Briefs

DMReview.com, July 26, 2007, By Steve Miller

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The point of departure for Fooled by a Random Black Swan is that the human brain sees the world as less random, and conversely, more well-behaved than it actually is. We often mistake pure luck for skill, and indeed, often elevate lucky fools to guru status. We are wired for certainty, determinism and causality, even when they don't exist. We think linearly, continuously and symmetrically, elevating the bell curve to religious status.

Black swans, those events that are outliers, carry extreme impact, and are not predicted - but nevertheless explained post facto - are of much higher importance than we would like to attribute, according to Taleb. He contrasts two types of randomness, the utopian Mediocristan, which is close to equality, and behaves according to the bell curve with continuous progression; and the winner-take-all Extremistan, with extensive skewness in population values and progression in jumps. Mediocristan, typified by a population height distribution or IQ, is impervious to black swans. Extremistan, typified by a population wealth distribution or sizes of companies, is vulnerable to black swans. Alas, our lives are more influenced by Extremistan than we'd like to think.

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