The Black Swan: The Impact of the Highly Improbable

The extreme impact of rare and unpredictable events

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Nathan Guo@nathan_yg · VC Intern at Lux Capital
I'm a big fan of Nassim Taleb's writing despite his often acerbic Twitter comments. This book really put him on the map, as it presciently described how difficult it is to predict "black swan events" just a year before the Great Financial Crisis. This book was predated by "Fooled by Randomness" which he also authored, which examines adjacent topics related to human biases, especially in relation to financial markets. If you are interested at all in finance, you should read Black Swan. One of my biggest takeaways from the book I had is to always try to understand whether a system is part of Mediocristan or Extremistan, i.e. whether a system follows normal behavior or power law behavior. He examines some of the implications of mistaking what sort of system you are studying. For example, the Black-Scholes model for pricing options is based on a normal distribution for stock prices, when it is pretty clear that that is not realistic. Outside of the financial markets, "Black Swan" also has important implications for behavior psychology. The famous behavioral psychologist Daniel Kahneman was quoted saying "The Black Swan changed my view of how the world works," and has stated that it had a big influence on his writing in "Thinking, Fast and Slow." For this reason, there are also many parallels between this book and "The Signal and the Noise" by Nate Silver, although this book dwells less on Bayesian statistics. All in all, Black Swan is an extremely important book in understanding how humans think, and how that behavior can result in mistakes in aggregate.