Posted on 04/24/2007 6:04:47 PM PDT by Excellence
< snip >In "The Black Swan"--a kind of cri de coeur--Mr. Taleb struggles to free us from our misguided allegiance to the bell-curve mindset and awaken us to the dominance of the power law. The attractiveness of the bell curve resides in its democratic distribution and its mathematical accessibility. Collect enough data and the pattern reveals itself, allowing both robust predictions of future data points (such as the height of the next five people to enter the room) and accurate estimations of the size and frequency of extreme values (anticipating the occasional giant or dwarf. The power-law distribution, by contrast, would seem to have little to recommend it. Not only does it disproportionately reward the few, but it also turns out to be notoriously difficult to derive with precision. The most important events may occur so rarely that existing data points can never truly assure us that the future won't look very different from the present. We can be fairly certain that we will never meet anyone 14-feet tall, but it is entirely possible that, over time, we will hear of a man twice as rich as Bill Gates or witness a market crash twice as devastating as that of October 1987. The problem, insists Mr. Taleb, is that most of the time we are in the land of the power law and don't know it. < end snip >
(Excerpt) Read more at opinionjournal.com ...
I just had to check it out because a) I was certain that he has an arabic or near Arabic name, but.
b) I was more certain that his book could not have been written by someone who grew up among muslims, or educated as a muslim, nor living even remotely in a muslim-controlled environment.
I ordered this book this morning as soon as I read the Wall Street Journal editorial.
It is the answer to anyone who thinks they can predict the future! Like ferinstance, democrats who know what social security will be like 25 years from now.
... and keep adding beneficiaries that have contributed little or nothing to the system, nor are entitled to benefits any more than al qaeda is...
An Arabic first and last name with Nicholas as a middle name indicates a Christian Arab. He may well have grown up “among” Mohammedans but his worldview would be very different.
I ordered it from Wal-Mart for $16.80. I can hardly wait to get my hands on it.
What does this have to do with black swans?
quote:
the rare but pivotal events that characterize life in the power-law world. He calls them Black Swans, after the philosopher Karl Popper’s observation that only a single black swan is required to falsify the theory that “all swans are white” even when there are thousands of white swans in evidence.
If your business model is slightly better than that of all your competitors you will eventually get most of the customers ... not just a few more.
If you look at undirected things such as average heights of humans then you will get average bell-curve results.
If you look at directied things such as people wanting to pay the lowest price or companies wanting to run at the lowest cost, then you will often get non-linear feedback.
If taller people were generally more desirable and it was relatively easy to control your height, then not even height would not follow a bell-curve.
A point I have been making for years. For a long time people have assumed that dominant athletes, for example, are far superior to their competitors when in fact, like Tiger Woods, they are only maybe a few percentage points better if that. But those few percentage points translate into dominance. Nevertheless even Woods doesn't win every tournament. If it can be measured accurately that I am five percent better than my opponent in let's say tennis, I will thrash him virtually every time. Even being just one percent better would allow me to win better than two thirds of my matches.
But by and large Tiger will win when he competes.
just getting done listening to it on CD. Very interesting. Ideas that I think lots of us have had. I’m going to listen to it again though. Although he repeats himself, his ideas are counter-culture (in the broadest sense), maybe even counter-nature, that I have to listen / read parts of it several times for his ideas to sink in.
I love the fact that he rips into all the social sciences so much.
thanks, bfl
This criticism, such as it is, of classical analysis rings tinny in my ear. It reminds me of Lucy van Pelt telling Linus "If Beethoven's so great, why isn't his picture on a bubble gum card."
Which is precisely why Beethoven isn't on a bubble gum card and Gauss' name will be remembered long after Mr. Taleb has passed into well deserved obscurity.
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