Posted by: Nicholas Davis | March 9, 2009

Yves Smith on the Black Swan

A great article by Yves Smith of Naked Capitalism on Taleb’s “Black Swan” – both the book and the ideas within it. Discussing why he feels it unlikely that the ideas will catch on, he writes:

… people do not want to see the world as subject to chance to the degree that Taleb says it is. This is hugely unsettling if you really do come to terms with the implications of his argument. We like to believe we have some measure of control over our lives. And research has shown that people do pretty consistently overestimate their degree of control and influence (for instance, most people will exaggerate their contribution to the success of a project, not as a matter of PR, although that may be true too, but their private assessment).

It’s a post worth reading. As someone whose job is to develop scenarios on global and regional challenges, I happen to share many of Taleb’s views. It would be very interesting to see how society might be different if we all had a rich understanding of the role that uncertainty plays in life. My own incentives and biases are lined up to say it would be better, but that’s a viewpoint that is very hard to empirically test!

A couple of quick points:

First, to the issue of whether the set of Taleb/Mandelbrot(etc etc) ideas could spread in a useful form (rather than as a misunderstood cliché). As you point out, a single book or person are unlikely to effect a major change in outlook on their own – for that, a movement is required. And, as Yves says, any movement has to overcome a range of challenges in the form of explicit incentives, psychological discomfort and cognitive biases. I know that Taleb is doing all he can to spread the concept through interviews etc, but in the end the change has to come from those who influence behaviour through their positions in society. As I said in an earlier post, Taleb argues that the relevant people are CEOs, policymakers and those responsible for business school education.

Leaving aside how you go about this for a second, it is possible that if (amplified by the timing of the book) a few key people/organizations internalize the concepts in fooled by randomness and TBS, AND IF that their new outlook positively affects organizational performance, AND IF that this link is  recognized – the resulting success of practices based on TBS could cause the idea itself to prosper and spread. That’s a lot of ifs, but something we spend a lot of time thinking about in relation to scenarios, which (at least in our approach) have a lot in common with FBR/TBS concepts. I’d love your comments on this.

The other major issue is, of course, the need for TBS concepts to lead to a decision-making framework that can go some way to solving for cognitive bias and the uncertainty inherent in complex systems at one fell swoop. For me, this is the holy grail. In my mind, there’s a need to integrate the reams of research out there on cognition, decision-making, complexity and leadership into a testable approach for facing important decisions. A tall order of course, but perhaps we’re a little bit closer thanks to the existence and timing of books like The Black Swan.


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