Is this a flaw in Nassim Taleb's black swan argument?
By Mark Vernon on Tuesday, July 21 2009, 06:11 - Wisdom - Permalink
Returning to The Black Swan - one of the big ideas books that is worth mulling over more than once - I had a shocking thought. Is Nassim inconsistent? Might he be, err, wrong? My thought went something like this.
He opposes Platonicity, roughly making up theories about the world and taking them to be true. He also ridicules the use of the Gaussian and Gaussian tools to identify averages and ignore exceptions, with the qualification that the Gaussian works well in Mediocristan, those cases in which an exception does not matter.
But surely, I thought, Nassim relies on Platonicity to come up with his insights on human nature, both in assuming that there is such a thing as human nature and then in describing what it is. Further, the empirical psychology he relies on to describe human nature deploys Gaussian techniques. Examples include his use of Dan Gilbert's concept of 'affective forecasting', in which we fail to learn from the past and mispredict the future in so doing. What is empirical psychology in love with if not the very homme moyen moral that Nassim mocks.
Now, in response to this second point, he is aware of the accusation, and stresses that the insights on human nature derived from empirical psychology are 'robust to the mistake of using the bell curve' because 'these studies generally elicit a yes/no type of result. No single observation, by itself, can disrupt their overall findings.' (p245)
One should, I suspect, challenge the artificial nature of the scenarios that the empirical psychologist constructs in order to elicit these tidy yes/no results: they must be artificial in order to be so clear cut, and yet from them assumptions about a presumed human nature are drawn. But leave that to one side. For a tighter tension arises directly in relation to Nassim's argument, and his encouragement to us to deviate from the human average when it comes to assessing uncertainty by becoming more aware of black swans. If it's true we live in Mediocristan now, in relation to our handling of the unknowns of life, he effectively wants his readers to move to Extremistan, where we, like him, would not blindly follow 'human nature.'
If that is even a viable project, which presumably he believes it must be, else why write the book, then that challenges the first point, the Platonicity that assumes there is such a thing as human nature and, moreover, that it is bad at handling black swans.
To put it another way, he would presumably predict that most people will continue to act ignorantly when it comes to black swans; it seems very likely. Though if the small chance came about that people didn't and instead changed and wised up, that would make a huge difference to the world. So here's the rub: that would be to go against one of his central pieces of wisdom: 'Be fooled in small matters, not in the large... Do not listen to predictors in social science (they are mere entertainers).' (p203)
In short, does his desire to write the book rest on the assumption that the good black swan of us becoming smarter about black swans is a black swan that can be discounted? And if so, does that mean he's not following his own advice, on account of being fooled by the Platonicity of 'human nature'? Or have I got my black swans in a twist? Or has half the planet already raised this objection only to have it refuted?










Comments
The book wasn't supposed to be a standalone argument.
It was specifically written to give credibility to the idea that it is foolish to ignore extreme events. Case in point, the big banks that destroyed the economy. They'd basically surrounded themselves with Ph.D.s who were paid very well to dismiss the possibility of individually unlikely events, even when such events were guaranteed over a lengthy period of time. They'd formed an effective barrier against argument by buttressing the weakness of their arguments with their credentials and obfuscation. The point of the obfuscation wasn't to defend the argument, just to confuse the 'judges' into relying on credentials and recent history to determine a winner. So Nassim attempted to give his point credibility by writing a book on it in the form of his black swan theory. Simply stating the flaws in their approach wasn't getting anywhere without credible backing.
Anyway, the theory doesn't mean anything on it's own. Never did. It was just designed to have large enough credibility to put a dent in a wall of intentional ignorance to begin to undermine their credibility.
Unfortunately they blew up before he made much headway anyway.
In any case, it makes no sense to say he was inconsistent, because consistency was never a goal, and the theory was never supposed to be anything other than a weapon to pierce a shell of complacency and deceit. His opponents were arguing from an even more faulty position after all.
Not sure where your problem with Taleb's argument is. It's not "his" argument but an inherent characteristic of any complex dynamical system - these systems are inherently unpredictable over a large range of parameter input. And researchers in complex systems have known about this unpredictability for at least 25 years. Mandelbrot lay the mathematical foundations (as mentioned in the book) and since then the research community learned that most systems cannot be predicted.
I'm always amazed why we (humans) think that we can predict to any degree of accuracy what's going to happen tomorrow. We seem to accept the fact that we can't predict the weather very well but sure believe that the stock market will make a comeback after a recession - just because this was the case in earlier recessions. Taleb tries to explain these human biases using psychological research on why we believe what we believe. It's an attempt to explain why we do what we do. Nothing else. These explanations may turn out to be "wrong" but the fact that complex dynamical systems are unpredictable (showing "chaotic behavior") will remain true nevertheless.
Mediocristan and Extremistan are mere concepts to "visualize" the vastly different system characteristics. We certainly do live in Extremistan - there is absolutely nothing you can do about this. It's the nature of our physical laws. However, if you want make sure that the effects of unpredictable system behavior (look at the crash of our economic system right now) doesn't affect us to an extreme (as it does now), you have to "design" every day live differently. This is essence of his book. For example, we have to look at our financial system and design it differently - try do minimally expose ourselves to rare events.
If we still believe we can "manage" the current system design successfully, just look at the recently published letter to the Queen of England by the British Academy as a result of a meeting:
"So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole."
Best regards
HP
Could you miss the point more completely??
Fine book