The Unknown is More Important than the Known

The bigger an event, the more unpredictable it gets and lies beyond our imagination. We want to have a plan for our whole lives, but only rarely can it come true.

The rarer the event, the less accurately we can estimate its degree of probability. Read that again

It’s pretty easy to predict an earthquake that goes once a year, and it’s impossible to predict an earthquake that goes only once per century or has probably never been before.

In other words, we’re not living in the ‘usual’ world. On any given day mysterious events can suddenly happen and completely change the direction of your life.

I’m talking about the recession, weather disasters, everyday catastrophes, etc.

If an event happened ten years ago, it can happen now and then. But new events come to this world each day, and no one could even think of them.

These are the things that we call ‘black swans’ and that we usually cannot predict, even if we try.

However, not every ‘black swan’ can ruin your life. Some of them can be positive; it’s only a question of probability.

You can be studying in college and suddenly meet a guy who will help you build a billion-dollar startup!

You just need to focus on catching as many good ones as possible. We’ll talk about it a little bit later.

Now that we understand what these black swans are, we can start clarifying them better and searching for them throughout our lives.

We tend to focus on the details rather than see the big picture. However, when we’re dealing with black swans, focus can play out in our favor.

When you want to predict something, you try to take as many properties as possible, but you never know which one will lead to anything.

We want to predict things, but it’s mostly useless.

Especially if we’re looking at the market. Financial experts and market specialists often fail to predict significant events or market crashes. Their predictions are no more accurate than those of ordinary workers, and sometimes even less so.

And that’s pretty terrifying. Just imagine that even gurus on the market cannot predict anything. And if some of them can, then it’s probably because of luck, and you could literally do the same.

There are millions of explanations, but only one truth

Those who want to find some proof of their position will definitely find it. It doesn’t matter how much information you have or how smart you are; it’s always a question of funding new arguments and there’s literally an infinite amount of them

In other words, even the smartest person can sound convincing, but that doesn’t necessarily mean they’re speaking the truth

Evidence can often be tailored to a given problem. You are convinced you are right and are looking for evidence to prove it.

The more information you give a person, the more hypotheses will come their way, and the worse the outcome will be.

The human brain has a tendency to perform an action first and then explain why it performed it. You explain as well as you breathe. So, you can always find a way to explain anything.

That’s why there are millions of explanations, but only one truth.

History doesn’t matter

By using history, you cannot predict anything. If something has been in the past, it doesn’t mean that it will be in the future. It seems pretty easy to understand, but let’s dive a little bit deeper.

The problem of 1,000 and one days. A turkey was fed for 1000 days, but on the 1001st day it was killed. From one perspective, we see great statistics showing us that turkey have been living for 1000 days and will definitely keep living further. However, it’s not.

If you live to see tomorrow, it could mean that:

a) Your chances of achieving immortality will increase.

b) You will get a little closer to death. Both conclusions are based on the same data.

You can’t always make predictions about the future based on past events. The turkey had daily stability and nothing to portend trouble.

As a result, it is possible to build systems of different views that do not confront each other. The same situation can lead to completely different and contradictory conclusions

In fact, this is the black swan only for turkey. The butcher knew about it long before that.

In addition to the history section, the book explains this philosophy.

If I expect to expect something in the future, I expect it now. If you know that your partner will cheat on you tomorrow, he is cheating on you today.

If you are able to anticipate the invention of the wheel, then you already know what it looks like, and consequently, you already know how to make the wheel, so you have already invented it.

The illusion of “normal”

Let’s discuss the “normal” distribution, which is the backbone of many statistical models.

By unveiling the illusion of the “normal,” Taleb opens up a new perspective for us to view the world — a world full of uncertainties, improbabilities, and outliers.

He adds some pretty interesting terms, such as “Extremistan” and “Mediocristan”.

Mediocristan—where extreme events are less likely to occur and the outcomes are more predictable and follow a normal distribution. It represents situations where individual outcomes are not as influential, such as in physical measurements or human height.

Extremistan—where extreme events have a significant impact and are more common than in normal distributions. It represents situations where outliers or rare events can have a disproportionate influence, such as in financial markets or technological advancements.

Our world is definitely a combination of these two different worlds. To prove that, let’s take a look at two great examples:

• We have a group of 100 people and want to know the average height. Even if we took the highest man on earth, it still wouldn’t make much of a difference. This is an example of mediocristan

• Now we’ll take a group of 100 people and calculate the average wealth among all of them. If there were 99 engineers and 1 billionaire, the average wealth would be $10 million. But we know that in the real world, people usually do not have $10 million.

That’s why it’s pretty stupid to use the “normal” distribution model in the extremistan. Looking for an average will just give you a random number without any sense behind it.