The Architects of the Black Swan as its Perpetuators

    As you read further into Nassim Taleb’s bestselling book The Black Swan, the author will introduce you not only to the idea of Black Swans (that is, unexpected events that have a major impact on human affairs) but to the notion that theoretical experts in a field are likely to cause and prolong the damage caused by these accidents of fate.

    Taleb distinguishes between experts who have actual, practical knowledge (such as an electrical engineer, a brain surgeon, or an oil painter) and those who have only theoretical knowledge which they try to force onto reality (such as economists, government officials, and the like). The first are absolutely essential to human life – the second are deadly to it in many different ways.

    One of their most dangerous aspects, Taleb argues, is that they tend to create neat theories which they believe makes them experts – theories based on highly controlled experiments and abstract mathematical formulae which work beautifully on paper, but which are based on everything behaving in a neat and predictable fashion most of the time.

    Taleb, on the other hand, contends that reality is like a porcupine, bristling with sharp points of the unexpected. Major, unexpected events are constantly occurring, and because of this, the neat, tame formulae of the economists are formulae for disaster. They assume something which is the opposite of reality – that stability in human affairs is the norm, whereas the actuality is that instability, chance, and sudden, unpredictable changes are the only true constants.

    As such, Taleb places the blame for our current crises on their shoulders – a convincing argument in light of the intricate eloquence, and considerably logical and factual support, that he brings to bear throughout the pages of The Black Swan. They create huge, complex financial networks that are so complicated that they generate unexpected results simply because their scale is too large for effective human management, and so far-flung that they are a huge “target” for Black Swan events across the globe.

    As part of correcting the problem, Taleb deplores that the fact that the people who caused the disaster are now being relied on to fix it – with their blinkered, formulaic, hidebound perspective still firmly in place, and no real idea of what went wrong. He states that they should be replaced by people with fresh ideas – and considering that this how the American democracy is supposed to stay strong, it is difficult to argue with his conclusions.