miguel-se7

No, not that movie with Natalie Portman. I am talking about the book by Nassim Nicholas Taleb. There are two things I think you should know about reading 'The Black Swan'.

First, most likely you will find Taleb to be extremely arrogant and a pain to read. Second, this is a book that you must absolutely read, specially if you have investments in the stock or crypto market.

The book's title comes from the following idea: every now and then, there occurs a highly unpredictable event which produces a massive effect on our world, and it's only after the fact that we are able to produce a 'reasonable' explanation to make the event appear predictable or even inevitable. This is the definition of a 'Black Swan'

As such, the book's main idea is that current models have a hard time predicting outliers and people have the tendency to fool themselves with a post-facto explanation as to why the crisis/event that occurred was inevitable, and easy to foresee, when in reality, no one was able to predict it.

Taleb argues that, since it is not possible to see most of these events coming, it’s more useful to try and protect ourselves again these disasters than accurately predicting their probability. Maintaining that we should learn how to rank beliefs not according to their plausibility, but by the harm they may cause if proven true.

Among other important ideas from the book is that we should understand that some domains do not allow us to correctly predict using past data, and some others do; We need to learn how to identify them. For this, it is rather useful to avoid confirmation bias, meaning, we should try to disprove our own ideas instead of seeing where they work.

We are also presented with the all too common suggestion of having a diversified portfolio; however, Taleb puts a spin on it as follows: Knowing that we are unable to accurately predict risks, it is better to adopt a hyperconservative position with most of your portfolio, say 85% invested in treasury bills, and an hyperagressive position with the rest, for example on highly speculative assets (If only we had some kind of coin we could invest in...). This, instead of the usual recommendation of having “medium risk” investments.

I believe that 'The Black Swan' raises some good questions and interesting takes on modern world problems that may fall on deaf ears due to Taleb's narrative voice and arrogant style.

You can find my previous reviews here. See below for some of my favorite quotes from the book:

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