The Black Swan: The Impact of the Highly Improbable

Academic libertarian: someone (like myself) who considers that knowledge is subjected to strict rules but not institutional authority, as the interest of organized knowledge is self-perpetuation, not necessarily truth (as with governments). Academia can suffer from an acute expert problem(q.v.), producing cosmetic but fake knowledge, particularly in narrative disciplines(q.v.), and can be a main source of black swans.

Apelles-style strategy: a strategy of seeking gains by collecting positive accidents from maximizing exposure to “good Black Swans.”

Barbell strategy: a method that consists of taking both a defensive attitude and an excessively aggressive one at the same time, by protecting assets from all sources of uncertainty while allocating a small portion for high-risk strategies.

Bildungsphilister: a philistine with cosmetic, nongenuine culture. nietzsche used this term to refer to the dogma-prone newspaper reader and opera lover with cosmetic exposure to culture and shallow depth. I extend it to the buzzword-using researcher in nonexperimental fields who lacks in imagination, curiosity, erudition, and culture and is closely centered on his ideas, on his “discipline.” This prevents him from seeing the conflicts between his ideas and the texture of the world.

Black Swan blindness: the underestimation of the role of the black swan, and occasional overestimation of a specific one.

Black Swan ethical problem: owing to the nonrepeatable aspect of the black swan, there is an asymmetry between the rewards of those who prevent and those who cure.

Confirmation error (or Platonic confirmation): you look for instances that confirm your beliefs, your construction (or model)—and find them.

Empty-suit problem (or “expert problem”): some professionals have no differential abilities from the rest of the population, but for some reason, and against their empirical records, are believed to be experts: clinical psychologists, academic economists, risk “experts,” statisticians, political analysts, financial “experts,” military analysts, CEOs, et cetera. They dress up their expertise in beautiful language, jargon, mathematics, and often wear expensive suits.

Epilogism: a theory-free method of looking at history by accumulating facts with minimal generalization and being conscious of the side effects of making causal claims.

Epistemic arrogance: measure the difference between what someone actually knows and how much he thinks he knows. An excess will imply arrogance, a deficit humility. An epistemocrat is someone of epistemic humility, who holds his own knowledge in greatest suspicion.

Epistemic opacity: randomness is the result of incomplete information at some layer. it is functionally indistinguishable from “true” or “physical” randomness.

Extremistan: the province where the total can be conceivably impacted by a single observation.

Fallacy of silent evidence: looking at history, we do not see the full story, only the rosier parts of the process.

Fooled by randomness: the general confusion between luck and determinism, which leads to a variety of superstitions with practical consequences, such as the belief that higher earnings in some professions are generated by skills when there is a significant component of luck in them.

Future blindness: our natural inability to take into account the properties of the future—like autism, which prevents one from taking into account the existence of the minds of others.

Locke’s madman: someone who makes impeccable and rigorous reasoning from faulty premises-—such as Paul Samuelson, Robert Merton the minor, and Gerard Debreu—thus producing phony models of uncertainty that make us vulnerable to Black Swans.

Lottery-ticket fallacy: the naïve analogy equating an investment in collecting positive Black Swans to the accumulation of lottery tickets. Lottery tickets are not scalable.

Ludic fallacy (or uncertainty of the nerd): the manifestation of the platonic fallacy in the study of uncertainty; basing studies of chance on the narrow world of games and dice. A-Platonic randomness has an additional layer of uncertainty concerning the rules of the game in real life. The bell curve (Gaussian), or GIF (Great Intellectual Fraud), is the application of the ludic fallacy to randomness.

Mandelbrotian Gray Swan: black swans that we can somewhat take into account—earthquakes, blockbuster books, stock market crashes—but for which it is not possible to completely figure out the properties and produce precise calculations.