Nassim Nicholas Taleb, “The Future Has Always Been Crazier Than We Thought”
February 7th, 02008 by Stewart Brand
Dispatches from Extremistan
A “black swan,” Taleb explained, is an event which is 1) Hard to predict; 2) Highly consequential; 3) Wrongly retro-predicted. We pretend we know why the big event happened, and so entrench our inability to deal with the next world-changing improbable event.
Examples: Viagra, 9/11, Harry Potter, First World War, Beatles, the PC, Google, and the rise of any successful religion. History is dominated by sudden, lasting changes wrought by deeply unexpected events.
Part of the problem is that we ignore the “silent evidence” of the nonobserved and nonobservable. We compute probability from the success of survivors. No one writes or reads a book titled “How I Lost a Million Dollars.” Another problem is that we revise our own predictions and intentions unconsciously to match what actually happens. We disguise having been wrong by pretending we were right. This is “confirmation bias.”
There are TWO kinds of randomness, two realms in which events happen…
Mediocristan is dominated by the average— one new observation won’t change much. If you are measuring the weight of a large sample of humans, adding the heaviest person in the world won’t change the result, whereas measuring the average wealth of a large sample of humans would be transformed by adding the wealthiest person. Mediocristan is the realm of the Law of Large Numbers and of the Gaussian Bell Curve.
Extremistan is dominated by extremes. Every year 16,000 novels are published in English. A handful of best-sellers absolutely dominate. This is the realm of the power-law curve and the Long Tail. Extremistant defies prediction. You can say there will be a few monsters and lots of midgets and the world will be changed by the monsters, and that’s all you can say.
Benoit Mandelbrot convinced Taleb that the main dynamic of Mediocristan is energy, and the main dynamic of Extremistan is information. Anything social is Extremistan.
Thus there are two kinds of experts. A soufflé chef really is an expert and can be trusted. An economist is a pseudo-expert. “Never take advice from someone wearing a tie.” All you get from a Council of Economic Advisors is an illusion of control. Stock market analysts have proved to be worse than nothing.
Don’t focus on probability. Focus on consequences. Black Swans will come. Prepare against the negative ones; be ready to soar with the positive ones.
Pay attentive heed to tradition and old people— they have experienced more Black Swans.
PS… All of the SALT speakers perform for free. Taleb added the further generosity of insisting on paying for his travel and lodging. Extra thanks to him for that.
February 7th, 2008 at 11:17 am
Fun fact: Arthur C. Clarke actually wrote an essay entitled “How I Lost a Billion Dollars in My Spare Time”, about neglecting to patent the concept of the geosynchronous telecommunications satellite.
February 23rd, 2008 at 3:36 pm
Brilliant! Great talk that was extremely insightful and very entertaining. It’s given me loads to think about.
February 25th, 2008 at 5:33 am
Actually, Jim Paul and Brendan Moynihan wrote a book called “What I Learned Losing a Million Dollars” in 1994. An Amazon search for the title returns The Black Swan at #3.
March 26th, 2008 at 3:46 am
The turkey and the butcher…
Just wanted to get this little ditty out: I was listening to a very interesting Long Now seminar by Nassim Taleb, about his insight into randomness, predictability, and the like. If you don’t know who he is, Taleb wrote a…
April 10th, 2008 at 4:42 pm
“What I Learned Losing a Million Dollars” is actually reference in “The Black Swan”, on page 105. The book is available at www.LOSINGAMILLION.com
August 5th, 2008 at 6:22 pm
[…] The Long Now Blog » Blog Archive » Nassim Nicholas Taleb, “The Future Has Always Been Crazier Th… […]
October 7th, 2008 at 4:08 am
It would be nice if these blog entries link back to the recordings.
November 1st, 2008 at 5:20 pm
[…] maintains 50% of the wealth. 50% of the world lives on $2.00 a day. As long as a system allows for this type of imbalance, it becomes a system destined to comply to power-law distributions. Disproportionate concentrations […]
November 11th, 2008 at 11:12 pm
[…] Foundation in February on “The Future Has Always Been Crazier Than We Thought” (mp3, summary), and at PopTech in 2007 (mp3, […]
December 28th, 2008 at 11:57 pm
Just finished reading The Black Swan the recorded (chandler) version and found it very insightful.
I only wish I had read something like it during my 47 years with the Bell System. Many of the stories he referred to I experienced. Including the Long Term Capital Management meltdown that occurred in my home town (Greenwich) where I trapped muskrats in a pond where their headquarters was built.
January 1st, 2009 at 10:46 am
Though very, very interesting, the above entry contains a fallacy.
+ “Mediocristan is dominated by the average— one new observation won’t change much.” (Par. 5)
+ “Extremistan is dominated by extremes.” (Par. 6)
≠ “Benoit Mandelbrot convinced Taleb that the main dynamic of Mediocristan is energy, and the main dynamic of Extremistan is information.” (Par. 7)
Shouldn’t energy be Extremistan’s dynamic, and information be Mediocristan’s dynamic?
April 12th, 2009 at 6:55 pm
[…] what are the “Black Swans” that Friedman missed? That’s the hard part, of course. Taleb would say that Black Swans defy prediction. Jetliners slamming into skyscrapers on a sunny September day. A tsunami off the coast of Georgia. A […]