The Black Swan is a rabbit hole.  (How’s that for a sentence?)  You can keep going farther and farther down and somehow you never get to the bottom, or as it seems, the bottom looks the same as the top.  As an intellectual exercise, this book is a roller-coaster ride.  What gets scary/interesting/mind-blowing, though, is when you put it into the context of the real world.  Like any good book that has a philosophical bent, it makes you question how you go about your everyday life.

Nassim’s first book, Fooled by Randomness, revolved around how uncertainty and chance work in the world.  In the Black Swan, he explores the idea of what he calls the black swan event – an event that has three characteristics: rarity, extreme impact, and retrospective (but not prospective) predictability (pg. xviii).  These black swans (or statistical outliers) dictate or influence the outcome in the many of the arenas in today’s world.  This has a direct effect on such diverse things as our inability to predict the future and the rise of a small number of mega-successful recording artists and book authors.

Ideas, Implications, Questions

• Nassim makes a distinction between two different types of uncertainty or randomness, which he nicknames Extremistan and Mediocristan.  He defines Mediocristan as an area where “when your sample is large, no single instance will significantly change the aggregate or the total.” (pg 32)  This is like finding the average height of a group of people – there won’t be one person that is 50 feet tall and throws the whole thing out of wack.  In Extremistan, “inequalities are such that one single observation can disproportionately impact the aggregate or total.” (pg 33).  I.e., you can study incomes in the U.S. and have someone like Bill Gates show up in the sample and skew the numbers.  The idea of having two different types of uncertainty environments is really powerful, especially as most social statistics (that we tend to study and have opinions about) are in the world of Extremistan.
• Nassim talks about the power (and pitfalls of) scalability.  Scalability is huge right now in marketing, especially Internet marketing.  Nassim shows how scalability can be a great thing, if you happen to make it big.  However, any scalable environment will have a lot more small fish than big fish.  This reminds me to approach scalable ventures, such as selling a book or audio-program, with a bit of caution.  I could be the next J.K. Rowlings, or I could sell just 4 books (and it’s more statistically probable to be the later).
• I think sales and sales results are ruled by the laws of the black swan.  It’s a bigger discussion than this bullet point, but it does have some interesting ramifications.  For example, this idea has let me see the sales process as non-linear, which is the exact opposite of what most traditional sales approaches predict.  By accepting the non-linear nature of sales, it allows me to relax, even if the results are not exactly as expected in the short run.  More about this in a future post.
• There is a problem with prediction:  We actually can’t be predictive in many areas that we think we can.  I think we turn a blind eye to the ineffectiveness of predictability in these venues.  Nassim has no problem exposing this inadequacy and by being aware of this predictive shortfalls, we can be better prepared for all the possible outcomes.

Should your read this book?

Absolutely.  Before you do so, however, make sure you have some time, and preferably people to talk it over with (a support group that meets in a bar is good).  At it’s heart, this is a philosophy book, so it’s dense and it will make you think and ponder a lot.  It will also give you a refreshingly new perspective on how our modern society works, and some practical ways to cope with the black swans that do exist in our world.