you need is one single (and, I am told, quite ugly) black bird.*
I push one step beyond this philosophical-logical question into an empirical
reality, and one that has obsessed me since childhood. What we call
here a Black Swan (and capitalize it) is an event with the following three
attributes.
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. Third, in spite of its outlier status,
* The spread of camera cell phones has afforded me a large collection of pictures of
black swans sent by traveling readers. Last Christmas I also got a case of Black
Swan Wine (not my favorite), a videotape (I don't watch videos), and two books.
I prefer the pictures.
xviii PROLOGUE
human nature makes us concoct explanations for its occurrence after the
fact, making it explainable and predictable.
I stop and summarize the triplet: rarity, extreme impact, and retrospective
(though not prospective) predictability.* A small number of Black
Swans explain almost everything in our world, from 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.
Just imagine how little your understanding of the world on the eve of
the events of 1914 would have helped you guess what was to happen next.
(Don't cheat by using the explanations drilled into your cranium by your
dull high school teacher.) How about the rise of Hitler and the subsequent
war? How about the precipitous demise of the Soviet bloc? How about the
rise of Islamic fundamentalism? How about the spread of the Internet?
How about the market crash of 1987 (and the more unexpected recovery)?
Fads, epidemics, fashion, ideas, the emergence of art genres and
schools. All follow these Black Swan dynamics. Literally, just about everything
of significance around you might qualify.
This combination of low predictability and large impact makes the
Black Swan a great puzzle; but that is not yet the core concern of this
book. Add to this phenomenon the fact that we tend to act as if it does not
exist! I don't mean just you, your cousin Joey, and me, but almost all "social
scientists" who, for over a century, have operated under the false belief
that their tools could measure uncertainty. For the applications of the
sciences of uncertainty to real-world problems has had ridiculous effects;
I have been privileged to see it in finance and economics. Go ask your
portfolio manager for his definition of "risk," and odds are that he will
supply you with a measure that excludes the possibility of the Black
Swan—hence one that has no better predictive value for assessing the total
risks than astrology (we will see how they dress up the intellectual fraud
with mathematics). This problem is endemic in social matters.
* The highly expected not happening is also a Black Swan. Note that, by symmetry,
the occurrence of a highly improbable event is the equivalent of the nonoccurrence
of a highly probable one.
P R O L O G U E xix
The central idea of this book concerns our blindness with respect to
randomness, particularly the large deviations: Why do we, scientists or
nonscientists, hotshots or regular Joes, tend to see the pennies instead of
the dollars? Why do we keep focusing on the minutiae, not the possible
significant large events, in spite of the obvious evidence of their huge influence?
And, if you follow my argument, why does reading the newspaper
actually decrease your knowledge of the world?
It is easy to see that life is the cumulative effect of a handful of significant
shocks. It is not so hard to identify the role of Black Swans, from
your armchair (or bar stool). Go through the following exercise. Look
into your own existence. Count the significant events, the technological
changes, and the inventions that have taken place in our environment
since you were born and compare them to what was expected before their
advent. How many of them came on a schedule? Look into your own personal
life, to your choice of profession, say, or meeting your mate, your
exile from your country of origin, the betrayals you faced, your sudden enrichment
or impoverishment. How often did these things occur according
to plan?
What You Do Not Know
Black Swan logic makes what you don't know far more relevant than
what you do know. Consider that many Black Swans can be caused and
exacerbated by their being unexpected.
Think of the terrorist attack of September 11, 2001: had the risk been
reasonably conceivable on September 10, it would not have happened. If
such a possibility were deemed worthy of attention, fighter planes would
have circled the sky above the twin towers, airplanes would have had
locked bulletproof doors, and the attack would not have taken place, period.
Something else might have taken place. What? I don't know.
Isn't it strange to see an event happening precisely because it was not
supposed to happen? What kind of defense do we have against that?
Whatever you come to know (that New York is an easy terrorist target,
for instance) may become inconsequential if your enemy knows that you
know it. It may be odd that, in such a strategic game, what you know can
be truly inconsequential.
This extends to all businesses. Think about the "secret recipe" to making
a killing in the restaurant business. If it were known and obvious, then
someone next door would have already come up with the idea and it
xx PROLOGUE
would have become generic. The next killing in the restaurant industry
needs to be an idea that is not easily conceived of by the current population
of restaurateurs. It has to be at some distance from expectations. The
more unexpected the success of such a venture, the smaller the number of
competitors, and the more successful the entrepreneur who implements
the idea. The same applies to the shoe and the book businesses—or any
kind of entrepreneurship. The same applies to scientific theories—nobody
has interest in listening to trivialities. The payoff of a human venture is, in
general, inversely proportional to what it is expected to be.
Consider the Pacific tsunami of December 2004. Had it been expected,
it would not have caused the damage it did—the areas affected would
have been less populated, an early warning system would have been put in
place. What you know cannot really hurt you.
Experts and "Empty Suits"
The inability to predict outliers implies the inability to predict the course
of history, given the share of these events in the dynamics of events.
But we act as though we are able to predict historical events, or, even
worse, as if we are able to change the course of history. We produce thirtyyear
projections of social security deficits and oil prices without realizing
that we cannot even predict these for next summer—our cumulative prediction
errors for political and economic events are so monstrous that
every time I look at the empirical record I have to pinch myself to verify
that I am not dreaming. What is surprising is not the magnitude of our
forecast errors, but our absence of awareness of it. This is all the more
worrisome when we engage in deadly conflicts: wars are fundamentally
unpredictable (and we do not know it). Owing to this misunderstanding
of the causal chains between policy and actions, we can easily trigger
Black Swans thanks to aggressive ignorance—like a child playing with a
chemistry kit.
Our inability to predict in environments subjected to the Black Swan,
coupled with a general lack of the awareness of this state of affairs, means
that certain professionals, while believing they are experts, are in fact
not. Based on their empirical record, they do not know more about their
subject matter than the general population, but they are much better at
narrating—or, worse, at smoking you with complicated mathematical
models. They are also more likely to wear a tie.
Black Swans being unpredictable, we need to adjust to their existence
P R O L O G U E xxi
(rather than naively try to predict them). There are so many things we can
do if we focus on antiknowledge, or what we do not know. Among many
other benefits, you can set yourself up to collect serendipitous Black Swans
(of the positive kind) by maximizing your exposure to them. Indeed, in some
domains—such as scientific discovery and venture capital investments—
there is a disproportionate payoff from the unknown, since you typically
have little to lose and plenty to gain from a rare event. We will see that,
contrary to social-science wisdom, almost no discovery, no technologies of
note, came from design and planning—they were just Black Swans. The
strategy for the discoverers and entrepreneurs is to rely less on top-down
planning and focus on maximum tinkering and recognizing opportunities
when they present themselves. So I disagree with the followers of Marx
and those of Adam Smith: the reason free markets work is because they
allow people to be lucky, thanks to aggressive trial and error, not by giving
rewards or "incentives" for skill. The strategy is, then, to tinker as
much as possible and try to collect as many Black Swan opportunities
as you can.
Learning to Learn
Another related human impediment comes from excessive focus on what
we do know: we tend to learn the precise, not the general.
What did people learn from the 9/11 episode? Did they learn that some
events, owing to their dynamics, stand largely outside the realm of the predictable?
No. Did they learn the built-in defect of conventional wisdom?
No. What did they figure out? They learned precise rules for avoiding Islamic
prototerrorists and tall buildings. Many keep reminding me that it
is important for us to be practical and take tangible steps rather than to
"theorize" about knowledge. The story of the Maginot Line shows how
we are conditioned to be specific. The French, after the Great War, built a
wall along the previous German invasion route to prevent reinvasion—
Hitler just (almost) effortlessly went around it. The French had been excellent
students of history; they just learned with too much precision. They
were too practical and exceedingly focused for their own safety.
We do not spontaneously learn that we don't learn that we don't learn.
The problem lies in the structure of our minds: we don't learn rules, just
facts, and only facts. Metarules (such as the rule that we have a tendency
to not learn rules) we don't seem to be good at getting. We scorn the abstract;
we scorn it with passion.
xxii PROLOGUE
Why? It is necessary here, as it is my agenda in the rest of this book,
both to stand conventional wisdom on its head and to show how inapplicable
it is to our modern, complex, and increasingly recursive environment.*
But there is a deeper question: What are our minds made for? It looks
as if we have the wrong user's manual. Our minds do not seem made to
think and introspect; if they were, things would be easier for us today, but
then we would not be here today and I would not have been here to talk
about it—my counterfactual, introspective, and hard-thinking ancestor
would have been eaten by a lion while his nonthinking but faster-reacting
cousin would have run for cover. Consider that thinking is time-consuming
and generally a great waste of energy, that our predecessors spent more
than a hundred million years as nonthinking mammals and that in the
blip in our history during which we have used our brain we have used it
on subjects too peripheral to matter. Evidence shows that we do much
less thinking than we believe we do—except, of course, when we think
about it.
A NEW KIND OF INGRATITUDE
It is quite saddening to think of those people who have been mistreated by
history. There were the poètes maudits, like Edgar Allan Poe or Arthur
Rimbaud, scorned by society and later worshipped and force-fed to schoolchildren.
(There are even schools named after high school dropouts.) Alas,
this recognition came a little too late for the poet to get a serotonin kick
out of it, or to prop up his romantic life on earth. But there are even more
mistreated heroes—the very sad category of those who we do not know
were heroes, who saved our lives, who helped us avoid disasters. They left
no traces and did not even know that they were making a contribution.
We remember the martyrs who died for a cause that we knew about, never
those no less effective in their contribution but whose cause we were never
* Recursive here means that the world in which we live has an increasing number of
feedback loops, causing events to be the cause of more events (say, people buy a
book because other people bought it), thus generating snowballs and arbitrary and
unpredictable planet-wide winner-take-all effects. We live in an environment where
information flows too rapidly, accelerating such epidemics. Likewise, events can
happen because they are not supposed to happen. (Our intuitions are made for an
environment with simpler causes and effects and slowly moving information.) This
type of randomness did not prevail during the Pleistocene, as socioeconomic life
was far simpler then.
P R O L O G U E xxiii
aware of—precisely because they were successful. Our ingratitude toward
the poètes maudits fades completely in front of this other type of thanklessness.
This is a far more vicious kind of ingratitude: the feeling of uselessness
on the part of the silent hero. I will illustrate with the following
thought experiment.
Assume that a legislator with courage, influence, intellect, vision, and
perseverance manages to enact a law that goes into universal effect and
