The Black Swan: The Impact of the Highly Improbable

Mediocristan: the province dominated by the mediocre, with few extreme successes or failures. No single observation can meaningfully affect the aggregate. The bell curve is grounded in Mediocristan. There is a qualitative difference between Gaussians and scalable laws, much like gas and water.

Narrative discipline: the discipline that consists in fitting a convincing and well-sounding story to the past. Opposed to experimental discipline.

Narrative fallacy: our need to fit a story or pattern to a series of connected or disconnected facts. The statistical application is data mining.

Nerd knowledge: the belief that what cannot be Platonized and studied does not exist at all, or is not worth considering. There even exists a form of skepticism practiced by the nerd.

Platonic fold: the place where our Platonic representation enters into contact with reality and you can see the side effects of models.

Platonicity: the focus on those pure, well-defined, and easily discernible objects like triangles, or more social notions like friendship or love, at the cost of ignoring those objects of seemingly messier and less tractable structures.

Probability distribution: the model used to calculate the odds of different events, how they are “distributed.” When we say that an event is distributed according to the bell curve, we mean that the Gaussian bell curve can help provide probabilities of various occurrences.

Problem of induction: the logical-philosophical extension of the black swan problem.

Randomness as incomplete information: simply, what i cannot guess is random because my knowledge about the causes is incomplete, not necessarily because the process has truly unpredictable properties.

Retrospective distortion: examining past events without adjusting for the forward passage of time. It leads to the illusion of posterior predictability.

Reverse-engineering problem: It is easier to predict how an ice cube would melt into a puddle than, looking at a puddle, to guess the shape of the ice cube that may have caused it. This “inverse problem” makes narrative disciplines and accounts (such as histories) suspicious.

Round-trip fallacy: the confusion of absence of evidence of Black Swans (or something else) for evidence of absence of Black Swans (or something else). It affects statisticians and other people who have lost part of their reasoning by solving too many equations.

Scandal of prediction: the poor prediction record in some forecasting entities (particularly narrative disciplines) mixed with verbose commentary and a lack of awareness of their own dire past record.

Scorn of the abstract: favoring contextualized thinking over more abstract, though more relevant, matters. “The death of one child is a tragedy; 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. How do we know if we have enough? From the probability distribution. If it is a Gaussian, then a few points of data will suffice. How do we know it is a Gaussian? From the data. So we need the data to tell us what probability distribution to assume, and we need a probability distribution to tell us how much data we need. This causes a severe regress argument, which is somewhat shamelessly circumvented by resorting to the Gaussian and its kin.

Uncertainty of the deluded: people who tunnel on sources of uncertainty by producing precise sources like the great uncertainty principle, or similar, less consequential matters, to real life; worrying about subatomic particles while forgetting that we can’t predict tomorrow’s crises.

NOTES BEHIND THE CURTAIN: ADDITIONAL NOTES, TECHNICAL COMMENTS, REFERENCES, AND READING RECOMMENDATIONS

I separate topics thematically; so general references will mostly be found in the chapter in which they first occur. I prefer to use a logical sequence here rather than stick to chapter division.

PROLOGUE and CHAPTER 1

Black Swan in logic: First, mine is not a problem in logic. the philosophical problem is about the possibility of a Black Swan. Mine is about the impact. Also, it may not be too relevant who came up with the metaphor first, but the earliest mention of Black Swan problem I could find is in John Stuart Mill’s A System of Logic. It was later used by many (including Charles Sanders Peirce) before it became associated with Karl Popper.