The Black Swan: The Impact of the Highly Improbable

  • Published

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb. Random House, 2007, 400 pp.

Even the most casual observers of history concede that attempts to predict the next threat to national defense are often erroneous and, consequently, not only futile but also misleading. In elegant yet candid fashion, Nassim Taleb addresses the inclination to fallaciously predict by conceptualizing the “black swan” phenomenon, which involves highly improbable, thus almost impossible to anticipate, events that inflict disproportionate influence. Subsequently, we examine these events in hindsight and rationalize them with prescriptive remedies. Though doing so is a human tendency, such a retrospective analysis ignores the fact that these events transcend normal expectations and, therefore, are innately unpredictable.

Taleb’s Black Swan is an inviting narrative of this phenomenon, driving deeply into the author’s philosophical approach to life and, in the process, providing an invaluable education in history, philosophy, economics, and foreboding—all of which make the book a welcomed companion for those who seek to understand the future. This is the second work by Taleb on probability, randomness, and the repercussions of our inability to predict. As in his other books, his upbringing in war-torn Lebanon offers a foundation not only for his theories but also for the development of his intellectual understanding. This artful approach gives the book depth and richness, and in doing so inundates the reader with humor, satire, and sarcastic explanations for humanity—which, if not for the engaging prose, would alienate the book’s audience. Far from alienating readers, however, Taleb draws them to the book, thereby stimulating philosophical contemplation.

His frustration with academia stems from the latter’s inability to supply useful prescriptive recommendations that account for randomness. Taleb summarizes this resonating theme with a pragmatic look at economists, whose predictive “insight” into markets frequently leads to errors and miscalculations. Most economists remained oblivious to conditions that drove the Great Depression; furthermore, they failed to anticipate the recent crash in the housing market and subsequent “Great Recession.” Yet, in hindsight, economists downplay their ineffectiveness in foreseeing economic events as failures not in prescriptive methodology but in technical analysis. Thus, they fail to acknowledge the underlying problem in prediction: randomness and the role of improbable events (which, oddly, can and do occur).

Taleb makes the compelling argument that economists, like other professionals, suffer susceptibility to black swan phenomena. The term itself derives from a cautionary tale rooted in scientific deduction. The very notion of a black swan was inconceivable to Europeans before their discovery of Australia. The idea that all swans were white enjoyed such prominence that people dismissed the sighting of the first black swan as an error. Despite the relative insignificance of this story (except to a few ornithologists of the time), it illustrates that “what we see is not necessarily all that is there” (p. 50), revealing the “limitation to our learning from observations or experience and the fragility of our knowledge” (p. xvii). This single event disproved the axiom—brought about through countless observations of white swans—that all swans are white, bringing to light a problem with the philosophical logic that drives learning and knowledge. One does not have to search far for black swan events, which characteristically demonstrate “rarity, extreme impact, and retrospective (though not prospective) predictability” (p. xviii).

The history of national defense is dense with black swan events, from the rise of Hitler to the demise of the Soviet bloc. Recently, the terrorist attacks of 11 September 2001, the insurgency in Iraq, and the Sunni Awakening show that history is rich with unpredictable yet highly consequential events. It is human nature that, after the fact, we assume we could have foreseen these events had we just been looking at the right things or drawn the appropriate conclusions. According to Taleb, this is the crux of human knowledge: we misinterpret history, and we dismiss the impact of randomness as improbable.

As for recommending the best way to cope with the black swan phenomenon, Taleb falls short. Although he devotes significant effort to explaining how to deal with improbable events, the conclusion is fiscally oriented. The beauty of Taleb’s argument, therefore, is not its prescriptive element but the far-reaching applicability of black swan events. Human history (and even our personal lives) is shaped to a large degree by events we could not have predicted. The very fact that these events lie beyond our comprehension of what we expected makes them significant. Unfortunately, Taleb fails to capitalize on the elegance of the far-reaching applicability in his theory, instead focusing on academia and finance. The reader may walk away with a sense of irresolute applicability of the black swan phenomenon, but the book’s philosophical examination of the unknown has considerable value.

Why then, would The Black Swan interest those of us who study air and space defense? The answer lies in understanding the limitations of human knowledge and the validity of empirical evidence to derive what is “fact.” Taleb’s resounding explanation serves as an ominous warning: do not attempt to foretell the next threat or war—instead, prepare for the unexpected and the highly improbable. Chances are, luck and improbability will play a dominant role in tomorrow’s conflict.

Maj Marshall Chalverus, USAF

Naval Postgraduate School, Monterey, CA

"The views expressed are those of the author(s) and do not reflect the official policy or position of the US government or the Department of Defense."