I read Fooled and Black Swan and I'm just going to admit it: I don't get it. I mean, I think I understood both books. But can someone explain why they're supposed to be so revelatory? I found them to be... something else.
Many, many smart people seem to swear by Fooled. Why? What am I missing?
I liked both and learned significant things from both. Haven't yet read anti-fragile.
In particular, the idea that the financial models (think Black Scholes and Long Term Capital Management) are based on seriously bad (e.g., non-fractal) ways of thinking about the way that the world works. The incident where Mandelbrot detected the prices of cotton to have an element involving some unexpected exponent (one sixth? memory isn't bringing that up). The standard way of thinking about these facts admit that they can't handle that. Thus, much of the way risk is modeled is like the guy looking for his lost ring under the street lamp even though he lost it half a block down. "At least there is light here."
Who else is telling us that bell curves and current risk models don't work? Not CNBC, Yahoo, Fox.
Another thing that I took away was how uncomfortable financially successful people are with the idea that luck is a significant component, perhaps even more than their talent and business skill.
Insofar as the issue of his tone or arrogance is concerned, I don't get that. Is it possible that when we complain about an adversary or messenger with bad "tone" or "arrogance" that there is something in the message that we don't like? Certainly he is direct and blunt in his approach. Doesn't put me off.
I feel like it is similar to the reaction that many classically trained engineers when confronted with chaos theory. The world can't possibly be that "random". Except that there is some deep beauty in this oddly-named "Chaos" theory that lends exceptional stability to many phenomenon.
And on the topic of Chaos, it is interesting to go back to James Gleick's Chaos: Making a New Science and read the part about how "there is no climate". Essentially, there isn't anything that guarantees us that the whole system won't just float off arbitrarily into a new Ice Age. Contemplate that in today's debate about climate change. That is, if you postulate that there is "global warming" (renamed to the more apparently less controversial "climate change") and get everybody to agree, what do you do? Is it not possible, in a chaotic system that is moving to a new attractor, that actions we take, like cutting in half carbon emissions, might have a totally unexpected effect? That would be my bet. Kind of a complicated decision to make in a heated political arena, populated by tribes of one sort or another, don't you think?
So the lesson from Swan and Fooled, in the large, to me, are "your models for how stuff works is likely busted, particularly if your income depends on you believing in them."
> Insofar as the issue of his tone or arrogance is concerned, I don't get that. Is it possible that when we complain about an adversary or messenger with bad "tone" or "arrogance" that there is something in the message that we don't like? Certainly he is direct and blunt in his approach. Doesn't put me off.
Wasn't a substantial part of Black Swan a story about a fake novelist writing a novel that people didn't like and wouldn't publish or something? It's been a while so I don't remember the details but it was pretty clearly Taleb coyly describing how he couldn't take editorial criticism.
There was also a lot of shit talking about sycophants, and then talk about how Benoit Mandlebrot was so smart that he thought Von Neumann was not that bright, and Mandlebrot likes Taleb so therefore Taleb's work must be super important.
I don't think any of that falls under the category of being direct and blunt in making an intellectual argument. It's just extraneous ego-driven bullshit.
The climate stuff is unrelated but worth making a short note on. The physics of climate change (not called that because it's less politically controversial, but because it's an umbrella term that describes a host of related phenomena that aren't solely an increase in temperature) are obviously complicated but not completely chaotic. As a professional (caveat emptor!) geoscientist I would phrase it that the longer-term changes are more linear but the shorter-term changes are less so, described quite nicely by you: "'Chaos' theory that lends exceptional stability to many phenomenon.' That being said, there is certainly a fair amount of stochasticity in the system but cutting carbon emissions by half (back to 1977 levels) just is not going to result in ice bulldozing Omaha. Really. It wouldn't be adding a new attractor, but it might be bringing one on a little more slowly.
I don't think any of that falls under the category of being direct and blunt in making an intellectual argument. It's just extraneous ego-driven bullshit
I probably can't strongly disagree with that. And you are probably right about the fake novelist--it has been some time.
Certainly Mandelbrot was one who got seriously delayed recognition for his contributions. As did Lorenz for his remarkable discovery that he couldn't get anyone to pay attention to.
I don't disagree that both Mandelbrot and Taleb are/were arrogant. I would rather pay attention to someone who is arrogant and smart rather than arrogant and stupid.
Your statement obviously complicated but not completely chaotic intrigues me. The reading I have done on the topic suggests that weather systems are to their core chaotic. I wonder if there is additional reading you can point to that suddenly cutting carbon emissions by half won't result in Omaha getting hammered. This conclusion does in fact seem to be the one that anti-climate-change-deniers have reached. The massive increase in carbon dioxide into the system is an impulse that seems to have moved the attractor in a scary direction. Why wouldn't a massive impulse in the opposite direction do the same?
I think the most important thing is to not conflate weather and climate. Weather is a local, relatively instantaneous, open system whereas climate is global, long-term and less open.
Weather is chaotic in part because energy can be rapidly brought into or removed from a weather system like a storm (a storm can go from over ocean to over land, or encounter hot and wet or cold and dry air, or the incoming solar radiation can change because of sunrise/sunsets), because internal circulation and lateral boundary conditions are really important (Navier-Stokes) and because water phase transitions (freezing/melting, evaporation/precip/sublimation) are all rapid and can account for a big chunk of the available energy.
The earth's climate is a bit different. Incoming energy from the sun doesn't change that rapidly--the sun has some 'weather' patterns and then there are earth's own orbital patterns that very regularly over periods from 23,000 to 100,000 years (Milankovitch cycles). But these are changes of a few % over long term. Very different than a hurricane hitting land or afternoon sun causing microscale convective systems to intiate. Greenhouse gases can change the amount of energy lost to either direct reflection of incoming short-wavelength solar radiation or later, long-wavelength radiation (i.e. radiation of energy that was initially absorbed rather than straight reflected), and again these changes are a few % net. Additionally, the earth's climate can't interact with any other climates, unlike weather systems.
There are some other things to keep in mind particularly about ice ages, ice sheets and changing greenhouse gas emissions. First, the timescales are important. Unlike some chaotic math functions, the changes to the global ice balance is mediated by the processes involved. Melting of ice sheets can happen as quickly as the ice can absorb heat--this is relatively fast. However, continental ice sheets don't grow by freezing of liquid water (we're talking Antarctica/Greenland/ the Laurentide ice sheet that covered northern North America, not the Arctic seasonal sea ice which is minuscule in comparison and can't cover land). Continental ice sheets grow by slow accumulation of snow. So this takes a lot of time relative to melting (tens of thousands of years).
>The massive increase in carbon dioxide into the system is an impulse that seems to have moved the attractor in a scary direction. Why wouldn't a massive impulse in the opposite direction do the same?
Because we're still moving in the same direction by reducing emissions, just less rapidly. We'd be changing the sign of the second derivative, not the first, much less the root function (CO2 through time). A good way to think about it is a big pot of water over a heat source. The climate is the broad distribution of heat in the system, the major convection cells, etc. The weather is the eddies and other turbulence. What we're doing by modifying greenhouse gases is changing how much the lid on top of the pot is covering the pot. Slowing emissions is more or less just covering the pot more slowly. Now, there are feedbacks in the climate system (more clouds mean more reflection of solar radiation, etc.) but in general we're still adding insulation to the system which is really unlikely to cause major, long-term cooling.
What worries me is direct, large-scale climate engineering: doing things to block incident solar radiation, etc. rather than reducing greenhouse gas emissions (this also won't help ocean acidification and other major ecological issues). I think the possibility of unforeseen consequences is much, much higher than going back to emissions levels that have been observed recently. Like Ol' Dirty Bastard said, "let's take it back to seventy-nine".
Thanks for the long and seriously thoughtful post.
So, let's not block out sunlight.
Do you have a sense of what a reasonable approach is? It seems that most of the public attention is on reducing greenhouse gasses. Except for the methane, which I understand is much more effective a greenhouse gas than CO2, as emitted from cows. Your argument that we are adjusting the second derivative is convincing.
What is your recommendation for correction--more than just reducing greenhouse gasses?
The biggest thing for me, apart from emissions reduction, is habitat preservation. The climate is always shifting of course, and humans will be OK (some populations will suffer, some will benefit but probably fewer, but we won't go extinct from this). However, limiting the contribution of climate change to the very real wave of anthropogenic extinctions is pretty important. Habitat loss is the most important here because the ecological health of an area is superlinearly related to its intact area; large areas are necessary for apex predators and migratory populations, but larger areas are much better at absorbing point-source disturbances, and allowing for spatial shifts in ecology as coastlines move uphill, streams and lakes dry up, etc. The individual communities can adjust more easily if they're not squeezed.
Healthy communities mean that populations are less likely to be decimated by some of the 'chaotic', nonlinear problems that accompany climate change. For example, slight warming of winter temps mean that bark beetles can move much farther north and ravage forests. Stressed forests can't deal as well which causes massive tree dieoffs of a species or two, leading to lots of standing dead timber which helps fires spread, killing the other tree species that were less susceptible to the beetles. Etc.
Both of you folks make a lot of solid points and then end with such humility. Don't know what to make of it, is that sort of a deliberate Anti-Taleb (i.e. contrarian) style? :-) ... In any case its very refreshing. Please carry on.
Yeah, that's the message I got. Maybe I'm just too receptive to that idea? I felt like, for the number of words and metaphors he spent, there must be some subtlety I was missing.
Fooled by randomness is his best book, but it's probably getting replaced by Robert Frank's book "Success and Luck" on my recommendation list for that topic.
It's just a good reminder that you might be luckier than you think and that skill doesn't fully explain the successful achievements.
Black Swan is seriously hard to read through; his arrogance is insufferable. The point he's making is fairly self evident; the book just got published at a very appropriate time.
You can get by without reading, or thinking about, his writings. He doesn't deserve the level of fame he has achieved by all standards.
I also found his arrogance in Black Swan insufferable - enough that I lost all taste for his writing. I saw him talk in person in my building when he was promoting Anti-Fragile, and I was also not impressed. Do you still recommend I read Fooled By Randomness?
My own academic papers have a decent number of self references, too. But there is an enormous difference between referencing your own work, and telling the reader that the author is brilliant and those other people over there are stupid.
I am honestly not sure what you are saying. I never brought up Mandelbrot, only Taleb. (Although this is a curious example, since Taleb brings up Mandelbrot a lot.)
It's a legitimate criticism, but he's arguing a strawman.
First off, the reviewer's coinflip analogy is deeply flawed. If you take a million draws from a binomial distribution, it's not going to end up the same as a million draws from an exponential distribution. That has an even deeper meaning when you, as an individual, are one random draw from said distribution, especially if you want to live in a society that considers itself "fair" (whatever that may mean).
Now Frank is not arguing against inequality. Frank is an economist, and almost no serious economist is against inequality as a whole concept (though many are against extreme inequality and, importantly, social immobility) because inequality is what you'd call "incentive compatible".
Frank's policy proposal is consistent and sane, but it will rub some the wrong way, as any policy proposal does. I'm certainly in favor of it; consumption is a better target for progressive taxation than most of what has been proposed this election season. That's the part that got the reviewer so riled up. I'm guessing the reviewer is not a professional economist.
The idea of a progressive consumption tax is consistent with microeconomic theory, too. People value things in an ordinal (not cardinal) manner, and at a sufficiently high level of income this means consumption has to be conspicuous to some degree (that's Veblen's whole insight).
Of course, political feasibility of the policy proposal is one thing, and certainly many worse policies are more politically feasible, as exemplified by how rubbed that reviewer has been by Frank's book.
The main difference between this book and Taleb's book is that Franks book is "Successful people are lucky, here's a policy proposal" and Taleb's book is "Successful people are lucky and also everyone is dumb and I'm so smart"
Okay, so I haven't read the book but I read the scathing review - and I think your rebuttal isn't quite fair.
You started to address the review but switched to ad hom attacks to discredit the reviewer - when in reality the reviewer is a past financial professor who works in risk management, and makes some very salient points about the logic behind the books claims.
Even what you say about sampling binomial vs. exponential populations isn't quite relevant, because as a coin or a person, you're not going to be switching between such distributions when sampling.
Sorry about the ad homs; the reviewer used moral/philosophical instead of technical reasons to argue against (except that point on simulations), so I assumed he was a riled up layperson. I read his review too fast, I guess.
The reviewer's point is this:
"Finally, the author is not asking me to personally give more money to the government, he wants me to support forcing other people to do it. But those other people have average luck, by definition "
But that's wrong; if the tax is progressive, and you take it as given that the successful are lucky, then you are in fact taxing the lucky with a progressive tax. The question is targeting the tax correctly.
The reviewer had a few more points than just that, such as how the author not only fails to point out that luck is correlated with success, but contradicts himself.
Even in that statement you quoted out of context, the reviewer is referring to how we all have the same amount of luck, so luck alone shouldn't be the basis for a progressive tax.
Now, there are good reasons for a progressive tax, but the reviewer is saying it doesn't justify ignoring illogical arguments in the book. Just because the conclusion is proven right somewhere else doesn't mean that all arguments for it are valid.
It's all about when it was done. Before the GFC everyone believed that if you were rich you were smart and the opposite. If you challenged this you were a loser.
Then along came a cranky old uncle, who had no business being in the building, except that he did.
Turns out he had a point and now we consider these ideas trivial.
Today if you say all people are born equal and deserve equal rights 99% of the world will agree. There was a time when this wasn't true.
I learned from Black Swan about how pervasive power laws and fractals were in social/financial phenomena, and how the important the framing (i.e. the prior expectations) of 'black swan' events are (black swan event for the turkey who gets beheaded, not for the farmer that does it every Thanksgiving). I'm a geophysicist and this stuff is our bread and butter, as a ton of risk and complexity theory applies to earthquakes (self-similarity, power laws, etc.) but I had never really made the connection to the human side of things, which I still thought about on a more atomic/psychological level than a systems level at that point. Since then I've read more widely in complexity, econ, etc., and while Taleb wasn't an introduction per se, or even that influential, I did learn some important things from him by virtue of reading him early on. Your friends might be in the same position.
The book itself was fairly repugnant. The few interviews I've read since have been interesting in that you can watch him self-destruct. For example the Edge.org interview where he answers the question of 'what scientific idea needs to be retired' with 'standard deviation'.
However, by far the best part of reading Black Swan (or some interview?) was his discussion about how he believed the body adjusted to regular but not random exercise, and therefore the best fitness strategy was to randomly break into a sprint when walking. I haven't been to NY since and would prefer not to but if I do go I really want to see him pinballing through bewildered pedestrians.
I think Black Swan was mostly propelled forward by its extremely poignant timing: It was published just before the financial crash, an event it seemed to describe in pretty high detail.
Also, I liked it. I felt it did very a good job of describing some important concepts in statistics and epistemology that weren't obvious to me at the time. YMMV, especially if you (unlike me) paid much attention in college maths and statistics.
> I think Black Swan was mostly propelled forward by its extremely poignant timing: It was published just before the financial crash, an event it seemed to describe in pretty high detail.
If true that's ironic, since Taleb is the first to say that the mortgage crisis and the associated problems were not black swans (they were predictable).
That's sounds strange. It's been a while since I've read it, but as I recall it, black swan events are inherently predictable (they are explicitly different from truly unpredictable events), it's just that human nature struggle to intuitively process their low probability and round it off to zero - which makes their impact so much greater if they do end up happening.
Which is exactly what happened in the financial crash. All of the mortgage investors assumed a worst case scenario of zero growth in house prices. If they had modelled even a modest decline, the fragility would have been exposed.
For the last 12 years, I have been telling anyone who would listen to me that we are taking huge risks and massive exposure to rare events. I isolated some areas in which people make bogus claims --epistemologically unsound. The Black Swan is a philosophy book (epistemology, philosophy of history & philosophy of science), but I used banks as a particularly worrisome case of epistemic arrogance --and the use of "science" to measure the risk of rare events, making society dependent on very spurious measurements. To me a banking crisis --worse than what we have ever seen -- was unavoidable and NOT A BLACK SWAN, just as a drunk and incompetent pilot would eventually crash the plane. And I kept receiving insults for 12 years!
Well it is like GoF design pattern book I have seen many knowledgeable people find it as master piece for software design while others think it is describing ways to overcome some rather obvious shortcoming of C++/Java etc. Nothing earth shattering in that.
what do you think the "it" is that you're missing?
the thesis is pretty simple: reasoning about randomly distributed events is counter-intuitive and we should not use mathematical models to convince ourselves that low probability/high impact events are somehow mitigated because they disappear in statistics when you smooth out the outliers.
The books are interesting, but I think that the reason that a lot of people actually 'swear by them' is because they give 'smart people' a very nice excuse for any failings they might see in themselves.
Many, many smart people seem to swear by Fooled. Why? What am I missing?