The Black Swan

by Nassim Nicholas Taleb

  Let us apply this reasoning to September 11, 2001. Around twenty-five hundred people were directly killed by bin Laden’s group in the Twin Towers of the World Trade Center. Their families benefited from the support of all manner of agencies and charities, as they should. But, according to researchers, during the remaining three months of the year, close to one thousand people died as silent victims of the terrorists. How? Those who were afraid of flying and switched to driving ran an increased risk of death. There was evidence of an increase of casualties on the road during that period; the road is considerably more lethal than the skies. These families got no support—they did not even know that their loved ones were also the victims of bin Laden.

  In addition to Bastiat, I have a weakness for Ralph Nader (the activist and consumer advocate, certainly not the politician and political thinker). He may be the American citizen who saved the highest number of lives by exposing the safety record of car companies. But, in his political campaign a few years ago, even he forgot to trumpet the tens of thousands of lives saved by his seat belt laws. It is much easier to sell “Look what I did for you” than “Look what I avoided for you.”

  Recall from the Prologue the story of the hypothetical legislator whose actions might have avoided the attack of September 11. How many such people are walking the street without the upright gait of the phony hero?

  Have the guts to consider the silent consequences when standing in front of the next snake-oil humanitarian.

  Doctors

  Our neglect of silent evidence kills people daily. Assume that a drug saves many people from a potentially dangerous ailment, but runs the risk of killing a few, with a net benefit to society. Would a doctor prescribe it? He has no incentive to do so. The lawyers of the person hurt by the side effects will go after the doctor like attack dogs, while the lives saved by the drug might not be accounted for anywhere.

  A life saved is a statistic; a person hurt is an anecdote. Statistics are invisible; anecdotes are salient. Likewise, the risk of a Black Swan is invisible.*

  Giacomo Casanova, a.k.a. Jacques, Chevalier de Seingalt. Some readers might be surprised that the legendary seducer did not look quite like James Bond.

  THE TEFLON-STYLE PROTECTION OF GIACOMO CASANOVA

  This brings us to gravest of all manifestations of silent evidence, the illusion of stability. The bias lowers our perception of the risks we incurred in the past, particularly for those of us who were lucky to have survived them. Your life came under a serious threat but, having survived it, you retrospectively underestimate how risky the situation actually was.

  The adventurer Giacomo Casanova, later self-styled Jacques, Chevalier de Seingalt, the wannabe intellectual and legendary seducer of women, seems to have had a Teflon-style trait that would cause envy on the part of the most resilient of Mafia dons: misfortune did not stick to him. Casanova, while known for his seductions, viewed himself as some sort of a scholar. He aimed at literary fame with his twelve-volume History of My Life, written in bad (charmingly bad) French. In addition to the extremely useful lessons on how to become a seducer, the History provides an engrossing account of a succession of reversals of fortune. Casanova felt that every time he got into difficulties, his lucky star, his étoile, would pull him out of trouble. After things got bad for him, they somehow recovered by some invisible hand, and he was led to believe that it was his intrinsic property to recover from hardships by running every time into a new opportunity. He would somehow meet someone in extremis who offered him a financial transaction, a new patron that he had not betrayed in the past, or someone generous enough and with a weak enough memory to forget past betrayals. Could Casanova have been selected by destiny to bounce back from all hardships?

  Not necessarily. Consider the following: of all the colorful adventurers who have lived on our planet, many were occasionally crushed, and a few did bounce back repeatedly. It is those who survive who will tend to believe that they are indestructible; they will have a long and interesting enough experience to write books about it. Until, of course …

  Actually, adventurers who feel singled out by destiny abound, simply because there are plenty of adventurers, and we do not hear the stories of those down on their luck. As I started writing this chapter, I recalled a conversation with a woman about her flamboyant fiancé, the son of a civil servant, who managed through a few financial transactions to catapult himself into the life of a character in a novel, with handmade shoes, Cuban cigars, collectible cars, and so on. The French have a word for this, flambeur, which means a mixture of extravagant bon vivant, wild speculator, and risk taker, all the while bearing considerable personal charm; a word that does not seem to be available in Anglo-Saxon cultures. The fiancé was spending his money very quickly, and as we were having the conversation about his fate (she was going to marry him, after all), she explained to me that he was undergoing slightly difficult times, but that there was no need to worry since he always came back with a vengeance. That was a few years ago. Out of curiosity, I have just tracked him down (trying to do so tactfully): he has not recovered (yet) from his latest blow of fortune. He also dropped out of the scene and is no longer to be found among other flambeurs.

  How does this relate to the dynamics of history? Consider what is generally called the resilience of New York City. For seemingly transcendental reasons, every time it gets close to the brink of disaster, the city manages to pull back and recover. Some people truly believe that this is an internal property of New York City. The following quote is from a New York Times article:

  Which is why New York still needs Samuel M. E. An economist who turns 77 today, Mr. E. studied New York City through half a century of booms and busts. … “We have a record of going through tough times and coming back stronger than ever,” he said.

  Now run the idea in reverse: think of cities as little Giacomo Casanovas, or as rats in my laboratory. As we put the thousands of rats through a very dangerous process, let’s put a collection of cities in a simulator of history: Rome, Athens, Carthage, Byzantium, Tyre, Catal Hyuk (located in modern-day Turkey, it is one of the first known human settlements), Jericho, Peoria, and, of course, New York City. Some cities will survive the harsh conditions of the simulator. As to others, we know that history might not be too kind. I am sure that Carthage, Tyre, and Jericho had their local, no less eloquent, Samuel M. E., saying, “Our enemies have tried to destroy us many times; but we always came back more resilient than before. We are now invincible.”

  This bias causes the survivor to be an unqualified witness of the process. Unsettling? The fact that you survived is a condition that may weaken your interpretation of the properties of the survival, including the shallow notion of “cause.”

  You can do a lot with the above statement. Replace the retired economist Samuel E. with a CEO discussing his corporation’s ability to recover from past problems. How about the touted “resilience of the financial system”? How about a general who has had a good run?

  The reader can now see why I use Casanova’s unfailing luck as a generalized framework for the analysis of history, all histories. I generate artificial histories featuring, say, millions of Giacomo Casanovas, and observe the difference between the attributes of the successful Casanovas (because you generate them, you know their exact properties) and those an observer of the result would obtain. From that perspective, it is not a good idea to be a Casanova.

  “I Am a Risk Taker”

  Consider the restaurant business in a competitive place like New York City. One has indeed to be foolish to open one, owing to the enormous risks involved and the harrying quantity of work to get anywhere in the business, not counting the finicky fashion-minded clients. The cemetery of failed restaurants is very silent: walk around Midtown Manhattan and you will see these warm patron-filled restaurants with limos waiting outside for the diners to come out with their second, trophy, spouses. The owner is overworked but happy to have all these important people patronize his eatery. Does this mean t
hat it makes sense to open a restaurant in such a competitive neighborhood? Certainly not, yet people do it out of the foolish risk-taking trait that pushes us to jump into such adventures blinded by the outcome.

  Clearly there is an element of the surviving Casanovas in us, that of the risk-taking genes, which encourages us to take blind risks, unaware of the variability in the possible outcomes. We inherited the taste for uncalculated risk taking. Should we encourage such behavior?

  In fact, economic growth comes from such risk taking. But some fool might argue the following: if someone followed reasoning such as mine, we would not have had the spectacular growth we experienced in the past. This is exactly like someone playing Russian roulette and finding it a good idea because he survived and pocketed the money.

  We are often told that we humans have an optimistic bent, and that it is supposed to be good for us. This argument appears to justify general risk taking as a positive enterprise, and one that is glorified in the common culture. Hey, look, our ancestors took the challenges—while you, NNT, are encouraging us to do nothing (I am not).

  We have enough evidence to confirm that, indeed, we humans are an extremely lucky species, and that we got the genes of the risk takers. The foolish risk takers, that is. In fact, the Casanovas who survived.

  Once again, I am not dismissing the idea of risk taking, having been involved in it myself. I am only critical of the encouragement of uninformed risk taking. The überpsychologist Danny Kahneman has given us evidence that we generally take risks not out of bravado but out of ignorance and blindness to probability! The next few chapters will show in more depth how we tend to dismiss outliers and adverse outcomes when projecting the future. But I insist on the following: that we got here by accident does not mean that we should continue to take the same risks. We are mature enough a race to realize this point, enjoy our blessings, and try to preserve, by becoming more conservative, what we got by luck. We have been playing Russian roulette; now let’s stop and get a real job.

  I have two further points to make on this subject. First, justification of overoptimism on grounds that “it brought us here” arises from a far more serious mistake about human nature: the belief that we are built to understand nature and our own nature and that our decisions are, and have been, the result of our own choices. I beg to disagree. So many instincts drive us.

  Second, a little more worrisome than the first point: evolutionary fitness is something that is continuously touted and aggrandized by the crowd who takes it as gospel. The more unfamiliar someone is with the wild Black Swan–generating randomness, the more he or she believes in the optimal working of evolution. Silent evidence is not present in their theories. Evolution is a series of flukes, some good, many bad. You only see the good. But, in the short term, it is not obvious which traits are really good for you, particularly if you are in the Black Swan–generating environment of Extremistan. This is like looking at rich gamblers coming out of the casino and claiming that a taste for gambling is good for the species because gambling makes you rich! Risk taking made many species head for extinction!

  This idea that we are here, that this is the best of all possible worlds, and that evolution did a great job seems rather bogus in the light of the silent-evidence effect. The fools, the Casanovas, and the blind risk takers are often the ones who win in the short term. Worse, in a Black Swan environment, where one single but rare event can come shake up a species after a very long run of “fitness,” the foolish risk takers can also win in the long term! I will revisit this idea in Part Three, where I show how Extremistan worsens the silent-evidence effect.

  But there is another manifestation that merits a mention.

  I AM A BLACK SWAN: THE ANTHROPIC BIAS

  I want to stay closer to earth and avoid bringing higher-up metaphysical or cosmological arguments into this discussion—there are so many significant dangers to worry about down here on planet earth and it would be a good idea to postpone the metaphysical philosophizing for later. But it would be useful to take a peek (not more) at what is called the anthropic cosmological argument, as it points out the gravity of our misunderstanding of historical stability.

  A recent wave of philosophers and physicists (and people combining the two categories) has been examining the self-sampling assumption, which is a generalization of the principle of the Casanova bias to our own existence.

  Consider our own fates. Some people reason that the odds of any of us being in existence are so low that our being here cannot be attributed to an accident of fate. Think of the odds of the parameters being exactly where they need to be to induce our existence (any deviation from the optimal calibration would have made our world explode, collapse, or simply not come into existence). It is often said that the world seems to have been built to the specifications that would make our existence possible. According to such an argument, it could not come from luck.

  However, our presence in the sample completely vitiates the computation of the odds. Again, the story of Casanova can make the point quite simple—much simpler than in its usual formulation. Think again of all the possible worlds as little Casanovas following their own fates. The one who is still kicking (by accident) will feel that, given that he cannot be so lucky, there had to be some transcendental force guiding him and supervising his destiny: “Hey, otherwise the odds would be too low to get here just by luck.” For someone who observes all adventurers, the odds of finding a Casanova are not low at all: there are so many adventurers, and someone is bound to win the lottery ticket.

  The problem here with the universe and the human race is that we are the surviving Casanovas. When you start with many adventurous Casanovas, there is bound to be a survivor, and guess what: if you are here talking about it, you are likely to be that particular one (notice the “condition”: you survived to talk about it). So we can no longer naïvely compute odds without considering that the condition that we are in existence imposes restrictions on the process that led us here.

  Assume that history delivers either “bleak” (i.e., unfavorable) or “rosy” (i.e., favorable) scenarios. The bleak scenarios lead to extinction. Clearly, if I am now writing these lines, it is certainly because history delivered a “rosy” scenario, one that allowed me to be here, a historical route in which my forebears avoided massacre by the many invaders who roamed the Levant. Add to that beneficial scenarios free of meteorite collisions, nuclear war, and other large-scale terminal epidemics. But I do not have to look at humanity as a whole. Whenever I probe into my own biography I am alarmed at how tenuous my life has been so far. Once when I returned to Lebanon during the war, at the age of eighteen, I felt episodes of extraordinary fatigue and cold chills in spite of the summer heat. It was typhoid fever. Had it not been for the discovery of antibiotics, only a few decades earlier, I would not be here today. I was also later “cured” of another severe disease that would have left me for dead, thanks to a treatment that depends on another recent medical technology. As a human being alive here in the age of the Internet, capable of writing and reaching an audience, I have also benefited from society’s luck and the remarkable absence of recent large-scale war. In addition, I am the result of the rise of the human race, itself an accidental event.

  My being here is a consequential low-probability occurrence, and I tend to forget it.

  Let us return to the touted recipes for becoming a millionaire in ten steps. A successful person will try to convince you that his achievements could not possibly be accidental, just as a gambler who wins at roulette seven times in a row will explain to you that the odds against such a streak are one in several million, so you either have to believe some transcendental intervention is in play or accept his skills and insight in picking the winning numbers. But if you take into account the quantity of gamblers out there, and the number of gambling sessions (several million episodes in total), then it becomes obvious that such strokes of luck are bound to happen. And if you are talking about them, they have happened to you.
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  The reference point argument is as follows: do not compute odds from the vantage point of the winning gambler (or the lucky Casanova, or the endlessly bouncing back New York City, or the invincible Carthage), but from all those who started in the cohort. Consider once again the example of the gambler. If you look at the population of beginning gamblers taken as a whole, you can be close to certain that one of them (but you do not know in advance which one) will show stellar results just by luck. So, from the reference point of the beginning cohort, this is not a big deal. But from the reference point of the winner (and, who does not, and this is key, take the losers into account), a long string of wins will appear to be too extraordinary an occurrence to be explained by luck. Note that a “history” is just a series of numbers through time. The numbers can represent degrees of wealth, fitness, weight, anything.

  The Cosmetic Because

  This in itself greatly weakens the notion of “because” that is often propounded by scientists, and almost always misused by historians. We have to accept the fuzziness of the familiar “because” no matter how queasy it makes us feel (and it does makes us queasy to remove the analgesic illusion of causality). I repeat that we are explanation-seeking animals who tend to think that everything has an identifiable cause and grab the most apparent one as the explanation. Yet there may not be a visible because; to the contrary, frequently there is nothing, not even a spectrum of possible explanations. But silent evidence masks this fact. Whenever our survival is in play, the very notion of because is severely weakened. The condition of survival drowns all possible explanations. The Aristotelian “because” is not there to account for a solid link between two items, but rather, as we saw in Chapter 6, to cater to our hidden weakness for imparting explanations.