I can’t say that I’ve ever dealt with anything with a million data points and still found them useless informationally—as Nassim Nicholas Taleb has asserted in “The Black Swan: The Impact of the Highly Improbable” (2007 / 2010). This book has garnered plenty of attention of late, and his ideas have found their way into broad debates about disaster preparedness and predictive analytics.

A so-called “black swan” event has three main attributes, according to Taleb: “First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact (unlike the bird). Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable” (2010, p. xxii). Such events have great explanatory power. He suggests that a small number of these black swans explain “the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. Ever since we left the Pleistocene, some ten millennia ago, the effect of these Black Swans has been increasing. It started accelerating during the industrial revolution, as the world started getting more complicated, while ordinary events, the ones we study and discuss and try to predict from reading the newspapers, have become increasingly inconsequential.” (p. xxii)

He asserts that such events are by definition unpredictable. He spends a large part of his book critiquing the uses of the Gaussian bell curve, which is used to baseline and explain so much—but which he asserts really has little in the way of explanatory power when it comes to predictions. Further, the bell curve gives the world a false sense of normalcy which may make far outlier events mentally inconceivable. The bell curve contributes to human egotism about their ability to forecast events—which humans assume to be fairly accurate—but which are quite the opposite.

Considering Antiknowledge

Taleb suggests that people can become more accurate at possibly anticipating black swans by studying “anti-knowledge” or what they do not know. There is a disproportionate payoff to knowing the unknown, or discovering what is outside mainline knowledge. Further, instead of focusing on micro-facts, he suggests that people would do better to study in the abstract, to pull out “metarules”. People need to set aside time to introspect and ruminate, in order to get a more accurate sense of the world, he suggests. People also should practice the expression of their imaginations—in order to not just be reactive to the world’s events but to actually anticipate.

The Importance of Baselining…But

In many fields, to understand the so-called state of the world, people go to averages and strive to understand what is common. The bell curve is not accommodative of large deviations though. The focus on what the author calls “Platonicities” (or known facts) disallows sufficient thinking on singularities which have not yet occurred; focusing on the knowns does not necessarily illuminate the unknowns.

Taleb suggests that the extremes should be studied to understand the baseline, or the common. “This is a book about uncertainty; to this author, the rare event equals uncertainty. This may seem like a strong statement—that we need to principally study the rare and extreme events in order to figure out common ones—but I will make myself clear as follows. There are two possible ways to approach phenomena. The first is to rule out the extraordinary and focus on the ‘normal.’ The examiner leaves aside ‘outliers’ and studies ordinary cases. The second approach is to consider that in order to understand a phenomenon, one needs first to consider the extremes—particularly if, like the Black Swan, they carry an extraordinary cumulative effect,” Taleb writes (2010, pp. xxviii-xxix). In a sense, the realm of possibility has to include events under enormous pressures and stresses in order to show actual potential. Focusing on the common offers a shared framework of analysis that leads to groupthink.

The author describes the world of the knowns as “Mediocristan” and the unknowns as “Extremistan.” Different tools need to be used to understand the latter. One of the tools is an open mind supported by erudition—or constant and broad learning. Assumptions need to be tested with a direct pursuit of disconfirming information. People need to not instantly jump to narrative explanations for certain events without considering the possibility of true random effects. “The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding,” Taleb writes (2010, pp. 63 – 64). Sometimes, it helps to actively not-theorize in order to be able to consider a wider range of possibilities (instead of going to dimension reduction).

An Outlandish World

In Extremistan, which is the world (according to Taleb), any prediction is deeply marred by cumulative errors. Being off by a small percentage of a point means huge compounding mistakes shortly into the future. All is non-routine. The artificial world of Mediocristan has mild randomness. He gives an example from human life expectancy. He writes: “It is not scalable, since the older we get, the less likely we are to live. In a developed country a newborn female is expected to die at around 79, according to insurance tables. When she reaches her 79th birthday, her life expectancy, assuming that she is in typical health, is another 10 years. At the age of 90, she should have another 4.7 years to go. At the age of 100, 2.5 years. At the age of 119, if she miraculously lives that long, she should have about nine months left. As she lives beyond the expected date of death, the number of additional years to go decreases. This illustrates the major property of random variables related to the bell curve. The conditional expectation of additional life drops as a person gets older.”

By contrast, in Extremistan, the variables may be scalable, with an opposite effect. Here, he uses examples of large-scale human projects: “With scalable variables, the ones from Extremistan, you will witness the exact opposite effect. Let’s say a project is expected to terminate in 79 days, the same expectation in days as the newborn female has in years. On the 79th day, if the project is not finished, it will be expected to take another 25 days to complete. But on the 90th day, if the project is still not completed, it should have about 58 days to go. On the 100th, it should have 89 days to go. On the 119th, it should have an extra 149 days. On day 600, if the project is not done, you will be expected to need an extra 1,590 days. As you see, the longer you wait, the longer you will be expected to wait” (2010, p. 159).

Fractals, not 2D Curves

To represent the world mentally, Nicholas Nassim Taleb suggests the uses of fractals instead of curves. Mandelbrotian fractals are the scalable repeating of patterns at different scales. These small patterns of Mandelbrotian randomness at some point evoke patterns in the whole. “Fractals should be the default, the approximation, the framework. They do not solve the Black Swan problem and do not turn all Black Swans into predictable events, but they significantly mitigate the Black Swan problem by making such large events conceivable,” writes Taleb (2010, p. 262). Further, he suggests that there is no “long run” into the future. Everything has to be lived first in the short run.

The Micro and the Macro

These ideas are intriguing and have some value at the macro level. In Mediocristan, and in the lived level of precise specifics that most of us live, the minute does matter. We do still need to baseline at the local level. We need to know where the normal is in order to try to innovate at the edges of the normal. To understand trends, we do need to know the various small measures of the specifics.

It doesn’t mean we don’t look around for where possible large-scale changes might come from, but one can’t live in that space of abstractions and amorphous emergent risks as a mode of daily living—unless you’re outfitted in the way that Taleb describes his own life to be. We live in the micro and occasionally consider the macro…and in those cases, the broad imagination of a black swan world view may come in handy.