This is a very interesting book. Sub-titled “The Impact of the Highly Improbable”, it deals with our (in)ability to predict events, and the meaning that this has for people in their non-everyday lives.
Taleb is an elegant and wide-ranging writer, and the book is full of pithy quotes (“Doubting the consequences of an outcome will allow you to remain imperturbable”; “We tend to use knowledge as therapy”) and odd connections. He likes to tease the reader a bit, and he’s not afraid to take a stand against conventional wisdom, especially when said wisdom makes things seem more certainly predictable than they really – according to Taleb – are. He deals with probability in an engaging and accessible way; readers without a strong background in math need not worry.
Basically, Taleb’s thesis is as follows: Conventional probability studies (using the Gaussian or “bell” curve that all of us remember from college) are of limited application. Much of what happens around us is understandable only by throwing away the Gaussian and using a Mandelbrotian (i.e., exponential) approach. Things that seem unimaginably unlikely (because they lie so far outside the tails of the bell) are in fact not so unimaginable at all when seen through a Mandelbrotian lens…rather, they are downright likely to happen given enough time. And that time is shorter than what you think.
Taleb’s background is in finance, so he uses the market to illustrate much of what he says. And many of his arguments seem convincing, especially when it comes to options valuation and the like. But some of his examples would seem to ring false. For instance, he says that the October 1987 market crash was unpredicted, and happened for no discernible reason. But some of the world’s best traders and investors apparently did see the crash coming, because they got out of the market and into cash with, in some cases, uncanny timing, and then jumped right back into the market when it was about to turn around and go up again. There are also investors like Jim Rogers who seem to be right time after time, over decades, which would also seem to argue against Taleb’s idea that the markets are basically unpredictable.
Or maybe it’s just the case that with six or seven billion people on the planet, the odds are that a few of them are going to be right. I really don’t know.
I would think that anyone with an interest in finance or investing, as well as those people who just enjoy having their minds expanded a bit, would want to read this book. I bought it in hardcover, and found it to be well worth the price.
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