The Black Swan: The Impact of the Highly Improbable

A "Black Swan" event is a highly improbable, virtually unpredictable event. Taleb argues that for an event to be considered a Black Swan it must meet the following criteria: it must be an outlier, it must have a heavy impact, and after the fact it must be explained in such a way that it later seems predictable or even preventable. The image of the Black Swan comes from the notion that at one time people believed that all swans were white; the sighting of a black swan challenged what was widely accepted as common knowledge. Taleb argues that people struggle to process the very possibility of Black Swan events.

Confirmation error is the tendency to corroborate what someone already thinks or believes to reach a conclusion. Also known as confirmation bias, this tendency leads people to commit lapses in logic, as they find instances that seem to prove their rationale or model. Interpreting events by means of confirmation error essentially removes the possibility of a Black Swan’s occurrence.

Taleb invents this word to illustrate the idea that a single observation or event can significantly impact an entire society. In Extremistan, Black Swans happen and influence the course of history. Conclusive observations from data should be viewed with skepticism, as Black Swans can radically skew data. In Extremistan, the world is difficult to predict, and as a result, narratives to explain historical events are harder to create. Furthermore, technological advances cause Extremistan to jump forward in history.

Named after German mathematician Carl Friedrich Gauss, the Gaussian bell curve is a probability distribution that shows that data points near the mean are more frequent in occurrence than data far from the mean. Taleb criticizes the Gaussian bell curve for focusing on the ordinary as the norm; in society we often observe that random, unpredictable events shape the world the most. According to Taleb, the Gaussian bell curve makes sense only within the context of abstract statistics. In real life outliers cause a much greater impact than ordinary precedent.

Taleb argues that we commit GIF—Great Intellectual Fraud—when we assume that we have rationalized and tamed the utterly unpredictable. This occurs when we rely too heavily on bell curves—particularly the Gaussian bell curve—in making inferences about past, current and future events. According to Taleb, life is unpredictable; to disregard the influence and power of Black Swan events is to turn a blind eye to what we know to be true: that extraordinary outliers shape our lives much more than the mundane.

These events are like Black Swans in the sense that their impact can be quite significant on human history. However, they are somewhat easier to account for and explain. Taleb cites wars, stock market crashes, unlikely bestselling books, and natural disasters such as earthquakes as examples. Gray Swans are possible, even from the standpoint of statistics; they are not altogether unknowable like Black Swans. The Mandelbrotian Gray Swan is named after French-American mathematician Benoit Mandelbrot. He came up with the idea of fractal randomness, putting the uncontrollable elements of life into a mathematical perspective.

In the Mediocristan view, the world is governed by the mediocre; no major failures or successes sway the course of its events. Consequently, the Gaussian bell curve is an acceptable representation of the world.

This refers to the human tendency to make sense of events by creating stories or finding patterns after. This stems from a fundamental need to reduce information so that it can be processed and interpreted. Taleb argues that we try desperately to attach precise reasons and causes to events, leading to the logical fallacy that he calls the narrative fallacy.