The Skeptical Empiricist
As a skeptical empiricist I prefer the experiments of empirical psychology to the theories-based MRI scans of neurobiologists, even if the former appear less “scientific” to the public. – Nassim Taleb
In his refreshingly original and caustic book, “The Black Swan“, this former Wall St. quant convincingly trashes the ubiquitous Gaussian probability distribution because of its lack of scalability and utter failure to account for “Black Swans“. Mr. Taleb also disses those statisticians, Nobel prize-winning economists, and planners that make predictions based on the reductionist properties of the taken-for-granted Gaussian probability distribution.
According to Mr. Taleb, a Black Swan is an event with these three attributes: unpredictability, consequences, and retrospective explainability. A prime example of a Black Swan is the 9/11 terrorist attack. Note that the housing bubble was not a Black Swan – since many people predicted it was coming.
Throughout his tome, Nassim exhibits some profound insight and wisdom across a wide range of topics. Here are just some of the many snippets that resonated with me.
Humans will believe anything you say provided you do not exhibit the smallest shadow of diffidence; like animals, they can detect the smallest crack in your confidence before you express it. The trick is to be as smooth as possible in personal manners.
The problem with business people… is that if you act like a loser they will treat you as a loser—you set the yardstick yourself. There is no absolute measure of good or bad. It is not what you are telling people, it is how you are saying it.
Now contemplate epistemic humility. Think of someone heavily introspective, tortured by the awareness of his own ignorance. He lacks the courage of the idiot, yet has the rare guts to say “I don’t know.” He does not mind looking like a fool or, worse, an ignoramus. He hesitates, he will not commit, and he agonizes over the consequences of being wrong. He introspects, introspects, and introspects until he reaches physical and nervous exhaustion.
Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making.
By removing the ten biggest one-day moves from the U.S. stock market over the past fifty years, we see a huge difference in returns—and yet conventional finance sees these one-day jumps as mere anomalies.
…it is contagion that determines the fate of a theory in social science, not its validity.
…there was a strange cohabitation of technical skills and absence of understanding that you find in idiot savants.
Missing a train is only painful if you run after it! Likewise, not matching the idea of success others expect from you is only painful if that’s what you are seeking.
The Achilles’ heel of capitalism is that if you make corporations compete, it is sometimes the one that is most exposed to the negative Black Swan that will appear to be the most fit for survival.