The Black Swan: The Impact of the Highly Improbable

Skeptical Empiricism and the a-Platonic School	The Platonic Approach
Interested in what lies outside the Platonic fold	Focuses on the inside of the Platonic fold
Respect for those who have the guts to say “I don’t know”	“You keep criticizing these models. These models are all we have.”
Fat Tony	Dr. John
Thinks of Black Swans as a dominant source of randomness	Thinks of ordinary fluctuations as a dominant source of randomness, with jumps as an afterthought
Bottom-up	Top-down
Would ordinarily not wear suits (except to funerals)	Wears dark suits, white shirts; speaks in a boring tone
Prefers to be broadly right	Precisely wrong
Minimal theory, consides theorizing as a disease to resist	Everything needs to fit some grand, general socioeconomic model and “the rigor of economic theory”; frowns on the “descriptive”
Does not believe that we can easily compute probabilities	Built their entire apparatus on the assumptions that we can compute probabilities
Model: Sextus Empiricus and the school of evidence-based, minimum-theory empirical medicine	Model: Laplacian mechanics, the world and the economy like a clock
Develops intuitions from practice, goes from observations to books	Relies on scientific papers, goes from books to practice
Not inspired by any science, uses messy mathematics and computational methods	Inspired by physics, relies on abstract mathematics
Ideas based on skepticism, on the unread books In the library	Ideas based on beliefs, on what they think they know
Assumes Extremistan as a starting point	Assumes Mediocristan as a starting point
Sophisticated craft	Poor science
Seeks to be approximately right across a broad set of eventualities	Seeks to be perfectly right in a narrow model, under precise assumptions

I cannot accept a pretense of science. I much prefer a sophisticated craft, focused on tricks, to a failed science looking for certainties. Or could these neoclassical model builders be doing something worse? Could it be that they are involved in what Bishop Huet calls the manufacturing of certainties?

Let us see.

Skeptical empiricism advocates the opposite method. I care about the premises more than the theories, and I want to minimize reliance on theories, stay light on my feet, and reduce my surprises. I want to be broadly right rather than precisely wrong. Elegance in the theories is often indicative of Platonicity and weakness—it invites you to seek elegance for elegance’s sake. A theory is like medicine (or government): often useless, sometimes necessary, always self-serving, and on occasion lethal. So it needs to be used with care, moderation, and close adult supervision.

The distinction in the above table between my model modern, skeptical empiricist and what Samuelson’s puppies represent can be generalized across disciplines.

I’ve presented my ideas in finance because that’s where I refined them. Let us now examine a category of people expected to be more thoughtful: the philosophers.

Chapter Eighteen: THE UNCERTAINTY OF THE PHONY

Philosophers in the wrong places—Uncertainty about (mostly) lunch—What I don’t care about—Education and intelligence