ALL THINGS BIG AND SMALL 2.0

* image of a complex system taken from http://www.necsi.org/ , the New England Complex Systems Institute.Nassin Nicholas Taleb's book The Black Swan [ see http://www.fooledbyrandomness.com/ ] is about the great impact that highly improbable events can cause in financial markets, in history, in natural events, on our working life, in our personal relationships etc. Taleb makes us aware of and fear black swans. But not all black swans are bad. There are good black swans too. In life, highly improbable events can lift you up to heights never imagined in your wildest dreams. The obscure writer/musician who was 'discovered' and rose to stardom. The small businessman who had a lucky break, a chance meeting that led to success. That first job interview with an interviewer who liked you. The lonely Blog or the YouTube video that, by word of mouth,and being in the right place at the right time drew a million visitors a day. These are all examples of riding to the sky on a black sw...

Click on Table for full-size and details Nassim Nicholas Taleb's "The Black Swan" (Random House, 2007) has attained cult status with the hedge fund crowd. His book is about the enormous consequences of highly improbable events. The essential points are: 1. Black Swans are the highly improbable events that have had enormous historical impact- like the current credit crunch caused by the sub-prime crisis, 9/11, the Latin American debt crisis of 1982, or the fall of the Soviet Union in 1990. Though very rare, Black Swans have many times more impact than more predictable, more frequent events. Black Swans are by definition unpredictable. 2. Black Swans are not as improbable as conventional statistics theory would have us believe. This is because the way we calculate probability has always been, and continues to be based upon the Gaussian [Bell Curve] distribution, where anything beyond 3 standard deviations is considered to have a probability of less than 1 %. Black Swan dis...