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The Black Swan – Nassim Nicholas Taleb

Black swan is an event with the following attributes:

  1. It is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility.

  2. It carries an extreme impact.

  3. In spite of its outlier status, human nature makes us conconct explanations for its occurence after the fact, making it explainable and predictable.

Black Swan logic makes what you don't know far more relevant than what you know.

A scalable profession is good only if you are successful; they are more competitive, produce monstruous inequalities, and are far more random, with huge disparities between efforts and rewards – a few can take a large share of the pie, leaving others out entirely at no fault of their own.

Two types of randomness / two varieties of uncertainty:

  1. Particular events don't contribute much individually – only collectively: When your sample is large, no single instance will significantly increase the aggregate or the total. Ex: height, weight… *Tyranny of the collective

  2. Inequalities are such that one single observation can disproportiionately impact the aggregate, or the total. Ex: wealth, book sales… Tyranny of the accidental.

What you can know from data in situation #1 augments very rapidly with the supply of information. But knowledge in situation #2 grows slowly and erratically with the addition of data, some of it extreme, possibly at an unknown rate.

Example of turkey: fed every day at noon for 1,000 days. Past behavior can not predict it will be slaughtered on day 1,001 for thanksgiving. Worse, its confidence increased with every day.

Inclination to narrate is biological. Pure randomness is impossible to compress. 100,000 random words can not be compressed. You need 100,000 to carry the exact message.

Narratives allows for compression. You just store the pattern.

The more random the information, the greater the dimensionality and thus the more difficult to summarize. Need to reduce dimension and bring order into randomness. Dimension reduction can lead to blindness.

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