Highlights from "The Black Swan: The Impact of the Highly Improbable"

I recently read the book "The Black Swan: The Impact of the Highly Improbable" by Nassim Nicholas Taleb. It was overall an interesting read, though I found some sections about the black swan events to be overly repetitive. I am told that "Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets" is a better book and I am looking forward to reading it once I clear my current stack of books! 

Anyhow, here are some excerpts from the book that I enjoyed reading and thought of making a note:


On money:

Money allows you to act like Victorian gentleman, free from slavery. It is a psychological buffer: the capital is not so large as to make you spoiled-rich, but large enough to give you the freedom to choose a new occupation without excessive consideration of the financial rewards. It shields you from prostituting your mind and frees you from outside authority--any outside authority.


On career: 

Invest in profession that is scalable, that is, one in which you are not paid by the hours and thus subject to the limitation of the amount of your labour. 

In unscalable professions, no matter how highly paid, your income is subject to gravity. Your revenue depends on your continuous efforts more than on the quality of your decisions. Moreover, this kind of work is largely predictable: it will vary, but not to the point of making the income of a single day more significant than that of the rest of your life. Doctor, baker, prostitute are all example of unscalable careers.

On the contrary, intellectual products need to be created only once, and can be sold many times over. Writer, speculator, fraudster are all example of scalable careers - the output is not limited by the number of hours, but the quality of ideas.

But be beware of the scalable. A scalable profession is good only if you are successful; they are more competitive, produce monstrous inequalities, and are far more random with huge disparities between efforts and rewards — a few can take a large share of the pie, leaving others out entirely at no fault of their own.

One category of profession is driven by the mediocre, the average, and the middle-of-the-road. In it, the mediocre is collectively consequential. The other has either giants or dwarves — more precisely, a very small number of giants and a huge number of dwarves.


On history: 

The importance of silent evidence

“Diagoras, a nonbeliever in the Gods, was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning. Diagoras asked, ‘Where were the pictures of those who prayed, then drowned?’”

Numerous studies of millionaires aimed at figuring out the skills required for hotshotness follow the following methodology. They take a population of hotshots, those with big titles and big jobs, and study their attributes. They look at what those big guns have in common: courage, risk taking, optimism, and so on, and infer that these traits, most notably risk taking, help you to become successful. You would also probably get the same impression if you read CEO's ghostwritten autobiographies or attended their presentations to fawning MBA students.

Now take a look at the cemetery. It is quite difficult to do so because people who fail do not seem to write memoirs, and, if they did, those business publishers I know would not even consider giving them the courtesy of a returned phone call. Readers would not pay $26.95 for a story of failure, even if you convinced them that it had more useful tricks than a story of success. The entire notion of biography is grounded in the arbitrary ascription of a causal relation between specified traits and subsequent events. Now consider the cemetery. The graveyard of failed persons will be full of people who shared the following traits: courage, risk taking, optimism, et cetera. Just like the population of millionaires. There may be some differences in skills, but what truly separates the two is for the most part a single factor: luck. Plain luck."


On risk :

The uncertainty of the Nerd
In real world, life threatening risks come from things that are not modelled. A casino runs more risk outside where the probabilities are unknown as compared to inside where they know their odds.


On life:

You have far more control over your life if you decide on your criterion by yourself. Be aggressive; be the one to resign, if you have the guts.

But all these ideas, all this philosophy of induction, all these problems with knowledge, all these wild opportunities and scary possible losses, everything palls in front of the following metaphysical consideration. I am sometimes taken aback by how people can have a miserable day or get angry because they feel cheated by a bad meal, cold coffee, a social rebuff, or a rude reception. Recall my discussion in Chapter 8 on the difficulty in seeing the true odds of the events that run your own life. We are quick to forget that just being alive is an extraordinary piece of good luck, a remote event, a chance occurrence of monstrous proportions.  Imagine a speck of dust next to a planet a billion times the size of the earth. The speck of dust represents the odds in favor of your being born; the huge planet would be the odds against it. So stop sweating the small stuff. Don’t be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth—remember that you are a Black Swan.


Special thanks to the Mountain View Public Library, for introducing me to so many wonderful books!