Nassim Nicholas Taleb was born in in Amioun, Lebanon. He is a researcher, essayist, trader, epistemologist, and former practitioner of mathematical finance. Taleb received his bachelors and masters degree in science from the University of Paris. Taleb began his financial mathematics career in several of New York City's Wall Street firms before becoming a scholar in the epistemology of chance events, randomness, and the unknown. Taleb's book, Fooled by Randomness, was translated into 23 languages. His title Bed of Procrustes made the N.
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The book focuses on the extreme impact of rare and unpredictable outlier events — and the human tendency to find simplistic explanations for these events, retrospectively. Taleb calls this the Black Swan theory.
The book covers subjects relating to knowledge, aesthetics , as well as ways of life, and uses elements of fiction and anecdotes from the author's life to elaborate his theories. It spent 36 weeks on the New York Times best-seller list. A central idea in Taleb's book is not to attempt to predict Black Swan events, but to build robustness to negative events and an ability to exploit positive events.
Taleb contends that banks and trading firms are vulnerable to hazardous Black Swan events and are exposed to losses beyond those predicted by their defective financial models. The book asserts that a "Black Swan" event depends on the observer: for example, what may be a Black Swan surprise for a turkey is not a Black Swan surprise for its butcher.
Hence the objective should be to "avoid being the turkey", by identifying areas of vulnerability in order to "turn the Black Swans white". Taleb has referred to the book as an essay or a narrative with one single idea: "our blindness with respect to randomness, particularly large deviations. Part One and the beginning of Part Two delve into psychology. Taleb addresses science and business in the latter half of Part Two and Part Three. Part Four contains advice on how to approach the world in the face of uncertainty and still enjoy life.
Taleb acknowledges a contradiction in the book. He uses an exact metaphor, the Black Swan idea to argue against the "unknown, the abstract, and imprecise uncertain—white ravens, pink elephants, or evaporating denizens of a remote planet orbiting Tau Ceti. There is a contradiction; this book is a story, and I prefer to use stories and vignettes to illustrate our gullibility about stories and our preference for the dangerous compression of narratives You need a story to displace a story.
Metaphors and stories are far more potent alas than ideas; they are also easier to remember and more fun to read. In the first chapter, the Black Swan theory is first discussed in relation to Taleb's coming of age in the Levant.
The author then elucidates his approach to historical analysis. He describes history as opaque, essentially a black box of cause and effect. One sees events go in and events go out, but one has no way of determining which produced what effect. Taleb argues this is due to The Triplet of Opacity.
She published her book on the web and was discovered by a small publishing company; they published her unedited work and the book became an international bestseller. The small publishing firm became a big corporation, and Krasnova became famous. This incident is described as a Black Swan event. The book goes on to reveal that the so-called author is a work of fiction, based in part on Taleb. The third chapter introduces the concepts of Extremistan and Mediocristan. He uses them as guides to define the predictability of the environment one is studying.
Mediocristan environments can safely use Gaussian distribution. In Extremistan environments, a Gaussian distribution should be used at one's own peril.
Chapter four brings together the topics discussed earlier into a narrative about a turkey who is fed and treated well for many consecutive days, only to be slaughtered and served as a meal. Taleb uses it to illustrate the philosophical problem of induction and how past performance is no indicator of future performance. He then takes the reader into the history of skepticism.
In chapter nine, Taleb outlines the multiple topics he previously has described and connects them as a single basic idea. In chapter thirteen, the book discusses what can be done regarding epistemic arrogance. He recommends avoiding unnecessary dependence on large-scale harmful predictions, while being less cautious with smaller matters, such as going to a picnic. He makes a distinction between the American cultural perception of failure versus European and Asian stigma and embarrassment regarding failure: the latter is more tolerable for people taking small risks.
The term black swan was a Latin expression: its oldest reference is in the poet Juvenal 's expression that "a good person is as rare as a black swan" "rara avis in terris nigroque simillima cygno", 6. Aristotle's "Prior Analytics" is the most likely original reference that makes use of example syllogisms involving the predicates "white", "black", and "swan.
This example may be used to demonstrate either deductive or inductive reasoning; however, neither form of reasoning is infallible, since in inductive reasoning, the premises of an argument may support a conclusion, but do not ensure it, and similarly, in deductive reasoning, an argument is dependent on the truth of its premises.
That is, a false premise may lead to a false result and inconclusive premises also will yield an inconclusive conclusion.
The limits of the argument behind "all swans are white" is exposed—it merely is based on the limits of experience e. The point of this metaphor is that all known swans were white until the discovery of black swans in Australia. Hume 's attack against induction and causation is based primarily on the limits of everyday experience and so too, the limitations of scientific knowledge.
The book spent 36 weeks on the New York Times Bestseller list ;  17 as hardcover and 19 weeks as paperback. Mathematics professor David Aldous argued that "Taleb is sensible going on prescient in his discussion of financial markets and in some of his general philosophical thought, but tends toward irrelevance or ridiculous exaggeration otherwise.
From Wikipedia, the free encyclopedia. The neutrality of this article is disputed. Relevant discussion may be found on the talk page. Please do not remove this message until conditions to do so are met. February Learn how and when to remove this template message. Dewey Decimal. March 27, Random House Trade Paperbacks. Retrieved November 5, — via Amazon. The American Journal of Philology.
Retrieved October 1, The Sunday Times. February 24, Retrieved November 5, The New York Times. Notices , March , pp.
Hardcover first edition. Epistemology , philosophy of science , randomness. Random House U. Allen Lane U. Fooled by Randomness.
The Bed of Procrustes.
Black swan theory
The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight. The theory was developed by Nassim Nicholas Taleb to explain:. Taleb's "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers , collectively play vastly larger roles than regular occurrences.