My Highlights From Nassim Taleb’s The Black Swan

I just finished up Nassim Taleb’s The Black Swan. I offer neither a review nor a summary below. What you will find are all the passages I highlighted as I read this book on the kindle. I’ve done some lite editing. But there are places where I may have pulled passages in the middle of sentences.

Derek Sivers does this with the books he reads. And I’ve long thought of doing something similar when I finish a book. So, here we go.

My Takeaway

We don’t know what we don’t know. And we don’t take this reality into account when we think about the future. And we  tend to assess the past too selectively and without taking into account the myriad possible alternate causes of past events. We often make bad decision based on too much information or from an overly-inflated sense of confidence in experts.

Actionable Advice

  • If you’re carrying debt around, then you’re vulnerable to an unforeseen bad unexpected event. You also aren’t going to have cash on hand for opportunities that might arise — the good black swan.
  • Don’t overdose on breaking news. If you have to watch the news, try to read a weekly update instead of something more instantaneous. Better yet, spend the time you would use watching the news, and read books instead. Deep thought makes you less vulnerable to uninformed and overconfident analysis.
  • Go to lots of parties so that you are exposed to more opportunities. Spend time in conversation with people. Have a solid network of thoughtful people and engage with them,
  • These are minor points, but I’m going to read a biography of Aristotle Onassis. And I’m going to take more slow and long walks tosupplementt the three days per week.
  • Here is yet another book that relies heavily on Thinking Fast and Slow. I think if you can really get the theories in that book, you’ll know what’s in just about every business or persuasion book.



A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives.

Fads, epidemics, fashion, ideas, the emergence of art genres and schools. All follow these Black Swan dynamics. Literally, just about everything of significance around you might qualify.

Ask your portfolio manager for his definition of “risk,” and odds are that he will supply you with a measure that excludes the possibility of the Black Swan—hence one that has no better predictive value for assessing the total risks than astrology

And, if you follow my argument, why does reading the newspaper actually decrease your knowledge of the world?

It is easy to see that life is the cumulative effect of a handful of significant shocks.

Black Swan logic makes what you don’t know far more relevant than what you do know.

The payoff of a human venture is, in general, inversely proportional to what it is expected to be.

We can easily trigger Black Swans thanks to aggressive ignorance—like a child playing with a chemistry kit.

The strategy is, then, to tinker as much as possible. The problem lies in the structure of our minds: we don’t learn rules, just facts, and only facts.

Who gets rewarded, the central banker who avoids a recession or the one who comes to “correct” his predecessors’ faults and happens to be there during some economic recovery?

We humans are not just a superficial race (this may be curable to some extent); we are a very unfair one.

The first is to rule out the extraordinary and focus on the “normal.” The examiner leaves aside “outliers” and studies ordinary cases. The second approach is to consider that in order to understand a phenomenon, one needs first to consider the extremes—particularly if, like the Black Swan, they carry an extraordinary cumulative effect.

You need a story to displace a story. Metaphors and stories are far more potent (alas) than ideas; they are also easier to remember and more fun to read. If I have to go after what I call the narrative disciplines, my best tool is a narrative. Ideas come and go, stories stay.

Living on our planet, today, requires a lot more imagination than we are made to have. We lack imagination and repress it in others.

I stick my neck out and make a claim, against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug.

also make the bolder (and more annoying) claim that in spite of our progress and the growth in knowledge, or perhaps because of such progress and growth, the future will be increasingly less predictable,

Part One – Umberto Eco’s Antilibrary, or How We Seek Validation

Note that the Black Swan comes from our misunderstanding of the likelihood of surprises, those unread books, because we take what we know a little too seriously.

History and societies do not crawl. They make jumps.

While we have a highly unstable memory, a diary provides indelible facts recorded more or less immediately;

Cabdrivers did not believe that they understood as much as learned people—really, they were not the experts and they knew

The overlap between newspapers was so large that you would get less and less information the more you read.

What is interesting to me as a probabilist is that some random event makes one group that initially supports an issue ally itself with another group that supports another issue, thus causing the two items to fuse and unify … until the surprise of the separation.

Any reduction of the world around us can have explosive consequences since it rules out some sources of uncertainty; it drives us to a misunderstanding of the fabric of the world.

For instance, you may think that radical Islam (and its values) are your allies against the threat of Communism, and so you may help them develop, until they send two planes into downtown Manhattan.

[I] then completely gave up reading newspapers and watching television, which freed up a considerable amount of time (say one hour or more a day, enough time to read more than a hundred additional books per year, which, after

As a matter of fact, in my mind it was far more than a possibility. I felt in my spine the weight of the epistemic arrogance of the human race.*

During the one or two years after my arrival at Wharton, I had developed a precise but strange specialty: betting on rare and unexpected events, those that were on the Platonic fold, and considered “inconceivable” by the Platonic “experts.” Recall that the Platonic fold is where our representation of reality ceases to apply—but we do not know it.

This is sometimes called “f*** you money,” which, have always been taken aback at the high number of people in whom an astonishingly high income led to additional sycophancy as they became more dependent on their clients and employers and more addicted to making even more money.)

Note that the designation f*** you corresponds to the exhilarating ability to pronounce that compact phrase before hanging up the phone.

wanted to become a flâneur, a professional meditator, sit in cafés, lounge, unglued to desks and organization structures, sleep as long as I needed, read voraciously, and not owe any explanation to anybody. I wanted to be left alone in order to build, small steps at a time, an entire system of thought based on my Black Swan Theory.

When people at cocktail parties asked me what I did for a living, I was tempted to answer, “I am a skeptical empiricist and a flâneur-reader, someone committed to getting very deep into an idea,” but I made things simple by saying that I was a limousine driver. I informed her (in English) that I was a limousine driver, proudly insisting that I only drove “very upper-end” cars. An icy silence lasted the whole flight, and, although I could feel the tension, it allowed me to read in peace.

If you are an idea person, you do not have to work hard, only think intensely.

In Extremistan, inequalities are such that one single observation can disproportionately impact the aggregate, or the total.

The Tyranny of the Accident
Another way to rephrase the general distinction is as follows: Mediocristan is where we must endure the tyranny of the collective, the routine, the obvious, and the predicted; Extremistan is where we are subjected to the tyranny of the singular, the accidental, the unseen, and the unpredicted.

If you are subject to Extremistan-based speculation, however, you can gain or lose your fortune in a single minute.

The turkey problem can be generalized to any situation where the same hand that feeds you can be the one that wrings your neck.

Mistaking a naïve observation of the past as something definitive or representative of the future is the one and only cause of our inability to understand the Black Swan.

Black Swans take time to show their effect while negative ones happen very quickly—it is much easier and much faster to destroy than to build. (During

Let me insist that erudition is important to me. It signals genuine intellectual curiosity. It accompanies an open mind and the desire to probe the ideas of others. Above all, an erudite can be dissatisfied with his own knowledge, and such dissatisfaction is a wonderful shield against Platonicity, the simplifications of the five-minute manager, or the philistinism of the overspecialized scholar. Indeed, scholarship without erudition can lead to disasters.

So, this book was not written by a Sufi mystic, or even by a skeptic in the ancient or medieval sense, or even (we will see) in a philosophical sense, but by a practitioner whose principal aim is to not be a sucker in things that matter, period.

I am skeptical in matters that have implications for daily life. In a way, all I care about is making a decision without being the turkey.

“I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative,” This asymmetry is immensely practical. It tells us that we do not have to be complete

Popper introduced the 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.

For instance, when children are presented with the picture of a single member of a group and are asked to guess the properties of other unseen members, they are capable of selecting which attributes to generalize. Show a child a photograph of someone overweight, tell her that he is a member of a tribe, and ask her to describe the rest of the population: she will (most likely) not jump to the

The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding.

It takes considerable effort to see facts (and remember them) while withholding judgment and resisting explanations. And this theorizing disease is rarely under our control: it is largely anatomical, part of our biology, so fighting it requires fighting one’s own self.

Try to be a true skeptic with respect to your interpretations and you will be worn out in no time.

a more appropriate solution is to make the event appear more unavoidable. Hey, it was bound to take place and it seems futile to agonize over it. How can you do so? Well, with a narrative. 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.

Keeping a diary is the least you can do in these circumstances.

Could it be that fiction reveals truth while nonfiction is a harbor for the liar? Could it be that fables and stories are closer to the truth than is the thoroughly fact-checked ABC News?

The next time you are asked to discuss world events, plead ignorance, and give the arguments I offered in this chapter casting doubt on the visibility of the immediate cause. You will be told that “you overanalyze,” or that “you are too complicated.” All you will be saying is that you don’t know!

Most of our mistakes in reasoning come from using System 1 when we are in fact thinking that we are using System 2. How?

Since we react without thinking and introspection, the main property of System 1 is our lack of awareness of using it!

The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories.

Another approach is to predict and keep a tally of the predictions. Finally, there may be a way to use a narrative—but for a good purpose.

Only a diamond can cut a diamond; we can use our ability to convince with a story that conveys the right message—what storytellers seem to do.

Believe me, it is tough to deal with the social consequences of the appearance of continuous failure. We are social animals; hell is other people.

Making $ 1 million in one year, but nothing in the preceding nine, does not bring the same pleasure as having the total evenly distributed over the same period, that is, $ 100,000

As a matter of fact, your happiness depends far more on the number of instances of positive feelings, what psychologists call “positive affect,” than
Highlight(yellow) – Human Nature, Happiness, and Lumpy Rewards

So 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

Mother Nature destined us to derive enjoyment from a steady flow of pleasant small, but frequent, rewards. As I said, the rewards do not have to be large, just frequent—a little bit here, a little bit there.

It is better to lump all your pain into a brief period rather than have it spread out over a longer one.

It may be a banality that we need others for many things, but we need them far more than we realize, particularly for dignity and respect.

Indeed, we have very few historical records of people who have achieved anything extraordinary without such peer validation—but we have the freedom to choose our peers.

If you engage in a Black Swan–dependent activity, it is better to be part
some business bets in which one wins big but infrequently, yet loses small but frequently, are worth making if others are suckers for them and if you have the personal and intellectual stamina. But you need such stamina. You also need to deal with people in your entourage heaping all manner of insult on you, much of it blatant. People often accept that a financial strategy with a small chance of success is not necessarily a bad one as long as the success is large enough to justify it. For a spate of psychological reasons, however,
Contrary to popular belief, these small, seemingly harmless stressors do not strengthen you; they can amputate part of your self.

What does not kill you makes you weaker.

Humans will believe anything you say provided you do not exhibit the smallest shadow of diffidence;

The trick is to be as smooth as possible in personal manners. It is much easier to signal self-confidence if you are exceedingly polite and friendly; you can control people without having to offend their sensitivity.

There is no absolute measure of good or bad. It is not what you are telling people, it is how you are saying it.

Silent evidence is what events use to conceal their own randomness, particularly the Black Swan type of randomness.

We may enjoy what we see, but there is no point reading too much into success stories because we do not see the full picture.

There may be some differences in skills, but what truly separates the two is for the most part a single factor: luck. Plain luck.

But this does not mean we (humans) should feel guilty for extinctions around us; nor does it mean that we should act to stop them—species were coming and going before we started messing up the environment. There is no need to feel moral responsibility for every endangered species.

A life saved is a statistic; a person hurt is an anecdote.

My being here is a consequential low-probability occurrence, and I tend to forget it.

Note that a “history” is just a series of numbers through time. The numbers can represent degrees of wealth, fitness, weight, anything.

be suspicious of the “because” and handle it with care—

When I expressed my amazement to Laurence, another finance person who was sitting next to me, he told me that the military collected more genuine intellects and risk thinkers than most if not all other professions. Defense people wanted to understand the epistemology of risk.

Probability is a liberal art; it is a child of skepticism, not a tool for people with calculators on their belts to satisfy their desire to produce fancy calculations and certainties.

Conclusion: A back-of-the-envelope calculation shows that the dollar value of these Black Swans, the off-model hits and potential hits I’ve just outlined, swamp the on-model risks by a factor of close to 1,000 to 1. The casino spent hundreds of millions of dollars on gambling theory and high-tech surveillance while the bulk of their risks came from outside their models.

propose that if you want a simple step to a higher form of life, as distant from the animal as you can get, then you may have to denarrate, that is, shut down the television set, minimize time spent reading newspapers, ignore the blogs. Train your reasoning abilities to control your decisions; nudge System 1 (the heuristic or experiential system) out of the important ones. Train yourself to spot the difference between the sensational and the empirical. This insulation from the toxicity of the world will have an additional benefit: it will improve your well-being.

Also, bear in mind how shallow we are with probability, the mother of all abstract notions. You do not have to do much more in order to gain a deeper understanding of things around you. Above all, learn to avoid “tunneling.”

Part Two – We Just Can’t Predict

but if you look at, say, situations where the odds are one in a hundred, one in a thousand, or one in a million, then the errors become monstrous. The longer the odds, the larger the epistemic arrogance.

you study Onassis’s life, which I spent part of my early adulthood doing, you would notice an interesting regularity: “work,” in the conventional sense, was not his thing. He did not even bother to have a desk, let alone an office. He was not just monitoring. Yet his main tool was a notebook, which contained all the information he needed. Onassis spent his life trying to socialize with the rich and famous, and to pursue (and collect) women. He generally woke up at noon. If he needed legal advice, he would summon his lawyers to some nightclub in Paris at two A.M. He was said to have an irresistible charm, which helped him take advantage of people.

additional knowledge of the minutiae of daily business can be useless, even actually toxic,

The problem is that our ideas are sticky: once we produce a theory, we are not likely to change our minds—so those who delay developing their theories are better off.

When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions,

Two mechanisms are at play here: the confirmation bias that we saw in Chapter 5, and belief perseverance, the tendency not to reverse opinions you already have. Remember that we treat ideas like possessions, and it will be hard for us to part with them.

Listening to the news on the radio every hour is far worse for you than reading a weekly magazine, because the longer interval allows information to be filtered a bit. In 1965, Stuart Oskamp supplied more is sometimes, but not always, better. This toxicity of knowledge will show in our investigation of the so-called expert.

The Greeks made a distinction between technē and epistēmē. The empirical school of medicine of Menodotus of Nicomedia and Heraclites of Tarentum wanted its practitioners to stay closest to technē (i.e., “craft”), and away from epistēmē (i.e., “knowledge,” “science”).

Experts who tend to be experts: livestock judges, astronomers, test pilots, soil judges, chess masters, physicists, mathematicians (when they deal with mathematical problems, not empirical ones),

accountants, grain inspectors, photo interpreters, insurance analysts (dealing with bell curve–style statistics). court judges, councilors, those who had a big reputation were worse predictors than those who had none.

Makridakis and Hibon reached the sad conclusion that “statistically sophisticated or complex methods do not necessarily provide more accurate forecasts than simpler ones.”

Simpler, less sexy methods fare exceedingly better, but they do not take you to Stockholm.

A classical mental mechanism, called anchoring, seems to be at work here. You lower your anxiety about uncertainty by producing a number, then you “anchor” on it, like an object to hold on to in the middle of a vacuum. This anchoring mechanism was discovered by the fathers of the psychology of uncertainty, Danny Kahneman and Amos Tversky, early in their heuristics and biases project. It operates as follows. Kahneman and Tversky had their subjects spin a wheel of fortune. The subjects first looked at the number on the wheel, which they knew was random, then they were asked to estimate the number of African countries in the United Nations. Those who had a low number on the wheel estimated a low number of African nations; those with a high number produced a higher estimate.

Let’s say a project is expected to terminatein 79 days, the same expectation in days as the newborn female has in years. On the 79th day, if the project is not finished, it will be expected to take another 25 days to complete. But on the 90th day, if the project is still not completed, it should have about 58 days to go. On the 100th, it should have 89 days to go. On the 119th, it should have an extra 149 days. On day 600, if the project is not done, you will be expected to need an extra 1,590 days. As you see, the longer you wait, the longer you will be expected to wait.

Don’t Cross a River if It Is (on Average) Four Feet Deep

It is often said that “is wise he who can see things coming.” Perhaps the wise one is the one who knows that he cannot see things far away.

We build toys. Some of those toys change the world.

will memorize declensions, the a-Platonic nonnerd will acquire, say, Serbo-Croatian by picking up potential girlfriends in bars on the outskirts of Sarajevo, or talking to cabdrivers, then fitting (if needed) grammatical rules to the knowledge he already possesses.

To clarify, Platonic is top-down, formulaic, closed-
commoditized;a-Platonic is bottom-up, open-minded, skeptical, and empirical.

There is a blind spot: when we think of tomorrow we do not frame it in terms of what we thought about yesterday on the day before yesterday.

When we think of tomorrow, we just project it as another yesterday.

The more we try to turn history into anything other than an enumeration of accounts to be enjoyed with minimal theorizing, the more we get into trouble. Are we so plagued with the narrative fallacy?†

Sextus Empiricus retold the story of Apelles the Painter, who, while doing a portrait of a horse, was attempting to depict the foam from the horse’s mouth. After trying very hard and making a mess, he gave up and, in irritation, took the sponge he used for cleaning his brush and threw it at the picture. Where the sponge hit, it left a perfect representation of the foam.

Trial and error means trying a lot. In The Blind Watchmaker, the world, rather, moves by large incremental random changes. My colleague Mark Spitznagel understood that we humans have a mental hang-up about failures: “You need to love to lose” was his motto.

you need to put a portion, say 85 to 90 percent, in extremely safe
instruments, like Treasury bills—as safe a class of instruments as you can manage to find on this planet.

First, make a distinction between positive contingencies and negative ones.
some segments of publishing, scientific research, and venture capital.

Don’t look for the precise and the local. Simply, do not be narrow-minded.
Seize any opportunity, or anything that looks like opportunity.
a big publisher (or a big art dealer or a movie executive or a hotshot banker or a big thinker) suggests an appointment, cancel anything you have planned: you may never see such a window open up again.

Work hard, not in grunt work, but in chasing such opportunities and maximizing exposure to them. This Diplomats understand that very well: casual chance discussions at cocktail parties usually lead to big breakthroughs—not dry correspondence or telephone conversations.Beware of precise plans by governments.

Do not waste your time trying to fight forecasters, stock analysts, economists, and social scientists, except to play pranks on them.

All these recommendations have one point in common: asymmetry. Put yourself in situations where favorable consequences aremuch larger than unfavorable ones.

This idea is often erroneously called Pascal’s wager, after the philosopher and (thinking) mathematician Blaise Pascal. He presented it something like this: I do not know whether God exists, but I know that I have nothing to gain from being an atheist if he does not exist, whereas I have plenty to lose if he does. Hence, this justifies my belief in God.

Part Three – Those Gray Swans of Extremistan

We knew the data revealed a fractal power law, but we learned that one could not produce a precise number. But what we did know—that the distribution is scalable and fractal—was sufficient for us to operate and make decisions.

We don’t have the luxury of sitting down to read the equation that governs the universe; we just observe data and make an assumption about what the real process might be, and “calibrate” by adjusting our equation in accordance with additional information. As events present themselves to us, we compare what we see to what we expected to see. It is usually a humbling process, particularly for someone aware of the narrative fallacy, to discover that history runs forward, not backward. As much as one thinks that businessmen have big egos, these people are often humbled by reminders of the differences between decision and results, between precise models and reality.

The above idea links all the parts of this book. While many study psychology, mathematics, or evolutionary theory and look for ways to take it to the bank by applying their ideas to business, I suggest the exact opposite: study the intense, uncharted, humbling uncertainty in the markets as a means to get insights about the nature of randomness that is applicable to psychology, probability, mathematics, decision theory, and even statistical physics.

from Mediocristan and turning them loose in Extremistan.

Alan Greenspan, the chairman of the Federal Reserve bank, supposedly blurted out, “I’d rather have the opinion of a trader than a mathematician.”
Part Four – The End

classmate in Paris, the novelist-to-be Jean-Olivier Tedesco, pronounced, as he prevented me from running to catch a subway, “I don’t run for trains.”

Snub your destiny. I have taught myself to resist running to keep on schedule. This may seem a very small piece of advice, but it registered. In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behavior, a sense of being in control of my time, my schedule, and my life. 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.

You stand above the rat race and the pecking order, not outside of it, if you do so by choice.

Mother Nature has given us some defense mechanisms: as in Aesop’s fable, one of these is our ability to consider that the grapes we cannot (or did not) reach are sour.

But an aggressively stoic prior disdain and rejection of the grapes is even more rewarding. Be aggressive; be the one to resign, if you have the guts.
Highlight(pink) – When Missing a Train Is Painless > Location 5630
It is more difficult to be a loser in a game you set up yourself. 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.

But all these ideas, all this philosophy of induction, all these problems with knowledge, all these wild opportunities and scary possible losses, everything palls in front of the following metaphysical consideration. I am sometimes taken aback by how people can have a miserable day or get angry because they feel cheated by a bad meal, cold coffee, a social rebuff, or a rude reception. Recall my discussion in Chapter 8 on the difficulty in seeing the true odds of the events that run your own life. We are quick to forget that just being alive is an extraordinary piece of good luck, a remote event, a chance occurrence of monstrous proportions. Imagine a speck of dust next to a planet a billion times the size of the earth. The speck of dust represents the odds in favor of your being born; the huge planet would be the odds against it. So stop sweating the small stuff. Don’t be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth—remember that you are a Black Swan. And thank you for reading my book.

Postscript Essay: On Robustness and Fragility, Deeper Philosophical and Empirical Reflections

Most people, alas, walk too fast, mistaking walking for exercise, not understanding that walking is to be done slowly, at such a pace that one forgets one is walking—so I need to keep going to Athens (where Spyros lives) in order to indulge in my favorite activity, being a flâneur.

This is another application of the barbell strategy: plenty of idleness, some high intensity. The data shows that long, very long walks, combined with high-intensity exercise outperform just running.

By the same argument we can lower 90 percent of Black Swan risks in economic life … by just eliminating speculative debt.

Seneca was said to be one of the wealthiest men of his day. He just made himself ready to lose everything every day. Every day.

Which includes one’s own life. Seneca’s readiness to lose everything extended to his own life. Suspected of partaking in a conspiracy, he was asked by the emperor Nero to commit suicide. The record says that he executed his own suicide in an exemplary way, unperturbed, as if he had prepared for it every day.

Latest Resources

Living a Fulfilling Life (as a Lawyer)

Living a Fulfilling Life (as a Lawyer)

Kathryn Burmeister, also known as The Happiness Lawyer, details starting her own firm, abandoning the status quo, and the key to being happy in the industry.
Read More
Originalist Textualism 101 for Practitioners

Originalist Textualism 101 for Practitioners with Keith Blackwell

Originalist textualism is a way of interpreting the law that can often feel a bit like stepping into a time machine. In this episode, former Justice of the Georgia Supreme Court, Keith Blackwell, guides us through originalist methodology and gives important context to the legal debates happening today and in the future.
Read More
What I’ve Read, Heard, And Am Pondering This Week: June 1

What I’ve Read, Heard, And Am Pondering This Week: June 1

What I’ve heard and seen is the new season of The Lincoln Lawyer on Netflix plus I am pondering what role the office will have in the future.
Read More