Tale 1400063515 2p all r1 - Nassim Nicholas Taleb

1 GLOSSARYA cademic libertarian: someone (like myself) who considers that knowl-edge is subjected to strict rules but not institutional authority, as the in-terest of organized knowledge is self-perpetuation, not necessarilytruth (as with governments). Academia can suffer from an acute expertproblem ( ), producing cosmetic but fake knowledge, particularlyin narrative disciplines( ), and can be a main source of black strategy: A strategy of seeking gains by collecting positive ac-cidents from maximizing exposure to good black Swans. Barbell strategy: a method that consists of taking both a defensive attitudeand an excessively aggressive one at the same time, by protecting assetsfrom all sources of uncertainty while allocating a small portion forhigh-risk : a philistine with cosmetic, nongenuine culture.

2 Niet-zsche used this term to refer to the dogma-prone newspaper reader andopera lover with cosmetic exposure to culture and shallow depth. I ex-tend it to the buzzword-using researcher in nonexperimental fieldswho lacks in imagination, curiosity, erudition, and culture and isclosely centered on his ideas, on his discipline. This prevents himfrom seeing the conflicts between his ideas and the texture of Swan blindness: the underestimation of the role of the black Swan,and occasional overestimation of a specific 1/25/07 2:08 PM Page 307 black Swan ethical problem: Owing to the nonrepeatable aspect of theBlack Swan, there is an asymmetry between the rewards of those whoprevent and those who error (or Platonic confirmation): You look for instances thatconfirm your beliefs, your construction (or model) and find problem (or expert problem ): Some professionals have nodifferential abilities from the rest of the population, but for some rea-son, and against their empirical records, are believed to be experts.

3 Clinical psychologists, academic economists, risk experts, statisti-cians, political analysts, financial experts, military analysts, CEOs,et cetera. They dress up their expertise in beautiful language, jargon,mathematics, and often wear expensive : A theory-free method of looking at history by accumulatingfacts with minimal generalization and being conscious of the side ef-fects of making causal arrogance: Measure the difference between what someone actu-ally knows and how much he thinks he knows. An excess will implyarrogance, a deficit humility. An epistemocrat is someone of epistemichumility, who holds his own knowledge in greatest opacity: Randomness is the result of incomplete information atsome layer.

4 It is functionally indistinguishable from true or physi-cal : the province where the total can be conceivably impacted bya single of silent evidence: Looking at history, we do not see the full story,only the rosier parts of the by randomness: the general confusion between luck and determin-ism, which leads to a variety of superstitions with practical conse-quences, such as the belief that higher earnings in some professions aregenerated by skills when there is a significant component of luck blindness: our natural inability to take into account the propertiesof the future like autism, which prevents one from taking into ac-count the existence of the minds of s madman: someone who makes impeccable and rigorous reasoningfrom faulty premises such as Paul Samuelson, Robert Merton theminor, and Gerard Debreu thus producing phony models of uncer-tainty that make us vulnerable to black fallacy: the na ve analogy equating an investment in 1/25/07 2:08 PM Page 308ing positive black Swans to the accumulation of lottery tickets.

5 Lotterytickets are not fallacy (or uncertainty of the nerd):the manifestation of the Platonicfallacy in the study of uncertainty; basing studies of chance on the nar-row world of games and dice. A-platonic randomness has an addi-tional layer of uncertainty concerning the rules of the game in real bell curve (Gaussian), or GIF (Great Intellectual Fraud), is the ap-plication of the ludic fallacy to Gray Swan: black Swans that we can somewhat take intoaccount earthquakes, blockbuster books, stock market crashes butfor which it is not possible to completely figure out their properties andproduce precise : the province dominated by the mediocre, with few extremesuccesses or failures. No single observation can meaningfully affect theaggregate.

6 The bell curve is grounded in Mediocristan. There is a quali-tative difference between Gaussians and scalable laws, much like gasand discipline: the discipline that consists in fitting a convincing andwell-sounding story to the past. Opposed to experimental fallacy: our need to fit a story or pattern to a series of connectedor disconnected facts. The statistical application is data knowledge: the belief that what cannot be Platonized and studieddoes not exist at all, or is not worth considering. There even exists aform of skepticism practiced by the fold: the place where our Platonic representation enters into con-tact with reality and you can see the side effects of : the focus on those pure, well-defined, and easily discernibleobjects like triangles, or more social notions like friendship or love, at thecost of ignoring those objects of seemingly messier and less distribution: the model used to calculate the odds of differentevents, how they are distributed.

7 When we say that an event is dis-tributed according to the bell curve, we mean that the Gaussian bellcurve can help provide probabilities of various of induction: the logical-philosophical extension of the BlackSwan as incomplete information: simply, what I cannot guess israndom because my knowledge about the causes is incomplete, notnecessarily because the process has truly unpredictable 1/25/07 2:08 PM Page 309 Retrospective distortion: examining past events without adjusting for theforward passage of time. It leads to the illusion of posterior problem: It is easier to predict how an ice cube wouldmelt into a puddle than, looking at a puddle, to guess the shape of theice cube that may have caused it.

8 This inverse problem makes narra-tive disciplines and accounts (such as histories) fallacy: the confusion of absence of evidence of black Swans(or something else) for evidence of absence of black Swans (or some-thing else). It affects statisticians and other people who have lost partof their reasoning by solving too many of prediction: the poor prediction record in some forecasting entities (particularly narrative disciplines) mixed with verbose com-mentary and a lack of awareness of their own dire past of the abstract: favoring contextualized thinking over more ab-stract, though more relevant, matters. The death of one child is atragedy; the death of a million is a statistic. Statistical regress argument (or the problem of the circularity of statistics):We need data to discover a probability distribution.

9 How do we knowif we have enough? From the probability distribution. If it is a Gauss-ian, then a few points of data will suffice. How do we know it is aGaussian? From the data. So we need the data to tell us what probabil-ity distribution to assume, and we need a probability distribution totell us how much data we need. This causes a severe regress argument,which is somewhat shamelessly circumvented by resorting to theGaussian and its of the deluded: people who tunnel on sources of uncertaintyby producing precise sources like the great uncertainty principle, orsimilar, less consequential matters, to real life; worrying about sub-atomic particles while forgetting that we can t predict tomorrow 1/25/07 2:08 PM Page 310