The Black Swan: The Impact of the Highly Improbable

But there is no reason to single out journalists. Academics in narrative disciplines do the same thing, but dress it up in a formal language—we will catch up to them in Chapter 10, on prediction.

Besides narrative and causality, journalists and public intellectuals of the sound-bite variety do not make the world simpler. Instead, they almost invariably make it look far more complicated than it is. The next time you are asked to discuss world events, plead ignorance, and give the arguments I offered in this chapter casting doubt on the visibility of the immediate cause. You will be told that “you overanalyze,” or that “you are too complicated.” All you will be saying is that you don’t know!

Dispassionate Science

Now, if you think that science is an abstract subject free of sensationalism and distortions, I have some sobering news. Empirical researchers have found evidence that scientists too are vulnerable to narratives, emphasizing titles and “sexy” attention-grabbing punch lines over more substantive matters. They too are human and get their attention from sensational matters. The way to remedy this is through meta-analyses of scientific studies, in which an überresearcher peruses the entire literature, which includes the less-advertised articles, and produces a synthesis.

THE SENSATIONAL AND THE BLACK SWAN

Let us see how narrativity affects our understanding of the Black Swan. Narrative, as well as its associated mechanism of salience of the sensational fact, can mess up our projection of the odds. Take the following experiment conducted by Kahneman and Tversky, the pair introduced in the previous chapter: the subjects were forecasting professionals who were asked to imagine the following scenarios and estimate their odds.

a. A massive flood somewhere in America in which more than a thousand people die.

b. An earthquake in California, causing massive flooding, in which more than a thousand people die.

Respondents estimated the first event to be less likely than the second. An earthquake in California, however, is a readily imaginable cause, which greatly increases the mental availability—hence the assessed probability—of the flood scenario.

Likewise, if I asked you how many cases of lung cancer are likely to take place in the country, you would supply some number, say half a million. Now, if instead I asked you many cases of lung cancer are likely to take place because of smoking, odds are that you would give me a much higher number (I would guess more than twice as high). Adding the because makes these matters far more plausible, and far more likely. Cancer from smoking seems more likely than cancer without a cause attached to it—an unspecified cause means no cause at all.

I return to the example of E. M. Forster’s plot from earlier in this chapter, but seen from the standpoint of probability. Which of these two statements seems more likely?

Joey seemed happily married. He killed his wife.

Joey seemed happily married. He killed his wife to get her inheritance.

Clearly the second statement seems more likely at first blush, which is a pure mistake of logic, since the first, being broader, can accommodate more causes, such as he killed his wife because he went mad, because she cheated with both the postman and the ski instructor, because he entered a state of delusion and mistook her for a financial forecaster.

All this can lead to pathologies in our decision making. How?

Just imagine that, as shown by Paul Slovic and his collaborators, people are more likely to pay for terrorism insurance than for plain insurance (which covers, among other things, terrorism).

The Black Swans we imagine, discuss, and worry about do not resemble those likely to be Black Swans. We worry about the wrong “improbable” events, as we will see next.

Black Swan Blindness

The first question about the paradox of the perception of Black Swans is as follows: How is it that some Black Swans are overblown in our minds when the topic of this book is that we mainly neglect Black Swans?

The answer is that there are two varieties of rare events: a) the narrated Black Swans, those that are present in the current discourse and that you are likely to hear about on television, and b) those nobody talks about, since they escape models—those that you would feel ashamed discussing in public because they do not seem plausible. I can safely say that it is entirely compatible with human nature that the incidences of Black Swans would be overestimated in the first case, but severely underestimated in the second one.

Indeed, lottery buyers overestimate their chances of winning because they visualize such a potent payoff—in fact, they are so blind to the odds that they treat odds of one in a thousand and one in a million almost in the same way.