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Book Review: The Black Swan (Nassim Nicholas Taleb)

February 7, 2011 (Last updated on September 25, 2018) by

It’s been some time since my last Forex book review, so today I’ve decided to share my impressions of the latest book on probability by the “financial dissident” Nassim Nicholas Taleb. If you still haven’t read his previous book — Fooled by Randomness (see my review here) — I strongly urge you to do so, even if you aren’t into trading. His latest book — The Black Swan — became a major bestseller and is a very important book, both for traders and for everyone else who works with the randomness.

The main idea of the book is that we can’t avoid the Black Swans (the rare events that are unpredictable in their nature) but we can try to decrease the amount of “bad” Black Swans in our life and increase the amount of “good” Black Swans — first, by admitting that our knowledge is very limited and by stopping to act like we can forecast rare events and, second, by choosing the life strategies, in which our potential success would be scalable and could surpass the potential failure. Other than that, the book offers the following important theses:

  • What we don’t know can be more important than what we think we know.
  • We live partly in Extremistan and partly in Mediocristan. Rare events are very important (and are unpredictable) in Extremistan. Rare events have little impact in Mediocristan and they usually can be predicted.
  • Financial analysts, experts, strategists, portfolio managers generally don’t posses much knowledge about the reality of their profession, but for some reason general public listens to their opinions. Taleb sates that it’s completely unjustified.
  • Bell curve (“the Great Intellectual Fraud”), although is a viable model in Mediocristan is a fallacy in Extremistan.
  • Modern world becomes more of Extremistan and less of Mediocristan.
  • Our minds are bound to search and unite different facts and reasons — that’s the problem of the narrative fallacy.
  • Pure probabilities don’t exist in Extremistan, they are properties of the artificial models — such as casinos and the study problems.
  • Fractal models of probabilities can’t predict the impact of the Black Swan, but they can give a slight hint, making a Black Swan Gray.
  • In Extremistan, metaphorically speaking, if you don’t chase the train, you don’t get frustrated by missing the train — if you don’t rely on the appearance or the lack of the Black Swans your state of mind won’t be disturbed by them.

Although I liked Taleb’s previous book (Fooled by Randomness) more, this one also deserves attention and was very interesting despite the small amount of the new ideas compared to his previous work. I’d like to point out the following advantages:

  • Interesting read due to the literary style of the author. I can imagine how boring could the book on such topic be if it would have been written by some “professor”.
  • Deeper understanding of the rare unpredictable events compared to Fooled by Randomness.
  • More practical advices. They are more of ideas than advices but still can be quite helpful.
  • A book with praises to both Popper and Mandelbrot in it? I buy it :)! (Yeah, that’s quite subjective.)

But to add some negative to this rather positive review, I’d want to mention that I liked Fooled by Randomness more than this one. Maybe that’s because the first book on a topic leaves a strong impression, or perhaps because of a rather bad translation (I couldn’t find The Black Swan in English here). Anyway, let’s list some disadvantages:

  • As it was the case with Taleb’s previous book, the structure of the book is quite bad, there is still a lot of subject jumping even inside the sub-chapters.
  • Nassim Taleb is a genius but his style is quite heavily ridden with snobbery of an erudite and an intellectual.
  • There were many things, about which I’d disagree with the author and which needed further discussion, but they don’t eliminate the importance of the main problem of the book.

To sum it all up, if you still haven’t read Fooled by Randomness, go, read it. If you liked it and want more, read The Black Swan. If you didn’t like it, then there’s no reason for you to read The Black Swan. But, apart from the direct usefulness of Taleb’s books, there’s always a big portion of aesthetic pleasure in reading his books. So, if you are looking for something to read, you can always stop by The Black Swan and combine the useful with the pleasant.

If you have any questions, comments or opinions regarding The Black Swan by Nassim N. Taleb, please, feel free to reply in the comments below.

16 Responses to “Book Review: The Black Swan (Nassim Nicholas Taleb)”

  1. Narendra

    Although I was looking for a good book to read, and I ordered The black swan some days back. I have just started reading it. I have not read his earlier book- “Fooled by randomness” and neither I am a philosophical person. The initial 5-7 pages have been a little tough to comprehend and retain the attention span. However with such good reviews I expect this book will keep me glued till the end…:) Anyways thanks a lot for this review.

    Reply

    admin Reply:

    I hope you’ll like it. I also had to use dictionary for reference several times while reading it :).

    Reply

  2. WavesRider

    i started reading this book few days ago and have to admit that the author is a genius.One cannot but bear respect for the way he tosses around an ambiguous issue like “randomness” with such an amusing and correlated manner. He opened my eyes on an unpercieved door of seeing life which made many things more apprehensible to me.This is my first book i read for him , and would be reading all his books for the thriving interest on the subject and the author.

    Reply

    admin Reply:

    I’m glad you liked it. Nassim Taleb is really good at what he does.

    Reply

  3. makhlouf

    i’ve read the book (many times for some parts). i agree that this is another way of seeing life which is itself a black swan

    Reply

    admin Reply:

    Have you read his recent article on the Middle Eastern revolts? http://www.foreignaffairs.com/articles/67741/nassim-nicholas-taleb-and-mark-blyth/the-black-swan-of-cairo
    It explains a lot…

    Reply

  4. Matt

    I was given this book before the financial crisis, however have only just started reading it. As an observer from outside the United States, and from outside the banking industry, I was a bit perplexed at how so many experts had been blinded by the bubble. I had stayed away from financial markets since the end of 2005. Taleb provides some great insights into the flaws of human nature, and particularly the financial industry.

    It also highlights the point that education can be a dangersous tool if the owner is not aware of how much he/she does not know. It helps me to explain why many non-university educated people with a bit of common sense pick up the flaws of investment bankers, better than the experts. Certainly worth a read if you’re interested in critical thinking and want to increase awareness of human nature (and how to benefit from this increased awareness).

    Reply

    admin Reply:

    Have you already managed to benefit from this increased awareness ;-)?

    Reply

  5. AlanV

    Years ago I attended an investment class in the Business Department at San Diego State University. The Prof taught technical analysis in looking at the stock market. Basically, you look at the psychology of the stock, the market, and the patterns shown. EVERYTHING shows in the price of the stock…opinions, expert opinions, fund managers’ opinions, investment bankers’ opinions. In other words, don’t believe what hear.
    Experts are a dime a dozen. They don’t know. And to top it all off — they don’t know that they don’t know.
    This book is opening my eyes to the randomness, the chaos throughout our everyday lives and how we try to make order to get us through the day. It is reinforcing my attitude and beliefs that we do not know and to not be surprised when a black swan appears. I look forward to picking up his other book. Thanks, I enjoyed reading your review.

    Reply

    admin Reply:

    Thanks for your opinion too!

    Reply

    pragati Reply:

    i have just started reading it…quite difficult to comprehend..but after reading the reviews , i will definitely give it a try… thanx for the wonderful review

    Reply

    admin Reply:

    You are welcome. It’s definitely worth the extra time.

    Reply

  6. Michael Haywood

    The problem I had with the book is that while he extols the wisdom of skeptical empiricists like him, he continually offers up anecdotes with no data as the proof of his assertions. I don’t mind one or the other, but the combination smacks of foolishness (which he is not) or laziness (which I suspect).

    Reply

    admin Reply:

    You are right, but I just take this book not as a scientific research article, but rather an expression of author’s opinion.

    Reply

  7. Gloria Wong

    When I was doing my MA Language Studies 2 years ago, a tutor whom I respected recommended this book. I only started reading it this morning. I was intrigued and enjoyed reading or until half way through the prologue where it says Richard Grasso was rewarded for ringing the opening bell on TV. I have never been to NYSE and my profession has got nothing to do with banking or investment or finance, but I could not help but think it must have been an oversimplification. After asking around (since wikipedia didn’t inform me much) I heard that Grasso brought had innovation to trading stocks in NYSE and the electronic trading platforms allowed the increase in volume and order flow, along with other benefits.
    I cannot repeat all I have heard but it has proved to me that Grasso’s contribution prevented panic which could have been immense in the NYSE afterr 9/11, and it appears to me he should be described as the hero who prevented disasters and Taleb should be singing his praises. I can only be guessing that Grasso’s success is the reason that Taleb thought of him as one of “those whom you saw trying to give you the impression that they were performing heroic acts”. Taleb’s ideas of heroes who prevent the mishaps are those whose achievements are not recognized. Grasso is Taleb’s black swan.
    I am kind of turned off by that flippant remark he made about Grasso but I have heard so many positive remarks about him. I have always known that I should take what I read with a pinch of salt, but this remark about Grasso is beyond irresponsible as it seems Taleb tried took hard to hide facts just to prove his points. I expect more than a point of view from a scholar.

    Reply

    admin Reply:

    I would like to notice that Mr. Taleb doesn’t state that “ringing the opening bell on TV” was Grasso’s only “heroic act” in a lifetime. He points at the fact that his symbolic act took a great share of media attention and made him a hero in the eys of public. He compares such “acts” to the acts that cannot be noticed at all, like the legislative measures example describe before Grasso example.

    Or that’s at least how I read that part :-).

    Reply

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