover "
A dangerous assertion. Did the market for Confederate bonds recover? Czarist bonds? German stocks purchased prior to 1933?