Things I learned from the Black Swan (Not the Movie)

Nicholas Nassim Taleb‘s book the Black Swan was easily my favorite read of 2010. In his own meandering, hyper-intellectual way, Taleb explores the nature of randomness and the unknowable. I held off on writing a review for months because I thought I could write the mother of all reviews that would blow minds clear across to Saturn and back. We all know that’s not going to happen. After all, Taleb wrote the mind-blowing book, not me. I’m not even sure I get it myself, to be honest. Instead, I’m going to list everything you need to know in life that you can learn from the Black Swan.

1. The known is not as important as the unknown.
This is why the book is called “Black Swan”. If you’ve only seen white swans before, you’ll have a rule in your head that all swans are white. Travel to Australia and New Zealand, where there are Black Swans, that rule is completely broken. The unknown factor of there being black swans changes the nature of what a swan is. It’s not always going to be a white creature anymore. These unknown factors are responsible for many of history’s upsets, like intentions of the hijackers on 9/11, the location of the Japanese fleet before pearl harbour, or Christopher Columbus’ voyage. The known isn’t very important when unknown existing factors can change the situation completely.

2. Heuristics are better than rules.
When dealing with the unknown, the situation can change completely based on just a few key pieces of information. You can calculate all the mathematical scenarios you like, but they aren’t going to change the fact that the Emperor just showed up to his own procession wearing only a crown and a smile. For instance, the New York Times believes that as a rule, people will pay for journalism. They aren’t going to be so self-assured when the advertising based news services eat their lunch. So-called “rules of thumb” will get you through more situations than doing things by the book.

3. All large institutions are fragile
Big government, big corporations, it doesn’t matter. They are all held together by an extremely delicate web of tense agreements between millions of individuals. They may have all the military, the money, and the lawyers, but it doesn’t take much change to rend the fabric of society. Complexity, by it’s nature, makes organizations fragile. I’m not saying we should start burying guns in our backyards, I’m saying that governments and corporations are not as powerful as we think. If you think that Harper majority is going to send jack-booted thugs kicking down our doors, remember that it only took one guy setting himself on fire in Tunisia to turn the entire Middle East upside-down, and they had more jack-booted thugs than anybody.

4. Anti-fragility matters, not size.
So large institutions are fragile because they can’t respond to change. The opposite of that should be robustness right? Not quite. The opposite of a fragile organization is one that takes advantage of Black Swan events. Something that is decentralized, adaptable, makes many mistakes and learns from them all. I’m seeing this philosophy take shape in companies like 37signals and Freshbooks. It’s new class of privately owned companies with malleable products, day-one profit goals, and no outside money. Read “Re-work” for a more detailed description of this philosophy.

5. Randomness does not equal gambling.
Casinos are terrible metaphors for randomness. All Casino games have a knowable amounts of outcomes. There are always 52 cards for a deck, and 6 sides to a die. There are no rules for a truly random event taking place, like the casino being hit by a meteorite or an Ocean’s 11 style heist.

6. The only way to deal with randomness is to expose yourself to it.

You can’t avoid randomness by buying more insurance, forming more committees or even burying guns in your yard (the powder will get wet) so what are you supposed to do with your life? The only way to deal with randomness is experience it yourself. Make it your friend. This is not the same as risk-taking. Rock-climbing and sky-diving involve taking a large number of non-random precautions. Instead, take on an endeavour where the outcome is unknown. This is similar to Google’s so-called “20% time” that has led to innovations like gmail and Google reader. For the average person, that means reading a book about an unfamiliar subject, having lunch with someone new, or perhaps even commenting on blogs from time to time.