nntaleb: Note 118 www.fooledbyrandomness.com/notebook.htm

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Great story about Eisenhower’s own Black Swan as well.

According to Taleb in “The Black Swan”, the human mind suffers from three ailments when it comes to looking back and understanding history, or even the events that shape our own personal history:

1. The illusion of understanding:  Plato, Newton, many scientists have discovered simple rules that predict the way the universe works.  I have a preference for simple formulae that predict behaviour. I love to generalise from my experience. The world is more complicated (or random) than the simple models we would like to use. Nando Parrado talks about the biggest decision in his life being the choice of seat 9B on an airplane 36 years ago (see my previous post on Nando Parrado here).
2. The distortion of hindsight: we underplay luck in our analysis of the past.  We seek hindsight validation of why Google is number 1, why Starbucks has 14,000 stores and another Seattle coffee shop is still just that, why one person becomes rich whilst another becomes poor – and we latch on to the simple models that we then try to generalise and apply. Each case of success is due to a massive quantity of luck (well discussed in Malcolm Gladwell’s book “Outliers”), combined with some decent input ingredients (that are well worthy of study and copy).
3. The overvaluation of authoritive people: they know lots about the past… but the future is not going to be just like the past – yet we shut down our brains and listen blindly when “the expert” walks into the room. They are the type of people who would say that there is no such thing as a purple cow. You will not see what you are not looking for, especially if you do not believe that it could exist. (watch this 60 sec video first – and tell me how many passes of the basketball are completed by the white team).

So, if prediction of the future is impossible, should we close down business schools, history courses, cancel company strategy planning sessions? 

Shared by JohnH

With NNT on hiatus as it were, my attention is being drawn to people who are talking about his ideas. I don’t really have the time (or smarts really) to do point by point analysis of each individual’s application (or criticism ) of NNT’s ideas, but I do think it’s interesting to see how these ideas are spreading.

Shared by JohnH

This links to NNT’s Amazon book reviews. HatTip to Dave Lull.

				Explaining Social Behavior: More Nuts and Bolts for the Social Sciences by Jon Elster Edition: Paperback Price: $23.76 Availability: In Stock		39 used & new from $19.73
10 of 10 people found the following review helpful: Simply the best: read it at least twice, November 23, 2007 I read this book twice. The first time, I thought that it was excellent, the best compendium of ideas of social science by arguably the best thinker in the field. I took copious notes, etc. I agreed with its patchwork-style approach to rational decision making. I knew that it had huge insights applicable to my refusal of general theories [they don’t work], rather limit ourselves to nuts and bolts [they work]. Then I started reading it again, as the book tends to locate itself by my bedside and sneaks itself in my suitcase when I go on a trip. It is as if the book wanted me to read it. It is what literature does to you when it is at its best. So I realized why: it had another layer of depth –and the author distilled ideas from the works of Proust, La Rochefoucault, Tocqueville, Montaigne, people with the kind of insights that extend beyond the ideas, and that makes you feel that a reductionist academic treatment of the subject will necessary distort it [& somehow Elster managed to combine Montaigne and Kahneman-Tversky]. So as an anti-Platonist I finally found a rigorous treatment of human nature that is not Platonistic –not academic (in the bad sense of the word). Nassim Nicholas Taleb  Comment  Permalink
				The Discovery of France: A Historical Geography from the Revolution to the First World War by Graham Robb Edition: Hardcover Price: $18.45 Availability: In Stock		49 used & new from $3.85
37 of 40 people found the following review helpful: An answer to so many questions, November 11, 2007 This book has wonderful qualities that I am certain will be picked up by other reviewers. But I would like to add the following. This is the most profound examination of how nationality is enforced on a group of people, with the internal colonization process and the stamping out of idiosyncratic traits. As someone suspicious of government and state control, I was wondering how France did so well in spite of having a big government. This book gave me the answer: it took a long time for the government and the “nation” to penetrate the depth of deep France, “la France profonde”. It was not until recently that French was spoken by the majority of the citizens. Schools taught French but it was just like Greek or Latin: people forgot it right after they finished their (short) school life. For a long time France’s villages were unreachable. A great book, a great investigation.  Comment  Permalink
				Good Calories, Bad Calories by Gary Taubes Edition: Hardcover Availability: Currently unavailable		73 used & new from $6.47
23 of 30 people found the following review helpful: A True Empiricist, A True Scientist, October 16, 2007 Gary Taubes is a true empiricist. I can’t believe people hold on to the Platonicity of the thermodynamic theory of diet (calorie in = calorie out). Read it twice, once for the diet, once a a rich document in the history of science. Nassim Nicholas Taleb

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In the interest of at least appearing to have some balance, from time to time I’ll share a well-written, intelligent criticism of NNT. This is by Eric Falkenstein, author of Finding Alpha.

Nassim Taleb is a former trader who wrote a textbook on option and market making, and then became more philosophical in his best seller Fooled by Randomness, and now in The Black Swan.  His big idea is that sometimes, unexpecting things happen: countries dissolve into anarchy, wars start, unknown authors become famous. His secondary ideas are variations on this theme, that people, especially experts, are generally biased, overconfident, and rationalize past event so they appear deterministic. Stated baldly, these assertion are hardly novel but true enough, and one can argue about their relevance in various cases. As a highly popular presentation of ideas near to my interests and vocation, I think it is worth critically examining if there is anything to his particular contribution to the literature on cognitive biases or social failures. My conclusion, in short, is no.