The Black Swan
Page 38
Beyond this, they may believe without question that we can predict societal events, that the Gulag will toughen you a bit, that politicians know more about what is going on than their drivers, that the chairman of the Federal Reserve saved the economy, and so many such things. They may also believe that nationality matters (they always stick “French,” “German,” or “American” in front of a philosopher’s name, as if this has something to do with anything he has to say). Spending time with these people, whose curiosity is focused on regimented on-the-shelf topics, feels stifling.
Where Is Popper When You Need Him?
I hope I’ve sufficiently drilled home the notion that, as a practitioner, my thinking is rooted in the belief that you cannot go from books to problems, but the reverse, from problems to books. This approach incapacitates much of that career-building verbiage. A scholar should not be a library’s tool for making another library, as in the joke by Daniel Dennett.
Of course, what I am saying here has been said by philosophers before, at least by the real ones. The following remark is one reason I have inordinate respect for Karl Popper; it is one of the few quotations in this book that I am not attacking.
The degeneration of philosophical schools in its turn is the consequence of the mistaken belief that one can philosophize without having been compelled to philosophize by problems outside philosophy. … Genuine philosophical problems are always rooted outside philosophy and they die if these roots decay. … [emphasis mine] These roots are easily forgotten by philosophers who “study” philosophy instead of being forced into philosophy by the pressure of nonphilosophical problems.
Such thinking may explain Popper’s success outside philosophy, particularly with scientists, traders, and decision makers, as well as his relative failure inside of it. (He is rarely studied by his fellow philosophers; they prefer to write essays on Wittgenstein.)
Also note that I do not want to be drawn into philosophical debates with my Black Swan idea. What I mean by Platonicity is not so metaphysical. Plenty of people have argued with me about whether I am against “essentialism” (i.e., things that I hold don’t have a Platonic essence), if I believe that mathematics would work in an alternative universe, or some such thing. Let me set the record straight. I am a no-nonsense practitioner; I am not saying that mathematics does not correspond to an objective structure of reality; my entire point is that we are, epistemologically speaking, putting the cart before the horse and, of the space of possible mathematics, risk using the wrong one and being blinded by it. I truly believe that there are some mathematics that work, but that these are not as easily within our reach as it seems to the “confirmators.”
The Bishop and the Analyst
I am most often irritated by those who attack the bishop but somehow fall for the securities analyst—those who exercise their skepticism against religion but not against economists, social scientists, and phony statisticians. Using the confirmation bias, these people will tell you that religion was horrible for mankind by counting deaths from the Inquisition and various religious wars. But they will not show you how many people were killed by nationalism, social science, and political theory under Stalinism or during the Vietnam War. Even priests don’t go to bishops when they feel ill: their first stop is the doctor’s. But we stop by the offices of many pseudo-scientists and “experts” without alternative. We no longer believe in papal infallibility; we seem to believe in the infallibility of the Nobel, though, as we saw in Chapter 17.
Easier Than You Think: The Problem of Decision Under Skepticism
I have said all along that there is a problem with induction and the Black Swan. In fact, matters are far worse: we may have no less of a problem with phony skepticism.
I can’t do anything to stop the sun from nonrising tomorrow (no matter how hard I try),
I can’t do anything about whether or not there is an afterlife,
I can’t do anything about Martians or demons taking hold of my brain.
But I have plenty of ways to avoid being a sucker. It is not much more difficult than that.
I conclude Part Three by reiterating that my antidote to Black Swans is precisely to be noncommoditized in my thinking. But beyond avoiding being a sucker, this attitude lends itself to a protocol of how to act—not how to think, but how to convert knowledge into action and figure out what knowledge is worth. Let us examine what to do or not do with this in the concluding section of this book.
Chapter Nineteen
HALF AND HALF, OR HOW TO GET EVEN WITH THE BLACK SWAN
The other half—Remember Apelles—When missing a train can be painful
It is now time for a few last words.
Half the time I am a hyperskeptic; the other half I hold certainties and can be intransigent about them, with a very stubborn disposition. Of course I am hyperskeptic where others, particularly those I call bildungsphilisters, are gullible, and gullible where others seem skeptical. I am skeptical about confirmation—though only when errors are costly—not about disconfirmation. Having plenty of data will not provide confirmation, but a single instance can disconfirm. I am skeptical when I suspect wild randomness, gullible when I believe that randomness is mild.
Half the time I hate Black Swans, the other half I love them. I like the randomness that produces the texture of life, the positive accidents, the success of Apelles the painter, the potential gifts you do not have to pay for. Few understand the beauty in the story of Apelles; in fact, most people exercise their error avoidance by repressing the Apelles in them.
Half the time I am hyperconservative in the conduct of my own affairs; the other half I am hyperaggressive. This may not seem exceptional, except that my conservatism applies to what others call risk taking, and my aggressiveness to areas where others recommend caution.
I worry less about small failures, more about large, potentially terminal ones. I worry far more about the “promising” stock market, particularly the “safe” blue chip stocks, than I do about speculative ventures—the former present invisible risks, the latter offer no surprises since you know how volatile they are and can limit your downside by investing smaller amounts.
I worry less about advertised and sensational risks, more about the more vicious hidden ones. I worry less about terrorism than about diabetes, less about matters people usually worry about because they are obvious worries, and more about matters that lie outside our consciousness and common discourse (I also have to confess that I do not worry a lot—I try to worry about matters I can do something about). I worry less about embarrassment than about missing an opportunity.
In the end this is a trivial decision making rule: I am very aggressive when I can gain exposure to positive Black Swans—when a failure would be of small moment—and very conservative when I am under threat from a negative Black Swan. I am very aggressive when an error in a model can benefit me, and paranoid when the error can hurt. This may not be too interesting except that it is exactly what other people do not do. In finance, for instance, people use flimsy theories to manage their risks and put wild ideas under “rational” scrutiny.
Half the time I am intellectual, the other half I am a no-nonsense practitioner. I am no-nonsense and practical in academic matters, and intellectual when it comes to practice.
Half the time I am shallow, the other half I want to avoid shallowness. I am shallow when it comes to aesthetics; I avoid shallowness in the context of risks and returns. My aestheticism makes me put poetry before prose, Greeks before Romans, dignity before elegance, elegance before culture, culture before erudition, erudition before knowledge, knowledge before intellect, and intellect before truth. But only for matters that are Black Swan free. Our tendency is to be very rational, except when it comes to the Black Swan.
Half the people I know call me irreverent (you have read my comments about your local Platonified professors), half call me fawning (you have seen my slavish devotion to Huet, Bayle, Popper, Poincaré, Montaigne, Hayek, and others).
WHEN MISSING A TRAIN IS PAINLESS
I once received another piece of life-changing advice, which, unlike the advice I got from a friend in Chapter 3, I find applicable, wise, and empirically valid. My classmate in Paris, the novelist-to-be Jean-Olivier Tedesco, pronounced, as he prevented me from running to catch a subway, “I don’t run for trains.”
Snub your destiny. I have taught myself to resist running to keep on schedule. This may seem a very small piece of advice, but it registered. In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behavior, a sense of being in control of my time, my schedule, and my life. Missing a train is only painful if you run after it! Likewise, not matching the idea of success others expect from you is only painful if that’s what you are seeking.
You stand above the rat race and the pecking order, not outside of it, if you do so by choice.
Quitting a high-paying position, if it is your decision, will seem a better payoff than the utility of the money involved (this may seem crazy, but I’ve tried it and it works). This is the first step toward the stoic’s throwing a four-letter word at fate. You have far more control over your life if you decide on your criterion by yourself.
Mother Nature has given us some defense mechanisms: as in Aesop’s fable, one of these is our ability to consider that the grapes we cannot (or did not) reach are sour. But an aggressively stoic prior disdain and rejection of the grapes is even more rewarding. Be aggressive; be the one to resign, if you have the guts.
It is more difficult to be a loser in a game you set up yourself.
In Black Swan terms, this means that you are exposed to the improbable only if you let it control you. You always control what you do; so make this your end.
THE END
But all these ideas, all this philosophy of induction, all these problems with knowledge, all these wild opportunities and scary possible losses, everything palls in front of the following metaphysical consideration.
I am sometimes taken aback by how people can have a miserable day or get angry because they feel cheated by a bad meal, cold coffee, a social rebuff, or a rude reception. Recall my discussion in Chapter 8 on the difficulty in seeing the true odds of the events that run your own life. We are quick to forget that just being alive is an extraordinary piece of good luck, a remote event, a chance occurrence of monstrous proportions.
Imagine a speck of dust next to a planet a billion times the size of the earth. The speck of dust represents the odds in favor of your being born; the huge planet would be the odds against it. So stop sweating the small stuff. Don’t be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth—remember that you are a Black Swan. And thank you for reading my book.
Epilogue
YEVGENIA’S WHITE SWANS
Yevgenia Krasnova went into the long hibernation that was necessary for producing a new book. She stayed in New York City, where she found it easiest to find tranquillity, alone with her text. It was easiest to concentrate after long periods during which she was surrounded by crowds, hoping to run into Nero so she could make a snide remark to him, perhaps humiliate him, possibly win him back. She canceled her e-mail account, switched to writing longhand, since she found it soothing, and hired a secretary to type her text. She spent eight years writing, erasing, correcting, venting her occasional anger at the secretary, interviewing new secretaries, and quietly rewriting. Her apartment was full of smoke, with papers strewn on every surface. Like all artists she remained dissatisfied with the state of completion of her work, yet she felt that she had gone far deeper than with her first book. She laughed at the public who extolled her earlier work, for she now found it shallow, hurriedly completed, and undistilled.
When the new book, which was aptly called The Loop, came out, Yevgenia was wise enough to avoid the press and ignore her reviews, and stayed insulated from the external world. As expected by her publisher, the reviews were laudatory. But, strangely, few were buying. People must be talking about the book without reading it, he thought. Her fans had been waiting for it and talking about it for years. The publisher, who now owned a very large collection of pink glasses and led a flamboyant lifestyle, was presently betting the farm on Yevgenia. He had no other hits and none in sight. He needed to score big to pay for his villa in Carpentras in Provence and his dues on the financial settlement with his estranged wife, as well as to buy a new convertible Jaguar (pink). He had been certain that he had a good shot with Yevgenia’s long-awaited book, and he could not figure out why almost everyone called it a masterpiece yet no one was buying it. A year and a half later, The Loop was effectively out of print. The publisher, now in severe financial distress, thought he knew the reason: the book was “too f***ing long!”—Yevgenia should have written a shorter one. After a long but soothing lachrymal episode, Yevgenia thought of the characters in the rainy novels of Georges Simenon and Graham Greene. They lived in a state of numbing and secure mediocrity. Second-rateness had charm, Yevgenia thought, and she had always preferred charm over beauty.
So Yevgenia’s second book too was a Black Swan.
GLOSSARY
Academic libertarian: someone (like myself) who considers that knowledge is subjected to strict rules but not institutional authority, as the interest of organized knowledge is self-perpetuation, not necessarily truth (as with governments). Academia can suffer from an acute expert problem (q.v.), producing cosmetic but fake knowledge, particularly in narrative disciplines (q.v.), and can be a main source of Black Swans.
Apelles-style strategy: A strategy of seeking gains by collecting positive accidents from maximizing exposure to “good Black Swans.”
Barbell strategy: a method that consists of taking both a defensive attitude and an excessively aggressive one at the same time, by protecting assets from all sources of uncertainty while allocating a small portion for high-risk strategies.
Bildungsphilister: a philistine with cosmetic, nongenuine culture. Nietzsche used this term to refer to the dogma-prone newspaper reader and opera lover with cosmetic exposure to culture and shallow depth. I extend it to the buzzword-using researcher in nonexperimental fields who lacks in imagination, curiosity, erudition, and culture and is closely centered on his ideas, on his “discipline.” This prevents him from seeing the conflicts between his ideas and the texture of the world.
Black Swan blindness: the underestimation of the role of the Black Swan, and occasional overestimation of a specific one.
Black Swan ethical problem: Owing to the nonrepeatable aspect of the Black Swan, there is an asymmetry between the rewards of those who prevent and those who cure.
Confirmation error (or Platonic confirmation): You look for instances that confirm your beliefs, your construction (or model)—and find them.
Empty-suit problem (or “expert problem”): Some professionals have no differential abilities from the rest of the population, but for some reason, and against their empirical records, are believed to be experts: clinical psychologists, academic economists, risk “experts,” statisticians, political analysts, financial “experts,” military analysts, CEOs, et cetera. They dress up their expertise in beautiful language, jargon, mathematics, and often wear expensive suits.
Epilogism: A theory-free method of looking at history by accumulating facts with minimal generalization and being conscious of the side effects of making causal claims.
Epistemic arrogance: Measure the difference between what someone actually knows and how much he thinks he knows. An excess will imply arrogance, a deficit humility. An epistemocrat is someone of epistemic humility, who holds his own knowledge in greatest suspicion.
Epistemic opacity: Randomness is the result of incomplete information at some layer. It is functionally indistinguishable from “true” or “physical” randomness.
Extremistan: the province where the tot
al can be conceivably impacted by a single observation.
Fallacy of silent evidence: Looking at history, we do not see the full story, only the rosier parts of the process.
Fooled by randomness: the general confusion between luck and determinism, which leads to a variety of superstitions with practical consequences, such as the belief that higher earnings in some professions are generated by skills when there is a significant component of luck in them.
Future blindness: our natural inability to take into account the properties of the future—like autism, which prevents one from taking into account the existence of the minds of others.
Locke’s madman: someone who makes impeccable and rigorous reasoning from faulty premises—such as Paul Samuelson, Robert Merton the minor, and Gerard Debreu—thus producing phony models of uncertainty that make us vulnerable to Black Swans.
Lottery-ticket fallacy: the naïve analogy equating an investment in collecting positive Black Swans to the accumulation of lottery tickets. Lottery tickets are not scalable.
Ludic fallacy (or uncertainty of the nerd): the manifestation of the Platonic fallacy in the study of uncertainty; basing studies of chance on the narrow world of games and dice. A-Platonic randomness has an additional layer of uncertainty concerning the rules of the game in real life. The bell curve (Gaussian), or GIF (Great Intellectual Fraud), is the application of the ludic fallacy to randomness.