The Black Swan

by Nassim Nicholas Taleb

  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.

  Epilogism: We know very little about Menodotus except for attacks on his beliefs by his detractor Galen in the extant Latin version of the Outline of Empiricism (Subfiguratio empírica), hard to translate:

  Memoriam et sensum et vocans epilogismum hoc tertium, multotiens autem et preter memoriam nihil aliud ponens quam epilogismum. (In addition to perception and recollection, the third method is epilogism sensum, as the practitioner has, besides memory, nothing other than epilogism senses; Perilli’s correction.

  But there is hope. Perilli (2004) reports that, according to a letter by the translator Is-haq Bin Hunain, there may be a “transcription” of Menodotus’s work in Arabic somewhere for a scholar to find.

  Pascal: Pascal too had an idea of the confirmation problem and the asymmetry of inference. In his preface to the Traité du vide, Pascal writes (and I translate):

  In the judgment they made that nature did not tolerate a vacuum, they only meant nature in the state in which they knew it, since, so claim so in general, it would not be sufficient to witness it in a hundred different encounters, nor in a thousand, not in any other number no matter how large, since it would be a single case that would deny the general definition, and if one was contrary, a single one …

  Hume’s biographer: Mossner (1970). For a history of skepticism, Victor Cousin’s lectures Leçons d’histoire de la philosophie à la Sorbonne (1828) and Hippolyte Taine’s Les philosophes classiques, 9th edition (1868, 1905). Popkin (2003) is a modern account. Also see Heckman (2003) and Bevan (1913). I have seen nothing in the modern philosophy of probability linking it to skeptical inquiry.

  Sextus: See Popkin (2003), Sextus, House (1980), Bayle, Huet, Annas and Barnes (1985), and Julia Anna and Barnes’s introduction in Sextus Empiricus (2000). Favier (1906) is hard to find; the only copy I located, thanks to Gur Huberman’s efforts, was rotten—it seems that it has not been consulted in the past hundred years.

  Menodotus of Nicomedia and the marriage between empiricism and skepticism: According to Brochard (1887), Menodotus is responsible for the mixing of empiricism and Pyrrhonism. See also Favier (1906). See skepticism about this idea in Dye (2004), and Perilli (2004).

  Function not structure; empirical tripod: There are three sources, and three only, for experience to rely upon: ob
servation, history (i.e., recorded observation), and judgment by analogy.

  Algazel: See his Tahafut al falasifah, which is rebutted by Averroës, a.k.a. Ibn-Rushd, in Tahafut Attahafut.

  Religious skeptics: There is also a medieval Jewish tradition, with the Arabic-speaking poet Yehuda Halevi. See Floridi (2002).

  Algazel and the ultimate/proximate causation: “… their determining, from the sole observation, of the nature of the necessary relationship between the cause and the effect, as if one could not witness the effect without the attributed cause of the cause without the same effect.” (Tahafut)

  At the core of Algazel’s idea is the notion that if you drink because you are thirsty, thirst should not be seen as a direct cause. There may be a greater scheme being played out; in fact, there is, but it can only be understood by those familiar with evolutionary thinking. See Tinbergen (1963, 1968) for a modern account of the proximate. In a way, Algazel builds on Aristotle to attack him. In his Physics, Aristotle had already seen the distinction between the different layers of cause (formal, efficient, final, and material).

  Modern discussions on causality: See Reichenbach (1938), Granger (1999), and Pearl (2000).

  Children and natural induction: See Gelman and Coley (1990), Gelman and Hirschfeld (1999), and Sloman (1993).

  Natural induction: See Hespos (2006), Clark and Boyer (2006), Inagaki and Hatano (2006), Reboul (2006). See summary of earlier works in Plotkin (1998).

  CHAPTERS 5–7

  “Economists”: What I mean by “economists” are most members of the mainstream, neoclassical economics and finance establishment in universities—not fringe groups such as the Austrian or the Post-Keynesian schools.

  Small numbers: Tversky and Kahneman (1971), Rabin (2000).

  Domain specificity: Williams and Connolly (2006). We can see it in the usually overinterpreted Wason Selection Test: Wason (1960, 1968). See also Shaklee and Fischhoff (1982), Barron Beaty, and Hearshly (1988). Kahneman’s “They knew better” in Gilovich et al. (2002).

  Updike: The blurb is from Jaynes (1976).

  Brain hemispheric specialization: Gazzaniga and LeDoux (1978), Gazzaniga et al. (2005). Furthermore, Wolford, Miller, and Gazzaniga (2000) show probability matching by the left brain. When you supply the right brain with, say, a lever that produces desirable goods 60% of the time, and another lever 40%, the right brain will correctly push the first lever as the optimal policy. If, on the other hand, you supply the left brain with the same options, it will push the first lever 60 percent of the time and the other one 40—it will refuse to accept randomness. Goldberg (2005) argues that the specialty is along different lines: left-brain damage does not bear severe effects in children, unlike right-brain lesions, while this is the reverse for the elderly. I thank Elkhonon Goldberg for referring me to Snyder’s work; Snyder (2001). The experiment is from Snyder et al. (2003).

  Sock selection and retrofit explanation: The experiment of the socks is presented in Carter (1999); the original paper appears to be Nisbett and Wilson (1977). See also Montier (2007).

  Astebro: Astebro (2003). See “Searching for the Invisible Man,” The Economist, March 9, 2006. To see how the overconfidence of entrepreneurs can explain the high failure rate, see Camerer (1995).

  Dopamine: Brugger and Graves (1997), among many other papers. See also Mohr et al. (2003) on dopamine asymmetry.

  Entropy and information: I am purposely avoiding the notion of entropy because the way it is conventionally phrased makes it ill-adapted to the type of randomness we experience in real life. Tsallis entropy works better with fat tails.

  Notes on George Perec: Eco (1994).

  Narrativity and illusion of understanding: Wilson, Gilbert, and Centerbar (2003): “Helplessness theory has demonstrated that if people feel that they cannot control or predict their environments, they are at risk for severe motivational and cognitive deficits, such as depression.” For the writing down of a diary, see Wilson (2002) or Wegner (2002).

  E. M. Forster’s example: reference in Margalit (2002).

  National character: Terracciano et al. (2005) and Robins (2005) for the extent of individual variations. The illusion of nationality trait, which I usually call the “nationality heuristic,” does connect to the halo effect: see Rosenzweig (2006) and Cialdini (2001). See Anderson (1983) for the ontology of nationality.

  Consistency bias: What psychologists call the consistency bias is the effect of revising memories in such a way to make sense with respect to subsequent information. See Schacter (2001).

  Memory not like storage on a computer: Rose (2003), Nader and LeDoux (1999).

  The myth of repressed memory: Loftus and Ketcham (2004).

  Chess players and disconfirmation: Cowley and Byrne (2004).

  Quine’s problem: Davidson (1983) argues in favor of local, but against total, skepticism.

  Narrativity: Note that my discussion is not existential here, but merely practical, so my idea is to look at narrativity as an informational compression, nothing more involved philosophically (like whether a self is sequential or not). There is a literature on the “narrative self”—Bruner (2002) or whether it is necessary—see Strawson (1994) and his attack in Strawson (2004). The debate: Schechtman (1997), Taylor (1999), Phelan (2005). Synthesis in Turner (1996).

  “Postmodernists” and the desirability of narratives: See McCloskey (1990) and Frankfurter and McGoun (1996).

  Narrativity of sayings and proverbs: Psychologists have long examined the gullibility of people in social settings when faced with well-sounding proverbs. For instance, experiments have been made since the 1960s where people are asked whether they believe that a proverb is right, while another cohort is presented with the opposite meaning. For a presentation of the hilarious results, see Myers (2002).

  Science as a narrative: Indeed scientific papers can succeed by the same narrativity bias that “makes a story.” You need to get attention. Bushman and Wells (2001).

  Discovering probabilities: Barron and Erev (2003) show how probabilities are underestimated when they are not explicitly presented. Also personal communication with Barron.

  Risk and probability: See Slovic, Fischhoff, and Lichtenstein (1976), Slovic et al. (1977), and Slovic (1987). For risk as analysis and risk as feeling theory, see Slovic et al. (2002, 2003), and Taleb (2004c). See Bar-Hillel and Wagenaar (1991)

  Link between narrative fallacy and clinical knowledge: Dawes (1999) has a message for economists: see here his work on interviews and the concoction of a narrative. See also Dawes (2001) on the retrospective effect.

  Two systems of reasoning: See Sloman (1996, 2002), and the summary in Kahneman and Frederick (2002). Kahneman’s Nobel lecture sums it all up; it can be found at www.nobel.se. See also Stanovich and West (2000).

  Risk and emotions: Given the growing recent interest in the emotional role in behavior, there has been a growing literature on the role of emotions in both risk bearing and risk avoidance: the “risk as feeling” theory. See Loewenstein et al. (2001) and Slovic et al. (2003a). For a survey see Slovic et al. (2003b) and see also Slovic (1987). For a discussion of the “affect heuristic,” see Finucane et al. (2000). For modularity, see Bates (1994).

  Emotions and cognition: For the effect of emotions on cognition, see LeDoux (2002). For risk, see Bechara et al. (1994).

  Availability heuristic (how easily things come to mind): See Tversky and Kahneman (1973).

  Real incidence of catastrophes: For an insightful discussion, see Albouy (2002), Zajdenweber (2000), or Sunstein (2002).

  Terrorism exploitation of the sensational: See the essay in Taleb (2004c).

  General books on psychology of decision making (heuristics and biases): Baron (2000) is simply the most comprehensive on the subject. Kunda (1999) is a summary from the standpoint of social psychology (sadly, the author died prematurely); shorter: Plous (1993). Also Dawes (1988) and Dawes (2001). Note that a chunk of the original papers are happily compiled in Kahneman et al. (1982), Kahneman
and Tversky (2000), Gilovich et al. (2002), and Slovic (2001a and 2001b). See also Myers (2002) for an account on intuition and Gigerenzer et al. (2000) for an ecological presentation of the subject. The most complete account in economics and finance is Montier (2007), where his beautiful summary pieces that fed me for the last four years are compiled—not being an academic, he gets straight to the point. See also Camerer, Loewenstein, and Rabin (2004) for a selection of technical papers. A recommended review article on clinical “expert” knowledge is Dawes (2001).

  More general psychology of decision presentations: Klein (1998) proposes an alternative model of intuition. See Cialdini (2001) for social manipulation. A more specialized work, Camerer (2003), focuses on game theory.

  General review essays and comprehensive books in cognitive science: Newell and Simon (1972), Varela (1988), Fodor (1983), Marr (1982), Eysenck and Keane (2000), Lakoff and Johnson (1980). The MIT Encyclopedia of Cognitive Science has review articles by main thinkers.

  Evolutionary theory and domains of adaptation: See the original Wilson (2000), Kreps and Davies (1993), and Burnham (1997, 2003). Very readable: Burnham and Phelan (2000). The compilation of Robert Trivers’s work is in Trivers (2002). See also Wrangham (1999) on wars.

  Politics: “The Political Brain: A Recent Brain-imaging Study Shows That Our Political Predilections Are a Product of Unconscious Confirmation Bias,” by Michael Shermer, Scientific American, September 26, 2006.

  Neurobiology of decision making: For a general understanding of our knowledge about the brain’s architecture: Gazzaniga et al. (2002). Gazzaniga (2005) provides literary summaries of some of the topics. More popular: Carter (1999). Also recommended: Ratey (2001), Ramachandran (2003), Ramachandran and Blakeslee (1998), Carter (1999, 2002), Conlan (1999), the very readable Lewis, Amini, and Lannon (2000), and Goleman (1995). See Glimcher (2002) for probability and the brain. For the emotional brain, the three books by Damasio (1994, 2000, 2003), in addition to LeDoux (1998) and the more detailed LeDoux (2002), are the classics. See also the shorter Evans (2002). For the role of vision in aesthetics, but also in interpretation, Zeki (1999).