As usual, the followings are some of the important points (in my humble interpretation of the book):
1) Black Swan logic makes what you don't know far more relevant than what you do know.
2) The more unexpected the success of such a venture, the smaller the number of competitors, and the more successul the entrepreneur who implements the idea.
3) The payoff of a human venture is, in general, inversely proportional to what it is expected to be.
4) .........(on investment and business)......to tinker as much as possible and try to collect as many Black Swan opportunities as you can.
5) Financial markets, commodity prices, inflation rates and economic data are matters that belong to Extremistan. In Extremistan, one unit can easily affect the total in a disproportionate way. In this world, you should always be suspicious of the knowledge you derive from data. This is a very simple test of uncertainty that allows you to distinguish between the two kinds of randomness.
6) Black Swan is a sucker's problem. In other words, it occurs relative to your expectation. (Sounds familiar, don't tell me you have never been suckered. Ever wondered why the rich just seems to get richer and the poor just get poorer?).
7) It remains the case that you know what is wrong with a lot more confidence than you know what is right.
8) Mechanism of conjectures and refutations, which works as follows: you formulate a (bold) conjecture and you start looking for the observation that would prove you wrong. This is the alternative to our search for confirmatory instances.
9) Patients who spend fifteen minutes every day writing an account of their daily troubles feel indeed better about what has befallen them. You feel less guilty for not having avoided certain events; you feel less responsible for it. Things appear as if they were bound to happen.
10) Lottery buyers overestimate their chances of winning because they visualize such a potent payoff - in fact, they are so blind to the odds that they treat odds of one in a thousand and one in a million almost in the same way. (Ever wondered why Tan Sri Lim and his family, Vincent Tan and Ananda Krishnan is wealthier than his customers? :p)
11) Researchers have mapped our activities into (roughly) a dual mode of thinking, which they separate as "System 1" and "System 2", or the experiential and cogitative. In brief, "System 1" is what we call "intuition" while "System 2" is what we call thinking. Most of our mistakes in reasoning come from using System 1 when we are in fact thinking that we are using System 2. Much of the trouble with human nature resides in our inability to use much of System 2, or to use it in a prolonged way without having to take a long beach vacation.
12) We can use our ability to convince with a story that conveys the right message.
13) .......it is tough to deal with the social consequences of the appearance of continuous failure.
14) ....to have a pleasant life you should spread these small "affects" across time as evenly as possible. Plenty of mildly good news is preferable to one single lump of great news.
15) It is better to lump all your pain into a brief period rather than have it spread out over a longer one.
16) Humans will believe anything you say provided that you do not exhibit the smallest shadow of diffidence; like animals, they can detect the smallest crack in your confidence before you express it. The trick is to be as smooth as possible in personal manners. The problem with business people, is that if you act like a loser they will treat you as a loser - you set the yardstick yourself. It is not what you are telling people, it is how you are saying it. But you need to remain understated and maintain an Olympian calm in front of others.
17) One Diagoras, a nonbeliever in the gods, was shown a painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning. Diagoras asked, "Where were the pictures of those who prayed, then drowned?" (Gets you thinking right? We always see this tactic in salespeople where they show you the benefits and rosy pictures to justify what they are selling but it would be interesting if we ask the "right" question like Diagoras and see how they react.)
18) It is much easier to sell "Look what I did for you" than "Look what I avoided for you". (This explains why strikers get higher paid compared to defenders in football. A striker always appear to win the game with their goals but it is very difficult for a defender to claim how many goals he has prevented).
19) We are explanation-seeking animals who tend to think that everything has an identifiable cause and grab the most apparent one as the explanation.
20) Note here that I (Nassim Nicholas Taleb) am not saying causes do not exist; do not use this argument to avoid trying to learn from history. All I am saying is that it is not so simple; be suspicious of the "because" and handle it with care - particularly in situations where you suspect silent evidence.
21) In addition to the confirmation error and the narative fallacy, the manifestations of silent evidence further distort the role and importance of Black Swans.
22) Ludic fallacy - the attributes of the uncertainty we face in real life have little connection to the sterilized ones we encounter in exams and games. (The trap which academics with little practical experience often falls into. This can possibly explains why street-smart people are generally more successful compared to PhD holders).
23) It is why those who "study" and fare well in school have a tendency to be suckers for the ludic fallacy.
24) We respect what has happened, ignoring what could have happened. In other words, we are naturally shallow and superficial - and we do not know it.
25) Train yourself to spot the difference between the sensational and the empirical.
26) Epistemic arrogance bears a double effect: we overestimate what we know, and underestimate uncertainty, by compressing the range of possible uncertain states (i.e., by reducing the space of the unknown).
27) The more information you give someone, the more hypotheses they will formulate along the way, and the worse off they will be. They see more random noise and mistake it for information.
28) The problem with experts is thay they do not know what they do not know.
29) Those who had a big reputation were worse predictors than those who had none.
30) Plans fail because of what we have called tunneling, the neglect of sources of uncertainty outside the plan itself.
31) ........it is the lower bound of estimates (i.e., the worst case) that matters when engaging in a policy - the worst case is far more consequential than the forecast itself.
32) We see flaws in others and not in ourselves.
33) We have a natural tendency to listen to the expert, even in fields where there may be no experts.
34) Do not listen to economic forecasters or predictors in social science (they are mere entertainers), but do make your own forecast for the picnic.
35) "Barbell" strategy used by Taleb as a trader. If you know that you are vulnerable to prediction errors, and if you accept that most "risk measures" are flawed, because of the Black Swan, then your strategy is to be as hyperconservative and hyperaggressive as you can be instead of being mildly aggressive or conservative.
36)........the most successful businesses are precisely those that know how to work around inherent unpredictability and even exploit it.
37) Go to parties! (This is where you may get breakthrough ideas rather living in our own small world. But there is a catch, choose wisely which parties to attend ;)
38) This idea that in order to make a decision you need to focus on the consequences (which you can know) rather than the probability (which you can't know) is the central idea of uncertainty.
39) Random outcomes, or an arbitrary situation, can also explain success, and provide the initial push that leads to a winner-take-all result.
40) It is easier for the rich to get richer, for the famous to become more famous.
41) Measures of uncertainty that are based on the bell curve simply disregard the possibility, and the impact, of sharp jumps or discontinuities and are, therefore, inapplicable in Extremistan.
42) Probabilities are dependent on history, and the first central assumption leading to the Gaussian bell curve fails in reality.
43) In the end it is those who derive consequences and seize the importance of the ideas, seeing their real value, who win the day.
44) 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 the 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.
45) 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.
46) Be aggressive, be the one to resign, if you have the guts.
47) It is more difficult to be a loser in a game you set up yourself.
48) 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. (You control your own life, don't let others determine your fate and most importantly, your happiness)
This book is definitely worth reading as it jolts the way you think about events. I really like the example about the well-fed turkey and how dangerous it is for us to extrapolate future events. We certainly do not want to be the turkey assuming that we will be continuously well-fed based on past experience (or data) but in reality, each day of being well-fed means closer towards being slaughtered! Personally, I have also made a note to re-read Chapter 19 if the day seems gloomy and sad. I wish you the same joy as I have in reading the book.
No comments:
Post a Comment