The Black Swan

Book: The Black Swan: The Impact of the Highly Improbable
Author: Nassim Nicholas Taleb
Publisher: Penguin Books
Pages: 366
Price: Rs 395

Eisha Sarkar
Posted on Mumbai Mirror on Wednesday, October 20, 2010 at 02:42:42 PM

"Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the current tight real-estate market will allow you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menacingly." The Black Swan could be one of those books. A staple read for MBAs, CEOs, leaders of the state (e.g. British Prime Minister David Cameron who uses the black swan robustness idea for his programme) and behavioral economists such as Malcolm Gladwell, Nassim Nicholas Taleb's bestseller is more likely to remain on your shelf for months before you open it. And when you do, you wonder why it has taken you this long.

New York-based Taleb, a philosophical essayist, scholar and practitioner of mathematical financial economics, has come up with a compelling book that describes the random events that underlie our lives, from bestsellers to world disasters. They are nearly impossible to predict, like the existence of the black swan was till Australia was discovered. Events like 9/11, the collapse of long-term capital management and most wars are Black Swans.  No one sees them coming, but in retrospect people manage to explain them. Taleb talks about the scandals of prediction, why the bell curve in statistics is the Great Intellectual Fraud and the aesthetics of randomness. He focuses on the outliers ("normal is often irrelevant"), dismisses newspapers and risk-assessment experts, resists schedules ("Missing a train is only painful if you run after it!"), makes 19th century German mathematician Carl Friedrich Gauss a villain and cautions about the pull of the sensational:

"Terrorism kills, but the biggest killer remains the environment, responsible for close to 1.3 million deaths annually. But terrorism causes outrage, which makes us overestimate the likelihood of a potential terrorist attack - and react more violently to one when that happens. We feel the sting of man-made damage far more than that caused by nature."

While understanding the risk in markets is the central theme of the book, Taleb manages well to blend skepticism with certainties, conservatism with aggressiveness, psychology with mathematics, history with predictability and the intellectual with practicality. He keep going back to his roots in the Levantine (he refuses to call it Lebanon) to come up with stories, narratives, reports and anecdotes to spice up his commentary. He introduces new ideas, concepts such as Mediocristan and Extremistan, new words like antibrary and even little-known authors and philosophers who defied convention with their theories. He concludes with the message, "You can always control what you do; so make this your end."

In spite of all the talk of randomness it contains, the sequence of the book "follows a simple logic from what can be labelled purely literary (in subject and treatment) to what can be deemed entirely scientific (in subject though not in treatment)". While the prose is simple, some of the concepts in the book are purely mathematical. By way of cross-referencing, Taleb subtly nudges you to re-read some of the chapters to understand them better. And what you certainly don’t want to miss are the footnotes on each page. Immensely readable and packed with humour, sarcasm and cynicism, they come up as welcome breaks between the heavy prose.

 Provocative and powerful, the Black Swan is a masterpiece. Don't let it rest unread on your shelf for too long.