## Reviews of Taleb's *Black Swan*

Nassim Nicholas Taleb published

*The Black Swan: The Impact of the Highly Improbable*in 2007. The book was an incredible success, selling over three million copies. It has been translated into 31 languages and was named by the Sunday Times as one of the twelve most influential books written since World War II. The book was loved by all but not everyone agreed with Taleb's thesis. It produced many reviews and also many articles/papers discussing various aspects of the book. We present below (i) some short extracts from reviews of the book, and (ii) some short extracts from papers/articles written as a consequence of Taleb's book. Note that the book has run to a second edition and some of the reviews are of this.-
**Reviews of The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb.**

**1.1. Review by: R Lund.**

*The American Statistician***61**(3) (2007), 189-192.

*The Black Swan: The Impact of the Highly Improbable*is not your normal (pun intended) statistics book. Foremost, the author, Nassim Nicholas Taleb, insults his audience more than a vintage Don Rickles performance. Statisticians raised on mathematical discourse will find the author's philosophical and condescending prose entertaining, if not awkward. The book fires shots at economists, philosophers, social scientists, and statisticians, with tie-wearing financial managers and the French taking the bulk of the trauma. Certainly, Taleb prefers to raise his voice rather than reinforce his argument. Between the barbs, Taleb makes many excellent points that merit discussion. The author is also reckless at times and subject to grandiose overstatements; the professional statistician will find the book ubiquitously naive. Many of Taleb's remarks (e.g., that "... the bell curve is ... [the] ... Great Intellectual Fraud") deserve a response from our community. ... I concur with the book's central premise that the extremes of a distribution are frequently more important (and impactful) than the means. ... In fairness to Taleb, his concern lies more with random elements not captured in the data sample than with defects of probability theory or statistical methods. An example may help clarify: Taleb notes that the six largest losses sustained in Las Vegas have nothing to do with gambling. One of these losses in fact stems from the kidnapping of a casino owner's daughter, something unlikely to be considered in any probability model. While the point is taken, two counterpoints are immediate: (i) exactly what is being modelled? and (ii) what does the sampled data represent? ... My overall feeling is that this book is well worth the time and paperback price. If nothing else, it may be the most controversial elementary statistics book since*The Bell Curve*(Herrnstein and Murray 1994). If you are remotely interested in finance and/or philosophical probability, the book is a must. Taleb's insights into Wall Street's black-tie shenanigans are entertaining and illuminating; on risk-awareness principles alone, I would entrust him as a mutual fund manager (who do I write the check out to Taleb?). As far as professional statisticians are concerned, there are many shortcomings; however, you will be wiser for having been exposed.

**1.2. Review by: M Novarese.**

*History of Economic Ideas***15**(3) (2007), 188-191.

This book proposes a systematic view of Nassim Nicholas Taleb's ideas, some of which have already been published in a series of articles and in a previous book. It is not easy to define who is Taleb: non-academic scholar, philosopher, and trader. His self-presentation is evocative: a "professional meditator", wealthy enough to chose his "occupation without excessive consideration for financial rewards", and without the need to deal with academics rules and intrigues. As he is also a trader, Taleb wants his reflections to be useful for practical purposes and to be able to reach a better understanding of the real world. Such reflections could help us face it successfully, or, mainly, to accept its randomness with the right mood. His (bad) relationships with most of the academic world, especially with mainstream economists, are exemplified by some insults he received from them. The reason for these insults is his strong criticism of the discipline. For instance he denounced the "scandal of prediction" (i.e. the fallacy of the economics and financial forecasting). This can and should, probably, be a sufficient reason, for economists to read his book and use it a starting point for reflecting on Economics, its limitations, but also its potential. Among Taleb's main references, in fact, also feature some remarkable, heterodox economists, like Kahneman or Hayek. There are besides, other ideas which could be usefully connected with other heterodox works. The Black Swan in the title of the book is the symbol of human impossibility and inability to know, as well as be aware of, such ignorance. The reference is to the falsificationism and scepticism of the philosopher Karl R Popper. He proposes the well known example of the black swan: even if we see many white swans, we won't be able to say with certainty "all swans are white". Such statements can be falsified by the observation of one and only one black swan.

**1.3. Review by: T Volery.**

*Academy of Management Perspectives***22**(1) (2008), 69-70.

Taleb is an essayist, researcher, and practitioner of mathematical finance. As a pioneer of complex financial derivatives, he had a lengthy senior trading career at Wall Street firms before he reduced his financial mathematics activities to start a second career as a scholar in the epistemology of chance events. His style is personal and literary, but his heterodox insights are rigorous (if some times jolted by authorial filigree). One of his earlier books,*Fooled by Randomness*(2001), became a bestseller in 18 countries and was selected by Fortune magazine as one of the "Smartest Books of All Time." ... His favourite quote (retrieved from his home page) is "My major hobby is teasing people who take themselves and the quality of their knowledge too seriously and those who don't have the guts to sometimes say 'I don't know.'" Taleb's provocative ideas and sound analysis make for a thrilling, disturbing, contentious, and unforgettable book on chance and randomness.

**1.4. Review by: G L Musgrave.**

*Business Economics***44**(2) (2009), 123-125.

I first looked at*The Black Swan*in mid-2007. It was a follow on to the author's interesting*Fooled by Randomness*. At the time, my thought was that if the market and economy were steady, the book would not receive much attention. If the market really tanked, the author would be viewed as a genius. One of the main ideas of the book is that important and improbable events occur more frequently than most expect or would be predicted by conventional analysis. The author calls such a phenomenon a Black Swan because the idea that all swans are white is based on the inductive observations of swans, until black ones were found in Australia. A Black Swan event is one that is not predicted and outside our regular expectations, has a major impact, and which have plausible explanations in retrospect. The current economic situation will probably be called a Black Swan event. Since the book was written prior to the current situation, many of the insights will seem prophetic. For instance, "regulators in the banking business are prone to a severe expert problem and they tend to condone reckless but (hidden) risk taking." Some might think that the book specifically predicted the current market and economic crisis - wrong. The book is about the expectation that it could occur. In fact, the author is very clear when he rebuffs folks who want a list of his predicted future Black Swans. The author's point is that the nature of these events makes them unpredictable. His presentation is important to business economists. He develops an argument that cautions us to be extremely sceptical about feeling confident concerning the certainty of the future and confident of conventional analysis in general. While he discusses many areas, we should be especially sceptical in economics and finance if the analysis is based on the presumption that the nor mal (Gaussian) distribution is appropriate..

**1.5. Review by: R Garner and M Ash, Review.**

*Science & Society***74**(2) (2010), 248-258.

The title refers to unusual, extreme, and unpredictable events - Europeans had never seen a black swan until they arrived in Australia, and were surprised to learn of its existence. Taleb argues that rare events are not as rare as one might think on the basis of Gaussian ("bell curve" or "normal") models, and that they are becoming more frequent. He presents the reader with the paradoxical challenge that we must be prepared for these events, even though they are impossible to predict. Nassim Nicholas Taleb comes across as a favourite uncle - brilliant, chatty, witty, and insightful. He offers asides on a myriad ideas and people, shares his passion for the writings of Montaigne and his warm appreciation for mathematician Benoit Mandelbrot, reveals the number of Catherine the Great's lovers (fewer than you might think), slams Plato and hails Popper, beguiles us by his disdain for CEOs and men in suits, and evokes the tolerantly multicultural "world we have lost" of his Levantine childhood. Scattered through the interstices of these reflections are pieces of a powerful thesis about the probabilities of events, one that had already been broached in Taleb's*Fooled by Randomness*(2005). The heart of Taleb's argument is that we should apply insights from Mandelbrot's work on fractals and scaling in financial markets (1997) to a broader spectrum of situations.

**1.6. Review by: J Suárez-Lledó.**

*Academy of Management Perspectives***25**(2) (2011), 87-90.

If not one of the most influential books of the last few years, The Black Swan has definitely been one of the most controversial pieces of criticism and economic thought. Nassim Nicholas Taleb is currently a distinguished professor of risk engineering at New York University, but he has held academic positions as professor or research fellow at Oxford University, the London Business School, and University of Massachusetts. With a background in mathematical finance, Taleb derives most of his expertise from extensive experience as a trader at institutions including BNP Paribas, UBS, CIBC, Credit Suisse, and several independent (some times self-founded) hedge funds. ... Taleb's most bitter critique is of modelling of risk and uncertainty using the Gaussian bell curve and similar methods (such as the Black-Merton Scholes formula for asset pricing). Taleb argues that "what can be mathematised [in financial markets and economics] is usually not Gaussian but Mandelbrotian", after the great mathematician Benoit Mandelbrot, the father of fractal geometry. The author favours a Mandelbrotian treatment of risk and uncertainty and the use of empirical methods to observe data, based on the property that "the fractal has numerical or statistical measures that are (somewhat) preserved across scales, unlike the Gaussian" - thus making it precisely the right tool to model scalability!

**1.7. Review by: K Vehkalahti.**

*International Statistical Review / Revue Internationale de Statistique***81**(2)(2013), 309-311.

This is a famous, critical and entertaining book about randomness, uncertainty and related topics. One of its points is that we should make a careful distinction between different random events and avoid making useless predictions. Instead, we should admit that we cannot predict everything and put the focus on the possible consequences, although the probabilities of some events might seem negligible. The name of the book refers to an unexpected event that has a major effect, either positive or negative one, depending on its observer. Examples include 9/11, the stock market crash, Harry Potter, Google, and so on. Non-technically written and built on episodes, stories and simple visualisations; the book is easy to read. On the other hand, its provocative, at times quite harsh criticism towards statistics, econometrics, economics, social sciences, and a few other areas, not to mention some particular persons working on those areas, might be tough for some readers. Most probably they will not like the argumentation style of the author. Indeed, a lot of critical comments have been presented towards the book and its author from academic communities. In any case, the book has surely had an impact and generated much interest in discussing and further expanding the ideas. -
**Papers on aspects of The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb.**

**2.1. N N Taleb, Black Swans and the Domains of Statistics.**

*The American Statistician***61**(3) (2007), 198-200.

The Black Swan: The Impact of the Highly Improbable (hence TBS) is only critical of statistics, statisticians, or users of statistics in a very narrow (but consequential) set of circumstances. It was written by a veteran practitioner of uncertainty whose profession (a mixture of quantitative research, derivatives pricing, and risk management) estimates and deals with exposures to higher order statistical properties. Derivatives depend on some nonlinear function of random variables (often square or cubes) and are therefore extremely sensitive to estimation errors of the higher moments of probability distributions. This is the closest to applied statistician one can possibly get. Furthermore, TBS notes the astonishing success of statistics as an engine of scientific knowledge in (1) some well-charted domains such as measurement errors, gambling theory, thermodynamics, and quantum mechanics (these fall under the designation of "mild randomness"), or (2) some applications in which our vulnerability to errors is small. Indeed, statistics has been very successful in "low moment" applications such as "significance testing" for problems based on probability, not expectation or higher moments. In psychological experiments, for instance, the outlier counts as a single observation, and does not cause a high impact beyond its frequency.

**2.2. A Brown, Strong Language on Black Swans.**

*The American Statistician***61**(3) (2007), 195-197.

Taleb is a friend of mine, despite (or perhaps due to) some sharp intellectual disagreements, so I don't feel that it is appropriate to review the book. Instead, this is an essay arguing for statisticians not to be put off the book by the frequent strongly worded insults in its pages. There is a lot of important material here, little that is new to the profession, but things that are seldom expressed in such a dramatic, passionate narrative, with strong grounding in history and philosophy. Taleb's real quarrel is with philosophers and empty-suit experts - the rest of us are innocent bystanders. There is also a lot of error, from basic mathematical over sights to ignorance of entire subfields of statistics. Rather than defending against gratuitous insults, statisticians should go on the offensive, attacking some of the main ideas of the book. The point is not to prove that Taleb is completely wrong - he's not; he's maybe 20 percent wrong. But that 20 percent leads him to egregious overstatement on issues that go to the heart of statistical practice.

**2.3. P Davidson, Black swans and Knight's epistemological uncertainty: are these concepts also underlying behavioral and post-Walrasian theory?**

*Journal of Post Keynesian Economics***32**(4) (2010), 567-570.

Abstract: This paper argues that Nassim Taleb's "black swan" argument regarding uncertainty is equivalent to Frank Knight's [1921] epistemological concept of uncertainty. Moreover, both behavioural economists and post-Walrasians use an epistemological concept of uncertainty, in part related to Taleb's black swans. This black swan approach differs significantly from Keynes's idea that uncertainty is an ontological concept. Consequently, these different uncertainty concepts have different policy implications.

**2.4. C G Ranade, of Bubbles and Black Swans.**

*Economic and Political Weekly***45**(22) (2010), 4-5.

Taleb was invited as a keynote speaker to the Finance and Private Sector Development Forum held at the World Bank in March 2009, which I had attended. He told the audience of about 250 economists and finance experts that the Black Swans by their very nature are impossible to predict by using the present economic and financial models. As an alternative to the present economic and financial models, Taleb offers his ideas about "The Fourth Quadrant" on his own web site. The ideas show how to possibly create a robust economy to confront future bubbles and Black Swans. He argues that most of the time, our policies are, unfortunately, "reactionary" because they are reactions to the Black Swans we have not been able to predict.

**2.5. A Terzi, Keynes's uncertainty is not about white or black swans.**

*Journal of Post Keynesian Economics***32**(4) (2010), 559-565.

Events unfolding over the past two years have caused financial as well as intellectual distress to the laymen who did not think a crisis of whopping proportions in the United States, with ripple effects all over the world, was possible. Popular outrage targeted "the" bankers for their greed and "the" economists for not preventing, or anticipating, the financial storm. Nassim Taleb has given informed voice to this widespread anger and blamed the crisis on bankers, central bankers, and financial economists for their being fooled by apparent stability, for cultivating the illusion of measuring risk, and ultimately making the system increasingly fragile.1 Joining the ranks of those who believe it is important to distinguish statistical risk from intractable uncertainty, Taleb asserts that there exist very rare, yet highly consequential, events that we cannot possibly forecast by assigning probabilities. On this basis, he has questioned the ability of people in general as well as of policymakers and regulators to seek appropriate protection from a category of events that they consistently overlook. He specifically blames U.S. policies of low interest rates and deficit spending, as well as rescue plans of ailing institutions allegedly aimed at saving the system, for ultimately making the system more, not less, prone to future crises. Taleb's work predates the 2007-8 crisis and remains controversial: most academics do not take it seriously, while he accuses academics of bad faith by using conceited statements to describe his unique contribution to the limits of knowledge. ... In Taleb's epistemologically opaque world, the challenge is to acknowledge our ignorance, and thus raise the robustness of our strategies. Assuming that objectively superior strategies exist, the system builds robustness through the survival of the fittest.

**2.6. P H Westfall and J M Hilbe, "The Black Swan": Praise and Criticism.**

*The American Statistician***61**(3) (2007), 193-194.

It is unusual for the Editors of*The American Statistician*to contribute regular articles to the journal. However, this is a special case. If you are a statistician, or statistically minded, Nassim Nicholas Taleb really wants to get under your skin. In his book,*The Black Swan: The Impact of the Highly Improbable*, (hence forth TBS), he says: " 'social scientists' ... for over a century have operated under the false belief that their tools could measure uncertainty." "... certain professionals [including especially statisticians] ... do not know more about their subject matter than the general population, but they are much better at ... smoking you with mathematical models." "... the bell curve ... is [the] ... Great Intellectual Fraud." "The beast in this book is not just the bell curve and the self deceiving statistician ..." He also makes several other comments disparaging of statisticians and statistically minded people he calls "quants." His often-unfounded and sometimes outrageous criticisms require a response from the statistical community. Despite the numerous irritating comments peppered through out, the book is quite engaging, well-written, and tells an interesting story. ... First some praise: We highly recommend TBS for statisticians, students of randomness and statistics, and "quants" in general. Our recommendation is not necessarily for its correctness, accuracy, and appropriate placement of statistics within the scientific enterprise, but instead for its stimulating ideas. ... It seems that Taleb has fallen victim to his own curse: having observed a few statisticians with an outlier avoidance mindset (let us call these statisticians "White Swans"), he then violates Hume's anti-inductive admonishment and assumes that all statisticians are "White Swans." What makes Taleb's error particularly egregious is that his sample of statisticians from which he makes such generalisations is both small and systematically biased! There is much to criticise in Taleb's book besides the disparaging (and unfounded) comments about statisticians.