Black Swan

Nissim Taleb author of Black Swam spoke last night at the Herbst Theatre. He spoke about probability and prediction. The term black swan first came about because no one ever believe one existed, it was like a unicorn. Then a black swan was spotted in Australia and everyone realized it wasn't that absurd of a possibility.

What Taleb spoke about can best be described as the philosophy of probability.

"A black swan is an outlier, an event that lies beyond the realm of normal expectations. Most people expect all swans to be white because that's what their experience tells them; a black swan is by definition a surprise. Nevertheless, people tend to concoct explanations for them after the fact, which makes them appear more predictable, and less random, than they are. Our minds are designed to retain, for efficient storage, past information that fits into a compressed narrative. This distortion, called the hindsight bias, prevents us from adequately learning from the past."

Taleb talked a bit about the stock market and commented that even people like Warren Buffet just get lucky. One of his articles in the Times discusses the attack on the Trade Center and how we understand risk.

Risk has the potential to create such failure and produce such creativity. We're so adverse to risk, but is avoiding risk always the best strategy.