I did a search across the SDMB and did not come across a thread dedicated to this book.
There should be. The Black Swanby Nassim Nicholas Taleb.
It was written a few years ago and got a lot of buzz, but mostly in Big Finance/Global Economic circles. The impression I got was that is like **Too Big to Fail **or **The Big Short **or some other ‘why the Finance big wigs get us into trouble’ books.
It is NOT like them - yes, it touches on why Financial Markets fail, but it is NOT about Finance.
Fundamentally, it is a **philosophy **book; one that *uses *behaviors in Financial markets and the technical math underlying them as the laboratory setting to illustrate his ideas. So you need to have a solid grounding in philosophy, finance, probability-based maths and a few other things to truly get it. I didn’t get much of the finance, but have been reading some of those “history of philosophy” books you can get at the airport and took a lot of math as a Computer Science major so I could grasp the basic ideas.
From a Philosophy standpoint, his ideas are grounded in two key concepts:
[ul]
[li]“Skeptical empiricism”- a fancy way of saying “assume you don’t know; rely only on the facts in front of you” or, as they say in Missouri: Show me.[/li][li]“Epistemic arrogance” – an even fancier way of saying “don’t think you can know everything” coupled with “what you think you know – but really don’t – can really hurt you.” [/ul][/li] [ul][li] Within this context is the “Black Swan event” – one that seems unthinkable when it happens, but is “foreseeable in hindsight” and have dramatic effect, like a big earthquake or the dominance of Facebook. [/li] [li] Epistemology is the part of classical philosophy that asks the question “what can Man know?” and “are their limits?” Since the author is starting from a place of skepticism, you can guess his position: we are arrogant, and the financial crisis is a result of that – we thought we could understand market behaviors, i.e., markets behave “rationally.” But they don’t – and Taleb spends a ton of time telling stories about being some sort of international economic badass, tweaking the noses of Nobel winners, Robert Rubin and Ben Bernanke and just about any other reputable name in the money game you can think of. [/li] [li] Really, though, the “truth” at the heart of the book is as old as a Greek tragedy: don’t think you can know, let alone control, the forces underlying our lives. Trying to do so is a recipe for disaster every time. [/li][/ul]
What is interesting is how he grounds this argument using the various math, economic, history of philosophy, and other disciplines –
[ul] [li]He argues that Man has survived because we are adaptable – and part of that adaptability is to be able to “look ahead” – i.e., consider possible outcomes and choose the best path.[/li][li]This tendency to Forecast leads us to come up with “rules of thumb” – basic frameworks we use to simplify the world and make choices.[/li][li]The tendency to Forecast, however, only fits some situations – and here, Taleb spends a ton of time discussing where forecasting does – and more importantly, does NOT – apply. Again, no surprise, Financial markets are an example of where forecasting does not work. [/li][li]When you are in an area that you can NOT expect to forecast accurately:[/ul][/li][ul][li]Establish a minimum nest egg that you never touch[/li][li]Diversify your nest egg and your general business practices – i.e., someone with a bank account AND money in their mattress is better off[/li][li]Grow via a “rapid deployment” approach: many small growth experiments from which you can drop the failures with minimal risk while tweaking and building off of the ones that survive.[/li][li]Keep alert for “positive Black Swan” opportunities that you can exploit[/li][/ul]
Anyone else read it? As someone who is in charge of both Strategic Planning (establishing a Top-Down approach to making trade-off choices in our business) and Risk Management (assume top-down plans are arrogant in the face of reality) I found this book fascinating and well-written. As a student of philosophy (self-taught), I appreciated how chose to ground this book as a philosophy book, NOT as a business or Finance book.
Entirely read-worthy.