Nassim Nicholas Taleb sits in a bare room with his analysts, machines and books. His machines are on the look out for unpredictable patterns in numbers. The data informs Taleb’s bets on things going wrong. He loses most of the time. But when he wins, he wins big.
Malcolm Gladwell’s article on Taleb was written at the turn of the century. Seven years later Taleb would go on to write a book called the Black Swan. All swans were white until the discovery of the black swan in Australia. Communism was a viable alternative to capitalism until the collapse of the Soviet Union in the 1990s. The United States was invulnerable until the 9th of September 2001. Lehman Brothers was one of the surest bets on the stock market. Until it wasn’t.
None of these events were predicted. All of them changed the world.
Black Swan is a book about error. About why the things we think will happen don’t. And why the things we think won’t happen do. In practical terms, it led Taleb to his financial strategy. He placed 85 per cent of his money on safe bets, and 15 per cent on highly risky bets. And nothing in the middle.
Since making a lot of money Taleb has become an academic and a writer. In his commencement address after receiving an honorary degree from the American University of Beirut, he describes a life defined by learning from error :
…. every major single piece of advice I was given turned out to be wrong and I am glad I didn’t follow them. I was told to focus and I never did. I was told to never procrastinate and I waited 20 years for The Black Swan and it sold 3 million copies. … I was told to not insult the New York Times and the Wall Street Journal, the more I insulted them the nicer they were to me. …. One should never do anything without skin in the game. If you give advice, you need to be exposed to losses from it.
Malcolm Gladwell, Blowing Up, New Yorker, April 22 and 29 2002
Nassim Nicholas Taleb, Black Swan.