The Black Swan by Nassim Nicholas Taleb

This article was inspired by Nassim Nicholas Taleb's The Black Swan . If you enjoy this article then consider purchasing or borrowing the book.


How to Utilize Randomness

“We respect what has happened, ignoring what could have happened.”

Why do economists believe that they can predict the future, when the past has demonstrated just the opposite? Unlikely events often occur, whether we look for them or not. From the success of the Star Wars franchise to the invention of the Internet, seemingly impossible events pop up out of know where, yet we adopt them into history as if they were unavoidable.

Humanity’s simplification of data keeps us from accounting for random chance events, causing us to miss innumerable opportunities. Narratives are often to blame for simplifying information. Rather than seeing a successful businessman as the product of luck, people will construct stories revolving around the individual’s talent, foresight and virtue, while this man achieved success simply because he was in the right place at the right time.

Of course not all success is the product of luck (take a surgeon’s abilities for example). In business or the world of art, chance often allows individuals to achieve fame beyond others with the same talents and privileges. Convinced that skill was responsible for their success; businessmen will look for trends in the data that prove their abilities. Failing to take randomness into account, we develop an incredible shortsightedness, which can prevent us from being on the right side of history.

Rather than using misleading forms of data representation, such as a “bell curve,” people would be better able to account for “black swans,” seemingly improbable events that come to pass, by using the “power law” curve, which is shaped by outliers instead of ignoring them. Whether it’s Bill Gates’s wealth or the popularity of Avatar, successful outliers exhibit feedback loops, which a bell curve can’t model. Take Marvel’s recentAvengers film, for example—positive reviews from friends, family and critics motivated people to go watch it. Just as the success of an obscure author, J.K. Rowling, couldn’t be forecasted, neither can future stock prices be truly predicted. “Expert” economists really can’t foresee the future.

Rather than feeling anxious about randomness’s power, keep your eyes open for random opportunities for success. Understand your limits. What is and isn’t risky to predict. Rather than trying to determine what will work, determine what won’t. If you chase black swans, ensure that the consequences have a greater chance of being positive than negative. Don’t collect data that reinforces your biases. Don’t be afraid of revising your views when met with new evidence.

If you want to successfully utilize randomness, you have to avoid decisive predictions of the future. Never bet on a product, service or idea unless the chances of success are greater than failure. Finally, don’t look at the past as a narrative, as stories downplay the fortuitous events surrounding success.

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