Нассим Талеб - The Black Swan. The Impact of the Highly Improbable

PROLOGUE and CHAPTER 1

Bell curve: When I write bell curve I mean the Gaussian bell curve, a.k.a. normal distribution. All curves look like bells, so this is a nickname. Also, when I write the Gaussian basin I mean all distributions that are similar and for which the improbable is inconsequential and of low impact (more technically, nonscalable—all moments are finite). Note that the visual presentation of the bell curve in histogram form masks the contribution of the remote event, as such an event will be a point to the far right or far left of the center.

Diamonds: See Eco (2002).

Platonicity: I’m simply referring to incurring the risk of using a wrong form—not that forms don’t exist. I am not against essentialisms; I am often skeptical of our reverse engineering and identification of the right form. It is an inverse problem!

Empiricist: If I call myself an empiricist, or an empirical philosopher, it is because I am just suspicious of confirmatory generalizations and hasty theorizing. Do not confuse this with the British empiricist tradition. Also, many statisticians, as we will see with the Makridakis competition, call themselves “empirical” researchers, but are in fact just the opposite—they fit theories to the past.

Mention of Christ: See Flavius Josephus’s The Jewish War .

Great War and prediction: Ferguson (2006b).

Hindsight bias (retrospective distortion): See Fischhoff (1982b).

Historical fractures: Braudel (1985), p. 169, quotes a little known passage from Gautier. He writes, “‘This long history,’ wrote Emile-Félix Gautier, ‘lasted a dozen centuries, longer than the entire history of France. Encountering the first Arab sword, the Greek language and thought, all that heritage went up in smoke, as if it never happened.’” For discussions of discontinuity, see also Gurvitch (1957), Braudel (1953), Harris (2004).

Religions spread as bestsellers: Veyne (1971). See also Veyne (2005).

Clustering in political opinions: Pinker (2002).

Categories: Rosch (1973, 1978). See also Umberto Eco’s Kant and the Platypus .

Historiography and philosophy of history: Bloch (1953), Carr (1961), Gaddis (2002), Braudel (1969, 1990), Bourdé and Martin (1989), Certeau (1975), Muqaddamat Ibn Khaldoun illustrate the search for causation, which we see already present in Herodotus. For philosophy of history, Aron (1961), Fukuyama (1992). For postmodern views, see Jenkins (1991). I show in Part Two how historiographers are unaware of the epistemological difference between forward and backward processes (i.e., between projection and reverse engineering).

Information and markets: See Shiller (1981, 1989), DeLong et al. (1991), and Cutler et al. (1989). The bulk of market moves does not have a “reason,” just a contrived explanation.

Of descriptive value for crashes: See Galbraith (1997), Shiller (2000), and Kindleberger (2001).

CHAPTER 3

Movies: See De Vany (2002). See also Salganik et al. (2006) for the contagion in music buying.

Religion and domains of contagion: See Boyer (2001).

Wisdom (madness) of crowds: Collectively, we can both get wiser or far more foolish. We may collectively have intuitions for Mediocristan-related matters, such as the weight of an ox (see Surowiecki, 2004), but my conjecture is that we fail in more complicated predictions (economic variables for which crowds incur pathologies—two heads are worse than one). For decision errors and groups, see Sniezek and Buckley (1993). Classic: Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds .

Increase in the severity of events: Zajdenweber (2000).

Modern life: The nineteenth-century novelist Émile Zola welcomed the arrival of the market for culture in the late 1800s, of which he seemed to be one of the first beneficiaries. He predicted that the writers’ and artists’ ability to exploit the commercial system freed them from a dependence on patrons’ whims. Alas, this was accompanied with more severe concentration—very few people benefited from the system. Lahire (2006) shows how most writers, throughout history, have starved. Remarkably, we have ample data from France about the literary tradition.

CHAPTER 4

Titanic: The quote is from Dave Ingram’s presentation at the Enterprise Risk Management Symposium in Chicago on May 2, 2005. For more on LTCM, see Lowenstein (2000), Dunbar (1999).

Hume’s exposition: Hume (1748, 2000).

Sextus Empriricus: “It is easy, I think, to reject the method of induction ( ). For since by way of it they want to make universals convincing on the basis of particulars, they will do this surveying all the particulars or some of them. But if some, the induction will be infirm, it being that some of the particulars omitted in the induction should be contrary to the universal; and if all, they will labor at an impossible task, since the particulars and infinite are indeterminate. Thus in either case it results, I think, that induction totters.” Outline of Pyrrhonism , Book II, p. 204.

Bayle: The Dictionnaire historique et critique is long (twelve volumes, close to 6,000 pages) and heavy (40 pounds), yet it was an intellectual bestseller in its day, before being supplanted by the philosophes . It can be downloaded from the French Bibliothèque Nationale at www.bn.fr.

Hume’s inspiration from Bayle: See Popkin (1951, 1955). Any reading of Bishop Huet (further down) would reveal the similarities with Hume.

Pre-Bayle thinkers: Dissertation sur la recherche de la vérité , Simon Foucher, from around 1673. It is a delight to read. It makes the heuristics and biases tradition look like the continuation of the pre-Enlightenment prescientific revolution atmosphere.

Bishop Huet and the problem of induction: “Things cannot be known with perfect certainty because their causes are infinite,” wrote Pierre-Daniel Huet in his Philosophical Treatise on the Weaknesses of the Human Mind . Huet, former bishop of Avranches, wrote this under the name Théocrite de Pluvignac, Seigneur de la Roche, Gentilhomme de Périgord. The chapter has another exact presentation of what became later known as “Hume’s problem.” That was in 1690, when the future David Home (later Hume) was minus twenty-two, so of no possible influence on Monseigneur Huet.

Brochard’s work: I first encountered the mention of Brochard’s work (1888) in Nietzsche’s Ecce Homo , in a comment where he also describes the skeptics as straight talkers. “An excellent study by Victor Brochard, Les sceptiques grecs , in which my Laertiana are also employed. The skeptics! the only honourable type among the two and five fold ambiguous philosopher crowd!” More trivia: Brochard taught Proust (see Kristeva, 1998).

Brochard seems to have understood Popper’s problem (a few decades before Popper’s birth). He presents the views of the negative empiricism of Menodotus of Nicomedia in similar terms to what we would call today “Popperian” empiricism. I wonder if Popper knew anything about Menodotus. He does not seem to quote him anywhere. Brochard published his doctoral thesis, De l’erreur , in 1878 at the University of Paris, on the subject of error—wonderfully modern.