The Impact of the Highly Impropable

I wanted to clear some things up. I always want to make clear from the get-go that I don’t claim to be any kind of an authority or expert, nor do I claim to speak for Taleb. I simply have been following this stuff and paying attention to it more closely and for longer than anybody I know.

I was talking about this book long before it became popular to hold up as maybe something one should give a second glance. Not that it is all the rage, I keep seeing, “This is a black swan,” “this is not a black swan,” “black swans blocking out the sun,” and on and on.

It’s not that simple and yet it is not so much of a mystery. In fact, there is a big clue on the front of the book. The title is actually – The Black Swan: The Impact of the Highly Improbable. That’s all. Nothing more or less. The book itself is a collection of stories and lessons about these highly improbable events. It, in my opinion, is an attempt by the author to teach the rest of us what he has learned from years of studying the philosophy of risk.

His primary focus is not wars and financial meltdowns, but all events, including ones much more mundane. Notice the subtitle says “highly” improbable, but it shouldn’t necessarily be assumed that he also assumes “high”impact. On another level the book is simply about math, statistics, probability, and our perception of them. Versus reality.

First, Black Swans can’t be blocking out the sun. They wouldn’t be Black Swans in that case.

A Black Swan is a highly improbably event. It isn’t something that nobody predicted and that a certain minority feels its hero miraculously predicted. Anybody who follows this train of thought clearly doesn’t understand the book. Taleb spends quite a bit of time on casino logic.

He makes very clear that somebody is always putting a huge amount of money all on red at roulette and winning. Someone is always hitting the jackpot on the slots. There are always huge payoffs. This is exactly why suckers continue to gamble. Because they see this and the animal in them thinks they could be next. But he also makes clear that somebody has to win, somewhere, all the time. Even thought the odds are ten billion to one, all around the globe there are ten billion hands being played every second, so every ten seconds somewhere, someone has to hit big. Multiply that by how many seconds there are in a day and how many people were present to see somebody hit big. The people that saw that were obviously people that are drawn to that sort of thing. Chances are they may be playing blackjack in that very room the next day. Be on vacation and have nothing better to do but gamble. But there is no “luck” in gambling. Only the very stupid and the Chinese believe this (which is weird, since I have never considered the Chinese stupid, quite the opposite).

It is pure numbers. And any single person has virtually no chance of ever scoring big. And the fact is they never do.

Case in point: Is there anybody that is well-known for making their fortune at the Roulette wheel? – which, coincindentally or not, has the best odds of any casino game with the possible exception of blackjack.

It isn’t that nobody predicted World War I (many prominent people, including Winston Churchill, did in one form or another) and it wasn’t that nobody predicted it would be serious.

It was that nobody predicted that it would be what it was.

It would be as if circa 1998 I predicted that in the next 20 years we would have some wars and recession or two and a depression and the Dow would hit 4000 after going above 14000 and we’d have 45% unemployment in 2012 and I went on like this for 12 pages and everything made sense, and I talked about bird-flu and AIDS and peak-oil.

But then what actually happened was a meteor struck Idaho and blasted westwards killing 80 million people and knocking half of California into the sea. The US recovered in 3 years, turned the new hole into a tourist attraction and went on to its most prosperous decades ever under a new Republican Party after the failed Presidency of Barack Obama, who was ridiculed for not realizing the potential of Iraq which bought Great Britain in an all stock deal in the mid-to-late 21st century and built its first car in a plant in Mosul in 2018. The plant was run by a former GM employee, Alfred E. Neuman, who was layed off in 2009, joined the National Guard and ended up marrying a translator from Baghdad and having children, one of whom would make porn movies in Moscow, another a best-selling novelist, and yet another, the first woman President of the United States.

I’m not making this up. (Well, I am making this up, obviously, but my point is that this is what Taleb means – this is his point).

As far-fetched as this seems, Taleb’s point is that this is how life is. He has a similar anecdote, not as whacky as mine, but the same thing. I’ll look it up when I have a chance.