There were two events on my radar this week, but I couldn’t attend either of them. Sometimes I wish I could be in two places at once. Actually, I wish that all the time. At this point, I’d settle for more streaming video.

The first event that got me fired up was Nissam Taleb’s talk about his recent book, Black Swan, on Monday, 2/04/08 at the SALT. As I said, I wasn’t able to attend, but Steward Brand did send out a brief email summary, so I’m pretty fired up about listening/watching the talk in the days to come. Truth be told, I have not yet read Black Swan (only barely skimmed it), but I skimmed the good parts.

Here’s what Steward Brand said in the email following the talk, in all it’s CTRL-C and CTRL-V glory, if you didn’t receive the email yourself.

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 books 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.” –Stewart Brand

To be totally transparent, I am only part way through Taleb’s earlier book, Fooled by Randomness. Since I read several books at a time, going back and forth, I often don’t finish anything for several months, then finish several books at about the same time. I’m hoping to thwart this tendency and just crank through these. Taleb’s short narrative of the Ludic fallacy (yes, which I found on Wikipedia) is simultaneously hilarious and horrifying:
We love tangible, the confirmation, the palpable, the real, the visible, the concrete, the known, the seen, the vivid, the visual, the social, the embedded, the emotional laden, the salient, the stereotypical, the moving, the theatrical, the romanced, the cosmetic, the official, the scholarly-sounding verbiage (b******t), the pompous Gaussian economist, the mathematicized crap, the pomp, the Academie Francaise, Harvard Business School, the Nobel Prize, dark business suits with white shirts and Ferragamo ties, the moving discourse, and the lurid. Most of all we favor the narrated.
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Alas, we are not manufactured, in our current edition of the human race, to understand abstract matters – we need context. Randomness and uncertainty are abstractions. We respect what has happened, ignoring what could have happened. In other words, we are naturally shallow and superficial – and we do not know it. This is not a psychological problem; it comes from the main property of information. The dark side of the moon is harder to see; beaming light on it costs energy. In the same way, beaming light on the unseen is costly in both computational and mental effort.” –Nassim Nicholas Taleb

P.S. I do enjoy how “Nobel Prize” rhymes with”Ferragamo ties.”