Monday, September 03, 2007

Black Swan--Overview

What you don't know certainly can hurt you.

That is the message of The Black Swan: The Impact of the Highly Improbable, by Nassim Taleb (Random House, April 2007).

The problem is not so much what we don't know. It is rather that we refuse to admit what we don't know. Humans are terrible at processing uncertainty. We overestimate our ability to predict the future. We assume that the world operates according to the law of "normal distribution" (Gaussian bell curve).

Some things do operate according to the "bell curve." Body size (height and weight) is constrained by genetics and physical laws.

But most things are subject to wild extremes.

Taleb defines a Black Swan using these criteria:

  • No one expects it to happen. Nothing in the past suggests it is likely to happen.
  • When it happens, it will cause a huge impact (either positively or negatively).
  • Even though it could never be predicted, once it happens people construct explanations for why it had to happen.

Most innovations are Black Swans.

Most disasters are Black Swans.

Most world-changing events are Black Swans.

This is not a criticism about our ignorance. It is an attack on our inherent arrogance.

Black Swans are unknowable by nature.

A couple of examples of Black Swans are the attack of September 11, on the negative side, and the rise of the Internet, on the positive side. Both of these have changed the world forever.

Imagine trying to predict the invention of the wheel. It is impossible to anticipate. If someone could predict it, the prediction would be equivalent to its invention.

By nature we try to fit reality into neat "Platonic" theories.

We use the following strategies to convince ourselves that we know more than we really know:

  • Ludic fallacy: Thinking that the real world operates according to the rules gambling and chance.
  • Confirmation error: Looking for evidence to confirm our preconceived theories.
  • Narrative fallacy: Constructing a story of events that lead up to a Black Swan after it happens.
  • Argument from silence: Mistaking the absence of evidence for evidence of absence.
  • Epistemic arrogance: Overestimating our knowledge and underestimating our ignorance.

There is a whole industry built around explaining success. Successful people and businesses are analyzed. Then characteristics are generalized from the study and touted as the keys to success. A story is constructed to explain why these people and organizations were destined to become successful. The problem is that the failures are usually not studied. Many of the "losers" could lay claim to the same characteristics. Success is often a Black Swan.

Not only do we generally fail to account for the possibility of Black Swans, but we also tend to underestimate their significance.

We can benefit from positive Black Swans by increasing our exposure to them. Taleb recommends going to parties, living in cities and taking advantage of the opportunities we encounter. One key skill needed is the ability to accept good mistakes and learning from them. We will sometimes be fooled, but we should be careful to "be fooled in small matters, not in the large."

We should pay attention to what actually happens and not try to fit everything into our theories of how things should work.

He argues that ignorance is materially the same as randomness. Predicting something that is already determined but unknown to me is the same as predicting a future that is yet to happen.

He also has distain for "experts in suits" who pretend to know more than they do.

In a subsequent post, I will explore the implications of these ideas for a missional approach to ministry.

Pastor Rod

"Helping You Become the Person God Created You to Be"

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