Academic, Irreverent but very Relevant
Well, this one blew me away. Non fictions generally don’t do that to me. Since they state facts, or at max hypothesis, they can at best be beautiful, such as Freakonomics, or inspirational, such as Seth Godin’s books. But this is in your face, intensely academic (but not in a pejorative way), very irreverent (rather insulting, to economists, historians, bankers and anyone who ‘theorizes’ on historical data) and bold enough to say – here is the black swan problem, but I don’t know the solution.
I thoroughly enjoyed the book over solitary lunches, dinners and coffee sessions. This one took a long time to read. Last time I recall spending so much time finishing a book was Atlas Shrugged, because digesting Ayan Rand’s thoughts took a while. This one, because Nassim Nicholas Taleb just compels you to believe that most of the professions that involve theorizing on historical data, are fraud. He bashes economists (especially the Nobel laureates), historians, finance professionals (not the traders though). His strongest tirade is against the philosophers, who NNT believe should stand most scrutiny since their only job is to think and help society through their though. His attack is mild against people who hold ‘real’ jobs – doctors, engineers, factory workers.
Book’s basic premise is – there are very few but fiercely strong incidents that shape our future (of economy, evolution, behaviour, any profession) and we can’t predict them. NNT calls them Black Swan and these could be negative (wars, market crash, epidemic) or positive (accidental invention/discoveries, book sales). Even though we can’t predict them, we should cushion ourselves against them (in case of – Black Swan) or take speculative bets to benefit from them (in case of + Black Swan).
What I learnt from the book
I couldn’t have predicted that Jiju will die suddenly in March. But I definitely could have ensured that his Life insurance, Mediclaim and other paperwork is in order. My personal learning from the book is:
- I can’t predict strong events in my life, but I should insure my risks
- 80% of my portfolio in safe investments – FD, real estate and gold. Rest 20% in intensely speculative bets – options trading, lending start-up capital in lieu of shareholding and others that I have to figure out
- Past behaviour is not an indicator of future performance (even though every MF document says it, very few actually understands it, and even fewer take corresponding action)
- Competition theory – the race to the top slot only needs a little difference in ability over your competitors. Try a little harder, and you may get it.
- No Evidence of Disease doesn’t equate to Evidence of no Disease.
- A data point that disconfirms your assertion/theory is way more important than 100s of data points that confirm it
Overall, a highly recommended read. But beware of the strong language. It is a necessary evil.