Book Review

I find myself increasingly drawn to the field of Behavioral Economics (so much so that I was considering a second PhD to channelize my love!), and how beautifully evasive these concepts are in real life. Starting with Daniel Kahneman’s Thinking Fast and Slow, followed by the writings and blogs of Steven Levitt, Dan Ariely, Nate Silver and Barry Schwartz (and still others like Malcolm Gladwell), has set me thinking a lot about how insane and illogical we are. We do see ourselves as logical and reasonably intelligent people who do not fall for the usual traps (OK, maybe you didn’t see me that way, but we’ll let that slide for now…), but how fool-proof are we? What about the narrative fallacy - ‘aah, that makes sense now’ or ‘I thought so’ or confirmation biases?

‘The Black Swan’ by Nassim Nicholas Taleb (http://fooledbyrandomness.com/) has been on my list ever since I first got infatuated with this topic. I finally finished it last month. Man, is it it well-written! The guy is brilliant, and his wit and humor are unmatchable! Among other things, he leads (and concludes) with our love for everything normal, statistically speaking and otherwise, and how we can’t but help make the obvious blunders of predicting, quite erroneously, based on the past, even though we know fully well that life doesn’t present itself as a series of bell curves stringed together just so that we can get away with some easy math! You’ll hear a lot about epistemology (defined in PS3; truth be told, I hadn’t heard of this word until last month), mediocristan (the Gaussian life) vs extremistan (scale-free distributions encountered more often than not in real-life)

Here’s a snippet: https://drive.google.com/file/d/0B7_wAV4HsNrkQmdFMndHSHhldFE/view Never mind if you don’t get it. I enjoyed every last bit of the book, and hope that you do too! Give it a try - whether you love it or hate it, it would be time well-spent! :)

Happy reading!

PS1. I’ve heard that people either love it or hate it. Clearly, I fall in the bin #1. Do I agree with everything? Well, yeah, almost everything. PS2. Luckily, none of you are directly tied to economics or financial sectors. :D Well, scientists and statisticians have been insulted too, but the elegance of it makes it OK! Lots to think about.:) PS3. Epistemology studies the nature of knowledge, justification, and the rationality of belief. Much of the debate in epistemology centers on four areas: (1) the philosophical analysis of the nature of knowledge and how it relates to such concepts as truth, belief, and justification, (2) various problems of skepticism, (3) the sources and scope of knowledge and justified belief, and (4) the criteria for knowledge and justification.

Blurb

A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.

The astonishing success of Google was a black swan; so was 9/11. For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives.

Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities.

We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.”

For years, Taleb has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. Now, in this revelatory book, Taleb explains everything we know about what we don’t know. He offers surprisingly simple tricks for dealing with black swans and benefiting from them.

Elegant, startling, and universal in its applications ‘The Black Swan’ will change the way you look at the world. Taleb is a vastly entertaining writer, with wit, irreverence, and unusual stories to tell. He has a polymathic command of subjects ranging from cognitive science to business to probability theory.

‘The Black Swan’ is a landmark book – itself a black swan.