Isn’t A “Black Swan Proof” World Impossible?

The econoblogosphere is buzzing about Taleb’s list on ways to “Black Swan Proof” the world.  While this is a great list for a new paradigm for financial markets, nobody seems to mention that it goes completely against everything Taleb stands (or stood for) philosophically.  The idea behind the black swan was that it was something so highly improbable that it could not be prevented.  Taleb went on to say that trying to prevent black swans would be ineffective and even create more of them.

While I found the piece to be excellent, along w/ Umair Haque’s “manifesto” last week, I can’t help but notice the contradiction here.  Taleb has built his name on the idea of the “black swan” and now I wonder if he “timed” the release of this philosophy to coincide with the financial meltdown, which I guess he has deemed a “black swan” event.   If that were to be true, wouldn’t that make him a prognosticator himself and one of those “experts” he treats with so much contempt in his own work.   The only person who remotely picked up on this was Felix Salmon who calls it “impossible”.

While I may be splitting hairs here, I found Taleb quite refreshing and find this obvious contradiction somewhat inauthentic.  Any thoughts?

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  1. Steve

    Taleb has repeatedly said in interviews that teh current meltdown is not a Black Swan event. It was, he said, completely predictable, inevitable, in fact. So your premise is not supported by his own claims.

  2. zerobeta

    Steve,

    Thanks for your comment. I still think this piece was inauthentic whether he has said in other pieces that this was not a black swan. My premise is that Taleb has written in his works that you can not “black-swan proof” the world. So regardless of what black swans we’re trying to protect the world from in regards to Wall Street, laying out ways in which to do so goes against the philosophy which made him famous. And you can not tell me that this recent piece wasn’t a “nod” to the current crisis as a black swan.

    I respect and appreciate Taleb enormously, and “Fooled by Randomness” was a book that really impacted me when I read it. I realize I may be really splitting hairs here, and I don’t want to take away from the piece itself – which I enjoyed, however he is being inauthentic when he writes something like this. As a philosopher he has a duty on some level to being authentic to his own philosophy.

  3. Fadam

    I agree with you here, mostly. I have also taken issue with Taleb dissing “experts” and then acting as an expert himself. But I think you are slightly misinterpreting him. It doesn’t seem he is trying to eliminate black swans, but reduce their impact. And I think that is something that can be accomplished. The title of the article is misleading, but I think “Black Swan Proofing” the world is meant to be similar to water proofing a deck – the effect of water does not go away entirely (it certainly doesn’t stop raining) but it has a much smaller impact than it otherwise would have. This is also evident from some of the examples; they obviously will not eliminate unforseen events, but may reduce the impact of those events. As you said, the actual list is still interesting and consistent with his previous writings. I think rather than focus on the title we should focus on his last sentence: “In other words, a place more resistant to black swans.”

  4. Justin,

    I had the same reaction when I saw the title to Taleb’s very interesting FT opinion piece. The content of the article and his arguments were, on the whole, very sensible, but I had to wonder if he had a chance to approve the article title.

    I noted this on Twitter while posting a link to the piece:

    As I understand it, a so-called “Black Swan” event is one that is rare and/or unpredictable, but it’s not as though we can create a world where these events cannot happen (especially if we know little or nothing about their existence in the first place)!

    On further thought, I came to realize that “Black Swan Proof” was short/catchy enough to fit in the title, and that (as Fadam points out) what they really meant to say was that we can use these principles to design a world more resistant to rather predictable financial disasters such as these.

  5. Zero Beta

    Fadam,

    I get your point and agree that his idea was “a world more resistant to black swans”. I don’t agree that you can equate a black swan with rain – more like a tornado. Most decks I know can easilly be rain-proofed but can not be “tornado-proofed” too easily because of the nature of the event.




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