The Black Swan: The Impact of the Highly Improbable

Why? Just consider that the statement “all swans are white” implies that all nonwhite objects are not swans. What confirms the latter statement should confirm the former. Therefore, the sighting of a nonwhite object that is not a swan should bring such confirmation. This argument, known as Hempel’s raven paradox, was rediscovered by my friend the (thinking) mathematician Bruno Dupire during one of our intense meditating walks in London—one of those intense walk-discussions, intense to the point of our not noticing the rain. He pointed to a red Mini and shouted, “Look, Nassim, look! No Black Swan!”

Not Everything

We are not naïve enough to believe that someone will be immortal because we have never seen him die, or that someone is innocent of murder because we have never seen him kill. The problem of naïve generalization does not plague us everywhere. But such smart pockets of inductive skepticism tend to involve events that we have encountered in our natural environment, matters from which we have learned to avoid foolish generalization.

For instance, when children are presented with the picture of a single member of a group and are asked to guess the properties of other unseen members, they are capable of selecting which attributes to generalize. Show a child a photograph of someone overweight, tell her that he is a member of a tribe, and ask her to describe the rest of the population: she will (most likely) not jump to the conclusion that all the members of the tribe are weight-challenged. But she would respond differently to generalizations involving skin color. If you show her people of dark complexion and ask her to describe their co-tribesmen, she will assume that they too have dark skin.

So it seems that we are endowed with specific and elaborate inductive instincts showing us the way. Contrary to the opinion held by the great David Hume, and that of the British empiricist tradition, that belief arises from custom, as they assumed that we learn generalizations solely from experience and empirical observations, it was shown from studies of infant behavior that we come equipped with mental machinery that causes us to selectively generalize from experiences (i.e., to selectively acquire inductive learning in some domains but remain skeptical in others). By doing so, we are not learning from a mere thousand days, but benefiting, thanks to evolution, from the learning of our ancestors—which found its way into our biology.

Back to Mediocristan

And we may have learned things wrong from our ancestors. I speculate here that we probably inherited the instincts adequate for survival in the East African Great Lakes region where we presumably hail from, but these instincts are certainly not well adapted to the present, post-alphabet, intensely informational, and statistically complex environment.

Indeed our environment is a bit more complex than we (and our institutions) seem to realize. How? The modern world, being Extremistan, is dominated by rare—very rare—events. It can deliver a Black Swan after thousands and thousands of white ones, so we need to withhold judgment for longer than we are inclined to. As I said in Chapter 3, it is impossible—biologically impossible—to run into a human several hundred miles tall, so our intuitions rule these events out. But the sales of a book or the magnitude of social events do not follow such strictures. It takes a lot more than a thousand days to accept that a writer is ungifted, a market will not crash, a war will not happen, a project is hopeless, a country is “our ally,” a company will not go bust, a brokerage-house security analyst is not a charlatan, or a neighbor will not attack us. In the distant past, humans could make inferences far more accurately and quickly.

Furthermore, the sources of Black Swans today have multiplied beyond measurability.[21] In the primitive environment they were limited to newly encountered wild animals, new enemies, and abrupt weather changes. These events were repeatable enough for us to have built an innate fear of them. This instinct to make inferences rather quickly, and to “tunnel” (i.e., focus on a small number of sources of uncertainty, or causes of known Black Swans) remains rather ingrained in us. This instinct, in a word, is our predicament.

Chapter Six: THE NARRATIVE FALLACY

The cause of the because—How to split a brain—Effective methods of pointing at the ceiling—Dopamine will help you win—I will stop riding motorcycles (but not today)—Both empirical and psychologist? Since when?

ON THE CAUSES OF MY REJECTION OF CAUSES