The Black Swan by Nassim Nicholas Taleb

I doubt I have the ability to summarise or condense this book - my mind is still spinning from the terminology used - ludic fallacy, epilogism, epistemic opacity, epistemic arrogance, mediocristan, platonicity, retrospective distortion and statistical regress argument. Nevermind the glossary page at the end.

The Slog Reviews: 9/10 and a must-read (well, for those who have a certain amount of faith in their intellectual and reading abilities)

Some bits which I thought worth typing out and referring to:

1. The lesson for the small is : be human! Just be a fool in the right places. Avoid unnecessary dependence on large-scale harmful predictions - those and only those. Avoid the big subjects that may hurt your future: be fooed in smal matters, not in the large. Do not listen to economic forecasters or to predictors in social science. Know how to rank beliefs not according to their plausibility but by the harm they may cause.

2. If you shed the idea of full predictability, there are plenty of things to do provided you remain conscious of their lmiits. Knowing that you cannot predict does not mean that you cannot predict from unpredictability. The bottom line: be prepared! Be prepared for all relevant eventualities.

3. Be open minded to let luck play a role. Maximise the serendipity around you. Trial and error means trying a lot. You need to love to lose.

4. People are often ashmed of losses so they engage in strategies that produce very little volatility but contain the risk of a large loss.

5. Barbell strategy - if you accept most risk measures are flawed, because of the Black Swan, then the straegy is to be hyperconservative and hyperaggresive instead of being midly aggresive or conservative. Instead of putting your money in medium risk investments, you need to put a portion, say 85 to 90 percent in extremely safe instruments, like Treasury Bills. The remaining 10 to 15 percent you put in extremely speculative bets, as leverages as possible (like options), preferably venture capital style portfolios.

6. Make a distinction between positive contingencies and negative ones. Distinguish between those human undertakings in which the lack of predictability can be (or has been) extremely beneficial and those where the failure to understand the future caused harm. In positive black sawn busineeses, you have to lose small to make big. You have little to lose per book and for completely unexpected reasons, one may take off. And you fare best if you know where your ignorance lies. This is different from collecting lottery tickets as these do not have a scalable payoff: there is a known upper limit to what they can deliver. The ludic fallacy applies here. Also, lottery tickets have known rules and laboratory style well presented possibilites.

7. Don't look for the precise and the local - chance favors the prepared. U do not have to look for something particular every morning but work hard to let contingency enter your working life. You got to be very careful if you don't know where you're going because you might not get there. Invest in preparedness and not in prediction. REmember that infinite vigilance is not possible.

8. Seize any opportunity or anything that looks like oppty. They are rare, much rarer than you think. Positive black swans have a necessary first step: you need to be expcosed to them. Collect as many free nonlottery tickets as you can and once they start paying off, do not discard them. Work hard, not in grunt work, but in chasing such opportunies and maximizing exposure to them. This makes living in big cities invaluable because you increase the odds of serendipitous encounters.

9. Beware of precise plans by government. U need to keep a vigilant eye on the side effects.

10. All these recommendations have one point in common: asymmetry. Put yourself in situations where the favourable consequences are much larger than unfavorable ones. The notion of asymmetric outcomes is the central idea of the book. This idea that in order to make a decision you need to focus on the consequences (which you can known) rather than probability (which you can't know) is the central idea of uncertainty. You can build an overall theory of decision making on this idea. All you have to do is mitigate the consequences.