If men define situations as real, they are real in their consequences. – Thomas theorem

a black swan #2

Posted in Today by bendyourcircuit on 01/06/2009

There is another, even deeper reason for our inclination to narrate, and it is not psychological. It has to do with the effect of order on information storage and retrieval in any system, and it’s worth explaining here because of what I consider the central problems of probability and information theory.

The first problem is that information is costly to obtain.
The second problem is that information is also costly to store—like real estate in New York. The more orderly, less random, patterned, and narratized a series of words or symbols, the easier it is to store that series in one’s mind or jot it down in a book so your grandchildren can read it someday.
Finally, information is costly to manipulate and retrieve. […]

[…] We, members of the human variety of primates, have a hunger for rules because we need to reduce the dimension of matters so they can get into our heads. Or, rather, sadly, so we can squeeze them into our heads. The more random information is, the greater the dimensionality, and thus the more difficult to summarize. The more you summarize, the more order you put in, the less randomness. Hence the same condition that makes us simplify pushes us to think that the world is less random than it actually is.

And the Black Swan is what we leave out of simplification.

nassim taleb, the black swan: the impact of the highly improbable

a black swan

Posted in Today by bendyourcircuit on 30/05/2009

I push one step beyond this philosophical-logical question into an em­pirical reality, and one that has obsessed me since childhood. What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Sec­ond, it carries an extreme impact. Third, in spite of its outlier status, human  nature makes  us concoct explanations  for  its occurrence after the fact,  making  it explainable and  predictable.

The human mind suffers from three ailments as it comes into contact with history, what I call the triplet of opacity. They are:
a. the illusion of understanding, or how everyone thinks he knows what is going on in a world that is more complicated (or random) than they realize;
b. the retrospective distortion, or how we can assess matters only after the fact, as if they were in a rearview mirror (history seems clearer and more organized in history books than in empirical real­ity); and
c. the overvaluation of factual information and the handicap of authoritative and learned people, particularly when they create categories—when they „Platonify.“

nassim taleb, the black swan: the impact of the highly improbable

Tagged with: , ,
%d bloggers like this: