The Black Swan by Nassim Taleb

The Black Swan or The Impact of the Highly Improbable is a second book for the common people by Nassim Nicholas Taleb, a famous crusher of the economic forecast theories. His first book — Fooled by Randomness — was a major success among both the laymen and the financial traders and has lead to many controversies among the latter. The Black Swan is his first book squared with a stronger emphasis on the effect of the low-probability events on everything we know in our life and in particular on the financial markets. It’s hard to overrate this book when recommending it to the traders. In my own opinion, traders shouldn’t even consider starting real account trading without first acquainting themselves with the ideas presented by Nassim Taleb. It’s also one of those cases when the great ideas are presented in a great wrapping — Taleb’s narrative style is fun, interesting and very enlightening.

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7 Review

  1. sin-son:

    I feel that “The Black Swan” has fast become one of those books that almost everyone quotes and no one reads. It is really sad considering the fact that the book is written so well and talks about such an interesting phenomenon. In fact, I feel that anyone who is even a tad curious about why strange and rare things occur, like a lightning bolt or a Harry Potter or a 9/11, should go and read this book.
    In this book, Taleb tried to point out with his lucid words how we need to break away from the traditional perspectives if we are to understand the predictability of such ‘Black Swan’ events that are huge in magnitude and occur very rarely. He also points out the faults in trying to incorporate these ‘outlier’ ‘Black Swans’ in the typical statistical approaches. While reading it, I could only come up with things like the 2008 housing bubble and the 9/11 but Taleb talks about ‘positive Black Swans’ as well – something that most reviewers fail to mention because (I suspect) they never open the book before reviewing it.
    Although it has to be said that the book can become somewhat heavy for those who do not come from a background in either economics or statistics. However, Taleb is a master teacher as well – and his well-balanced repetition of concepts throughout the book – as he visits them again and again at different levels of depth – gets the idea clear in your head by the end. All you have to do is persevere through the journey.
    I recommend this book to anyone and everyone who has an open, unbiased way of looking at this world, and has no objections to the foundations of his/her worldview questioned or altered – for the sake of a better view.
    On the whole, “The Black Swan” is undeniably intended for the people who are involved in the markets and trading and are related to the economic field in general. But, those are not the only people who stand to gain from this beautifully written and insightful book.

  2. Jeff:

    There were a lot of expectations associated with this book for me.
    In fact, in the beginning, it presented the beautiful and interesting concept of the ‘Black Swan’ – rare occurrences that have disproportionate impacts on the system and that these evens are normally outside of our predictive capacities. Then the writer highlighted that there can be cases where the famous Bell curve does not fit in. However, somewhere along the way, I felt that he got over zealous with the whole idea and crossed over to the other extreme, almost making you believe that Black Swans are all that was, and all that influenced anything and everything that happened.
    He failed to point out that perhaps – there was a middle path.
    Also, he comes up with this mythical man who goes through certain experiences – all concocted to prove the author’s point. I felt that this part was quite pathetic and sadly, I felt that the writer fell in to the same trap that he said the conventional statisticians and econometrists were in – of looking at the data only with a fixed view.
    Combine all of this with the didactic tone of writing – I felt that all I could give this book was 2 out of 5.

  3. George:

    The Black Swan: The Impact of the Highly Improbable written by Nassim Nicholas Taleb is smart, informative and witty. It is full of humor if you have an ear for it and it makes intelligent quips at people who always come up with post-hoc theories after something has happened. Apart from showing you the drawbacks that are hidden in post-hoc analysis, Taleb’s book is a must read for the curious investor, or simply for the curious mind.
    At the outset, it tells you of an era when man thought he knew all that there was to be know – or more specifically, that all swans were white. This belief was then shattered and blown to smithereens when the first black colored swan was spotted in Australia – an ugly creature to behold. The parallel that Taleb draws to the black swans representing the ugly truth that everyone would rather ignore and brush under the carpet is quite obvious.
    This is the vein in which the rest of the book goes on. Taleb takes all of your perspectives and worldviews and shatters them one by one – just as the people who thought that swans could only come in white were ruffled by the existence of a black one. But the main point that is being put forth here is threefold: First, humans cannot possibly know everything and so you should be wary of those who pretend to be so. Second, the future is uncertain and dynamic and has many possibilities – which is to say that nothing is a hundred percent certain. And third, even though there are many who tell you that ‘they told you so’ they actually had not – if you really come to think about it. Black swans become Taleb’s elegant (albeit desirably ugly) metaphor for those unwanted crashes and undesirable critical events in the markets.
    Taleb is a clever writer and he builds up his thesis well and backs it up with historical evidence. Although you might feel that his theory too is a post hoc one at times – you should give him credit for his novelty. Yet, you might feel at times that there is no mention of how you can steer clear of black swans and how you can spot them in the first place. Another point to note is that “The Black Swan” is not that easy a read. For someone who does not have a background in economics it might be dense at times however, the complexity lies not in Taleb’s language (which is lucid and well-put) but more in his choice of allusions and references and those rare terminologies.
    Another point is that even though this title is just a little short of 300 pages, Taleb is repetitive, a bit tedious and takes a long time to make his point. The smarter reader might find this a bit annoying and a touch patronizing, but probably Taleb had the slower readers in mind while writing like this.
    Other places where you might feel like putting Taleb down is when he rambles off to his Lebanon childhood and his Beirut days. He does this to illustrate how people change their theories/stories before and after something critical (read ‘a Black Swan’) occurs. Cases in point being when he points how, in Beirut, people were shocked when it started to decay but later, they would tell everyone how they always saw it coming.
    Even after granting all his faults, Taleb emerges as a smart, witty and (almost) captivating theory-teller. And, at the end of the day, his thesis regarding Black Swan events is something that is a must know if you are a stock broker – if not for anything else but to have a more rounded view of your markets. Moreover, Taleb has only one basic assumption: We don’t know everything. Not that hard to dispute, eh?
    One thing that Taleb has going for him in this book is his sense of humor. I felt that it was well-placed and hilarious mostly. His historical allusions too were well-chosen and used only when he really needed one to drive a point home. I would say you would laugh more than you would actually expect to when you start reading this book.
    On the whole, I’d say this one is a good read and quite funny to boot. A must for know-it-alls and a recommended read for those who are generally curious about the world at large.

  4. Gamblah:

    This writer has managed to hit it right smack on the nail. It is well-written, with a sharp voice, and interspersed with good humor. The author is someone whom you’d picture as having above-average IQ and a low tolerance-threshold for dumb theories. Even though the fundamental concepts that he puts forth could have even been explained in only a few pages, you don’t tire of the multiple ways in which Nassim Nicholas Taleb states, argues, defends and supports his ideas. He builds up ideas that refute well-established theories of the day – and I feel that it is always fun when this happens. Don’t you?

  5. RECEIVER:

    The Black Swan is a book that tells you that you need to re-evaluate the way you look at data. In it, the author, Nassim Nicholas Taleb, tells you in lucid words why it is foolhardy to apply the tools of mathematics to the financial world without really checking the underlying fundamentals of those methods. We don’t need to go beyond 2008 to see where this has led us. Letting math tools take over all your speculations and trading without having any idea whatsoever of what is really going on – either in the market or in the mathematical calculations – has pure, merciless, catastrophic results. To take a simple case, people are fond of formulas derived from the Bell Curve almost everywhere in econometrics – but no one actually bothers to actually see if it is suitable to be using something based on the Bell Curve at all in the first place. In fact, Taleb actually ends up naming the Bell Curve as the “the great intellectual fraud”. To think that simply by using probabilities based on non-stationary processes (that are inter-dependent, have feedback loops at multiple scales and show scalability as well) to diversify risk is one of the greatest fallacies of the 21st century. According to Taleb, a more informed mind would rather look at the markets as partly fractal – as put forth by Mandelbrot, partly random, partly with a trend or drift, and partly determined by critical ‘Black Swan’ events. Only then can you get a better grip on risk in this ever growing and ever interconnected global financial system.

  6. Book Review: Fooled by Randomness (Nassim Nicholas Taleb):

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