Denigration of History
Taleb argues for learning from historical anecdotes while distrusting theories that claim to uncover laws of history. He uses past accounts and simulated futures to develop judgment about randomness.
THE IDEA
Denigration of History
One more word on history seen from a Monte Carlo perspective. The wisdom of such classical stories as Solon’s prods me to spend even more time in the company of the classical historians, even if the stories, like Solon’s warning, have benefited from the patina of time. However, this goes against the grain: Learning from history does not come naturally to us humans, a fact that is so visible in the endless repetitions of identically configured booms and busts in modern markets. By history I refer to the anecdotes, not the historical theorizing, the grand-scale historicism that aims to interpret events with theories based on uncovering some laws in the evolution of history—the sort of Hegelianism and pseudoscientific historicism leading to such calls as the end of history (it is pseudoscientific because it draws theories from past events without allowing for the fact that such combinations of events might have arisen from randomness; there is no way to verify the claims in a controlled experiment). For me, history is of use merely at the level of my desired sensibility, affecting the way I would wish to think by reference to past events, by being able to better steal the ideas of others and leverage them, correct the mental defect that seems to block my ability to learn from others. It is the respect of the elders that I would like to develop, reinforcing the awe I instinctively feel for people with gray hair, but that has eroded in my life as a trader where age and success are somewhat divorced. Indeed, I have two ways of learning from history: from the past, by reading the elders; and from the future, thanks to my Monte Carlo toy.
When to use it
A trader studying past market crashes to avoid similar pitfalls in investment strategies.
A policymaker reviewing historical pandemics to prepare for future outbreaks.
An executive analyzing past business cycles to make strategic decisions during economic uncertainty.
A student learning from historical figures' mistakes to improve personal decision-making.
FROM THEORY TO EVERYDAY LIFE
In practice
Financial Bubbles
The dot-com and housing bubbles offer cases for comparing investor behavior across market booms. A trader can study those similarities while asking which conditions differed and how chance affected each outcome. Repetition alone does not identify a single reason that investors failed to learn.
A MOMENT TO REFLECT
Put it to work.
In what ways have you dismissed historical anecdotes as irrelevant to your current decisions?
How can you actively incorporate lessons from past events that may seem random or anecdotal?
Identify a recurring pattern in your field. Which historical comparison helps explain it, and where might the comparison break down?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)