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Sunday, November 11, 2007

The Black Swan visits Duke University

Nathan Nicholas Taleb: The Black Swan at amazon.com
Nathan Nicholas Taleb's best selling book, The Black Swan: The Impact of the Highly Improbable, is a provocative big picture look at how colliding and cascading social forces are capable of causing unpredictable outlier events, or Black Swans. A Black Swan is a reference to the fact that "before the discovery of Australia, people in the Old World were convinced that all swans were white, an unassailable belief as it seemed completely confirmed by empirical evidence."

A Black Swan is a highly improbable event with three principle characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9/11. For Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives.
The 2006 Duke University lacrosse case is a perfect example of a Black Swan. The scandal was a shocking jolt at a leading academic institution. It was frequently referred to as the "perfect storm," because of its explosive mix of race, class, sex, athletes, and the South.

The media jumped on the story and made it into a scandalous saga about race and class at an elite university (Duke is called the Harvard of the South) located in a predominantly black city. The three accused lacrosse players were cast as privileged white students, who critics charged were running wild on campus and ended up gang raping an innocent black stripper. It all turned out to be not true.

The harsh treatment of the lacrosse players by their own faculty and administration was one of the most shocking aspects of the scandal. It matches the story of the turkey that Taleb uses to show how the past is not a reliable tool for predicting the future.
The uberphilosopher Bertrand Russell presents a particularly toxic variant of my surprise jolt in his illustration of what people in his line of business call the Problem of Induction ... - certainly the mother of all problems in life. How can we logically go from specific instances to reach general conclusions? How do we know what we know? How do we know that what we have observed from given objects and events suffices to enable us to figure ot their other properties. There are traps built into any kind of knowledge gained from observation.

Consider a turkey that is fed every day. Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race "looking out for its best interests" as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

[...] How can we know the future, given knowledge of the past; or more generally, how can we figure out properties of the (infinite) unknown based on the (finite) known? [...]

The turkey problem can be generalized to any situation where the same hand that feeds you can be the one that wrings your neck. . .
The Duke lacrosse team was just like that turkey. The team, for years, had gone along thinking that their friendly faculty was looking out for their best interests and feeding them knowledge. The lacrosse players had no idea a false gang rape accusation would turn the faculty (and many of their own classmates) into a lynch mob that wanted to wring their collective necks. Or castrate and flunk them as the case might be.

The jolting display of hatred towards the players by the infamous Duke Group of 88, their supporters, and campus radicals, all tacitly approved by the Duke administration, signaled that something was seriously wrong with higher education. It was in inflection point. The academic bubble that was a liberal arts education was burst. The Black Swan had landed.

Taleb goes on to demolish the the value of the "Narrative Disciplines." That is, a discipline that consists in fitting a convincing and well-sounding story to the past. As opposed to an experimental discipline. All of the Angry Studies, that is, Women's Studies, African and African American Studies, etc. are narrative disciplines.

Taleb also spends time wringing the intellectual necks of story telling journalists.
Do media journalists repair to the nurse's office every morning to get their daily dopamine injection so that they can narrate better (Note the word dope, used to designate the illegal drugs athletes take to improve performance, has the same root as dopamine.)
He shows how "we fool ourselves with stories that cater to our Platonic thirst for distinct patterns: the narrative fallacy.... (it is actually a fraud, but, to be more polite, I will call it a fallacy.)" He defines a narrative fallacy as: "our need to fit a story or pattern to a series of connected or disconnected facts. The statistical application is data mining."

Even if you have not followed the Duke lacrosse case you will find the The Black Swan an excellent book that helps to make order out of chaos and see the big picture for managing your own life and financial future.

related:
Wikipedia: Nassim Taleb
Wikipedia: Black swan theory
New Scientist Profile
Malcolm Gladwell /The New Yorker article: "Blowing Up: How Nassim Taleb turned the inevitability of disaster into an investment strategy"
Podcast interview with Nassim Taleb / EconTalk: Taleb on Black Swans
Nassim Taleb's home page

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