The Black Swan: The Impact of the Highly Improbable

Bell curve: when I write bell curve I mean the Gaussian bell curve, a.k.a. normal distribution. All curves look like bells, so this is a nickname. Also, when I write the Gaussian basin I mean all distributions that are similar and for which the improbable is inconsequential and of low impact (more technically, nonscalable—all moments are finite). Note that the visual presentation of the bell curve in histogram form masks the contribution of the remote event, as such an event will be a point to the far right or far left of the center.

Diamonds: see Eco (2002).

Platonicity: I’m simply referring to incurring the risk of using a wrong form—not that forms don’t exist. I am not against essentialisms; I am often skeptical of our reverse engineering and identification of the right form. It is an inverse problem!

Empiricist: If I call myself an empiricist, or an empirical philosopher, it is because I am just suspicious of confirmatory generalizations and hasty theorizing. Do not confuse this with the British empiricist tradition. Also, many statisticians, as we will see with the Makridakis competition, call themselves “empirical” researchers, but are in fact just the opposite—they fit theories to the past.

Mention of Christ: see Flavius Josephus’s The Jewish War.

Great War and prediction: Ferguson (2006b).

Hindsight bias (retrospective distortion): see Fischhoff (1982b).

Historical fractures: Braudel (1985), p.169, quotes a little known passage from Gautier. He writes, “‘This long history,’ wrote Emile-Félix Gautier, ‘lasted a dozen centuries, longer than the entire history of France. Encountering the first Arab sword, the Greek language and thought, all that heritage went up in smoke, as if it never happened’” For discussions of discontinuity, see also Gurvitch (1957), Braudel (1953), Harris (2004).

Religions spread as bestsellers: Veyne (1971). see also Veyne (2005).

Clustering in political opinions: Pinker (2002).

Categories: Rosch (1973, 1978). see also Umberto Eco’s Kant and the Platypus.

Ontological uncertainty: Some of the literature discusses my categorization problem as ontological uncertainty, meaning there can be uncertainty concerning the entities themselves.

Historiography and philosophy of history: Bloch (1953), Carr (1961), Gaddis (2002), Braudel (1969, 1990), Bourde and Martin (1989), Certeau (1975), Muqaddamat Ibn Khaldoun illustrate the search for causation, which we see already present in Herodotus. For philosophy of history, Aron (1961), Fukuyama (1992). For postmodern views, see Jenkins (1991). I show in Part Two how historiographers are unaware of the epistemological difference between forward and backward processes (i.e., between projection and reverse engineering).

Information and markets: See Sshiller (1981, 1989), Delong et al. (1991), and Cutler et al. (1989). The bulk of market moves does not have a “reason,” just a contrived explanation.

Of descriptive value for crashes: See Galbraith (1997), Shiller (2000), and Kindleberger (2001).

CHAPTER 3

Movies: see de vany (2002). See also Salganik et al. (2006) for the contagion in music buying.

Religion and domains of contagion: See Boyer (2001).

Wisdom (madness) of crowds: Collectively, we can both get wiser or far more foolish. We may collectively have intuitions for Mediocristan-related matters, such as the weight of an ox (see Surowiecki, 2004), but my conjecture is that we fail in more complicated predictions (economic variables for which crowds incur pathologies—two heads are worse than one). For decision errors and groups, see Sniezek and Buckley (1993).Classic: Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds.

Increase in the severity of events: Zajdenweber (2000).

Modern life: The nineteenth-century novelist Emile Zola welcomed the arrival of the market for culture in the late 1800s, of which he seemed to be one of the first beneficiaries. He predicted that the writers’ and artists’ ability to exploit the commercial system freed them from a dependence on patrons’ whims. Alas, this was accompanied with more severe concentration—very few people benefited from the system. Lahire (2006) shows how most writers, throughout history, have starved. Remarkably, we have ample data from France about the literary tradition.

CHAPTER 4