Life is Very Unusual
Taleb argues that rare events deserve special attention when their cumulative effects dominate outcomes. He criticizes approaches that discard extremes and infer risk mainly from ordinary observations.
THE IDEA
LIFE IS VERY UNUSUAL
This is a book about uncertainty; to this author, the rare event equals uncertainty. This may seem like a strong statement—that we need to principally study the rare and extreme events in order to figure out common ones—but I will make myself clear as follows. There are two possible ways to approach phenomena. The first is to rule out the extraordinary and focus on the “normal.” The examiner leaves aside “outliers” and studies ordinary cases. The second approach is to consider that in order to understand a phenomenon, one needs first to consider the extremes—particularly if, like the Black Swan, they carry an extraordinary cumulative effect.
I don’t particularly care about the usual. If you want to get an idea of a friend’s temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life. Can you assess the danger a criminal poses by examining only what he does on an ordinary day? Can we understand health without considering wild diseases and epidemics? Indeed the normal is often irrelevant.
Almost everything in social life is produced by rare but consequential shocks and jumps; all the while almost everything studied about social life focuses on the “normal,” particularly with “bell curve” methods of inference that tell you close to nothing. Why? Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty. Its nickname in this book is GIF, Great Intellectual Fraud.
When to use it
In risk management, examine tail losses that an average can conceal.
When evaluating job candidates, consider evidence of performance under pressure alongside routine work.
In investing, focus on potential black swan events that could have outsized returns or losses.
In public health, prepare for rare outbreaks as well as recurring illnesses.
FROM THEORY TO EVERYDAY LIFE
In practice
Assessing a Friend's Character
Taleb suggests observing a friend under severe circumstances to learn things that ordinary interactions may not reveal. This adds evidence about character; a single stressful episode need not settle the judgment.
Understanding Health
Understanding health requires studying wild diseases and epidemics, not just normal health conditions. The extremes inform the normal.
A MOMENT TO REFLECT
Put it to work.
Think of a recent significant event in your life. How much of its impact came from rare circumstances rather than routine?
In your field of work, what extreme events have shaped outcomes more than average conditions?
How might focusing on outliers change your understanding of a problem you are currently facing?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- The Black Swan The Impact of the Highly Improbable With a new section On Robustness and Fragility (Nassim Nicholas Taleb)