Reading The Black Swan

I am having a lot of fun reading the landmark Taleb's book The Black Swan.

At first I craved the mathematical errors, looking at how correcting them would change the meaning of the book. The most obvious error was about the "Brooklyn Fat Tony" calling the odds of a fair coin landing heads to be "below one percent" after 99 tails. Taleb claimed that it is "far more" likely for coin to be unfair than for a fair coin to land 99 times on the same side. His mistake was that it is actually easy to calculate exactly how likely that is. We just need to ask Taleb how many trials he did to determine that the coin was fair. If he did 1000 trials and the coin landed about 500 times on each side, how unlikely it is for an unfair coin to produce such a result? I know that Taleb did this fairness trial, because him being an "empiricist" would not allow for making any statements without prior experiment. In the absence of any initial knowledge Tony would be correct, even though unable to calculate the true probability being 0.99%. In the actual scenario described in the book he is making a big mistake.

But eventually this approach lost its appeal. Taleb's mistakes grew more and more obvious. Asking audience to produce a 98% correct interval estimating a random variable and instead of getting 100 instances of a variable looking at correctness of 100 different estimates for a single instance of the random variable. Facepalm! Drawing major conclusions based on the sample size one. How much worse could it be for a person claiming to know a thing about statistics?

The new way for me to enjoy the book is based on turning around every example. Taleb is so often contradicts himself that I am taking each example on its head and imaging Taleb using it in a different chapter to illustrate the opposite idea.

For example, he ridicules Pan Am airline for offering round-trip booking for a Moon flight after the first successful flight. Apparently, the company was stupid enough to forecast an advent of accessible space flight, was wrong at it - look how bad business folks and predicting the future! On the other hand, he could have praised Pan Am for betting on an unlikely Black Swan event not happening. The company was in trouble and was in need of some publicity. The management decided to bet on a Black Swan event - make some cash now at the risk of a huge cost if space flight would've indeed happened. By doing this move, the company took advantage of gullible public failing to forecast the future. This move would've received highest praise from Taleb in another chapter of his own book.

The book was quite influential, but I never read it before. Reading it now I am amused just how wrong could one's reasoning be and still lead to sensible recommendations. Makes me wonder if reasoning was even required for this book. Perhaps Taleb could've done the same with his gym stories alone.

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