Book: 20220117 to 20220209, "THE BLACK SWAN" by Nassim Nicholas Taleb

20220117 - Prologue

"Why does reading the newspaper actually decrease your knowledge of the world?" p xxiii

Wow! This may significantly decrease the time I wasted on news!

"What you know cannot really hurt you." p xxiv

Is this one of the reasons that we should read more? The reason that we should "think ahead, think hard"?

PART ONE: UMBERTO ECO'S ANTILIBRARY, OR HOW WE SEEK VALIDATION

20220119 - Chapter 1 : The Apprenticeship of an Empirical Skepti

"Berlin Diary:: The Journal of a Foreign Correspondent, 1934-1941" definitely worth reading, together with "Rise And Fall Of The Third Reich".

We can summize history, but we cannot do that in the stream of time. When GFC happened in 2008, I knew what was happening, but I had no clue before the outbreak.

Same to the stock price. We normally know why the price went up or down yesterday, but we have no clue whether it would go up or down tomorrow.

Everything is messy. There are too many factors which affect the world. We don't know which one is critical, until the major event happens.

So, we cannot predict short term events.

But, can we predict long term trends? For example, overpopulation always cause disasters, right?

20220120 - Chapter 2: Yevgenia's Black Swan

Yevegenia's "A Story of Recursion" just like "Harry Potter" and many other famous books.

This book itself is fabricated, but the point is real.

20220121 - Chapter 3: The Speculator and the Prostitute

Which job is better? Scalable one or non-scalable one?

The first one belongs to Long Tail theory, and the latter belongs to Bell Curve theory(Gaussian distribution, Normal distribution).

I agree with Taleb: there will be less and less scalable jobs, especially when AI is taking over the world.

So how can we beat the system/world? Wealth tax?

20220121 - Chapter 4: One Thousand and One Days, or How Not to Be a Sucker

Is First Principle the best tool against the Black Swan? Or is Plan B the best tool?

What is the best way to keep wealth? Bill Gates believes in farm land. But if the economy went down, even the value of farm land will go down as well.

I think the automation of manufacturing necessities(such as food and energy) at lowest cost, is the best tool agains market crash. Not farm land, not real estate, not gold or crypt coins.

Real cost can save us from "renting cost", so the owner occupied property is meaningful.

"(Erudition) signals genuine intellectual curiosity. It accompanies an open midn and the desire to probe the ideas of others." p 48

Staying in the centre of the herd, means staying in the middle of the Bell Curve. Then we don't need to worry about the Black Swan: it's not going to affect us much. It's much riskier when staying at the edge of the herd, where we can find the most delicious grass.

The Black Swan problem was noticed thousands of years ago. That's one of the reasons that religions were so popular.

20220122 - Chapter 5: Confirmation Shmonfirmation!

I think this confirmation bias is mainly caused by laziness and habit/meme. People don't want to spend too much time to verify something from all angles, so they pick up the most likely instances to confirm our instinct guess.

Another issue could be EGO. No one likes to verify something by "stupid" questions/assumptions.

Why stock price goes up/down? We intend to find evidences to support our opinion.

This chapter resonates with "Thinking, Fast and Slow" by Daniel Kahneman.

20220124 - Chapter 6: The Narrative Fallacy

This chapter resonates with "Sapiens - A Brief History of Humankind" by Yuval Noah Harari.

To understand/memorize this world/environment, our brain have to build a virtual model to get rid of the details. What we really got is pattern/rule.

The Black Swan is the exception outside of the pattern we perceived.

To reduce errors of those patterns/models, we need to verify/validate them. But if the pattern is based on history, then there is no way to verify it. However, The Black Swan is based on prediction, not based on history.

20220124 - Chapter 7: Living in the Antechamber of Hope

It's better to let good things happen little by little across long period of time, and let bad things happen in a big lump sum in one go. That makes us happier.

How to handle the Black Swan? It seems that the key is to evaluate the probability correctly.

Or, we can treat the Black Swan as "bonus". Similar to Olympic players, they don't do daily training as their job. Instead, they have another normal job, and the traning is more like hobby. Painting, playing musical instruments, writing, etc. should all be treated as hobbies. Scientists are also teachers/professors, that's the source of their income.

How about financial investment? Same. The investment itself should not take too much time, so we can have a job, and the financial investment is the hobby. What we get from hobby could be much more than what we get from our job, but it also could be zero.

20220125 - Chapter 8: Giacomo Casanova's Unfailing Luck: The Problem of Silent Evidence

If more and mroe people follow the book "Unscripted", no doubt that there will be less and less golden balls.

Luck is randomness. In most cases, lucky people just have some good habit/personalities and luck. Silent evidences is critical.

Reasoning is how we try to succeed in natural selection. We can't just rely on natural selection. This reasoning is quite often wrong, but it's still better than nothing.

20220126 - Chapter 9: The Ludic Fallacy, or The Uncertainty of the Nerd

"Just as we tend to underestimate the role of luck in life in general, we tend to overestimate it in games of chance." p 129

What is going to happen in our lives? We never know. It's always the Black Swans.

The same thing also happens to company, country, economy, etc.

The tiger is the Black Swan in that Casino. p130

There are two types of randomness. Throwing a dice and the result is not really random, so we can calculate the probability and handle it properly. And the Black Swan is caused by imperfect perception/knowedge. It is unpredictable.

These two classes of randomness are not isolated from each other. They are mixed together in real world. p345

"Train yourself to spot the difference tetween the sensational and the empirical." p 133

"But the last thing you need to do when you deal with uncertainty is to 'focus'. p 133 

This reminds me of meditation. We need to train to control our mind and emotion, and don't focus on anything to find the real self.

应无所住，而生其心。

PART TWO: WE JUST CAN'T PREDICT

20220127 - Chapter 10: The Scandal of Prediction

If a profession needs forcasting something which involves a lot of factors, then the experts in this profession is not reliable.

Information normally means noise. The more information means the more distraction. And, because we don't want to change our opinion (many people think that changing opinion is to betray themselves)

To make better prediction, we need to acquire less information.

"Don't cross a river if it is (on average) four feet deep." p 160

We don't really know the average depth of the river, and the average depth of the rive is not really helpful.

20220128 - Chapter 11: How to Look for Bird Poop

If some place all of sudden got 10 year or even 40 year drought, is it caused by Three-body problem? No way to predict it until getting close to the point of time. Chaoes theory. Butterfly effect. Minor change may cause huge difference in result. This is why the book "Foundation" is not possible, why prediction in social science is not possible, why in most of the cases that there is no map/general theory for reality.

People always look for shortcuts/rules/patterns/maps. That's how we can win in natural selection. But sometimes this also bring disasters to us.

20220129 - Chapter 12: Epistemocracy, a Dream

"The ultimate test of whether you like an author is if you've reread him" p 198

Reverse-engineering on history is also impossible. There are too many butterflies.

Technical innovations bring huge impact to civilization. That's why history cannot repeat itself.

We can learn from history, just don't pay too much attention to our narratives. I think we can only reply on basic science, such as math, physics, and biology. For example, "Gun, Germs and Steel" and "Collapse" are most likely correct.The root cause of serious wars are always caused by food shortages. Overpopulation, many years of drought (the Black Swan) and other natural disasters may trigger wars.

Unfortunately, these analysis is only useful at large time scale, such a hundreds of years. We never know what's likely to happen this year or next year.

Memes don't race. Instead, it's randomness and natural selection.

20220129 - Chapter 13: Appelles the Painter, or What Do You Do if You Cannot Predict?

We should only make short term predictions. This is gene envolvement VS butterfly effect. No matter how good our gene is, it's not good enough to make long term prediction.

However, we can do something to help implement our long term prediction. For example, we can do daily exercise to make ourselves strong in months or years, we can build our own business to make ourselves wealthy, and we can do something for the community/country to make it better.

Long term prediction is much more likely to be correct if we work on it.

"American culture encourages the process of failure, unlike the cultures of Europe and Asia where failure is met with stigma and embarrassment." p 204

We cannot make precise predictions. And we don't need to do that. What we need is to do something to mitigate/utilize the consequences.

PART THREE: THOSE GRAY SWANS OF EXTREMISTAN

20220130 - Chapter 14: From Mediocristan to Extremistan, and Back

Efficiency and stability contradict with each other. But position is not related to them.

That's why the margin of safety is so important if something may change rapidly.

When thinking about safety, government bond > bank saving > real estate > Index Fund > Individual Stock > Options, and their stability go backwords.

What can protect us from market crash or hyperinflation? Short the market. Government Bond cannot save us. In 2008, 10 year Treasury Rate didn't change much.

As long as oversupply is the trend, we will not see hyperinflation, but short term market crash is definitely possible.

Modern society has many huge networks, such as Internet, Electricity, Logistics, Millitary, etc. For better efficiency, there are less and less major nodes in the network. When the efficiency goes up, the robust goes down. 

Finally found one error in this book: the longer longivity of OSCAR stars are more likely caused by their better self-discipline, instead of pecking order. Luck is not the only factors to decide pecking order.

20220201 - Chapter 15: The Bell Curve, That Great Intellectual Fraud

One of the major problems of Bell Curve is about innovation. Innovation is always outside of Bell Curve.

Anything related to virtual/abstract concept, such as money, doesn't suit Bell Curve. Or anything not meaningful if answer with Yes/No. For example, we can check if someone is taller or shorter than 1.7 metre, and that's meaningful. But if we ask whether someone has more than 1 million dollar, the answer is not meaningful. For someone has less than 1 million dollar, it could be $1000, and it could be $999K , which are completely different.

Another exception is about memory. Anything can cumulate doesn't suit Bell Curve. For example, book sales. If a book is recommended once in a major media, it's more likely to get recommended in other major medias.

Third one is about "step" or "unit". Don't really understand this section. Maybe it's about the basic measurement unit of the result?

20220202 - Chapter 16: The Aesthetics of Randomness

We should use randomness to help us to understand science, not use science to help us to understand randomness. p 268

We can turn some Black Swans into Grey Swans, but not all of them. For example, when COVID-19 pandemic appeared, central banks printed enormous amount of money. That helped a lot. But it may cause unknow disaster many years later.

We can do something with Grey Swan, but not much with Black Swan. The more we read, the more Black Swan will be changed to Grey Swan to us.

20220203 - Chapter 17: Locke's Madmen, or Bell Curves in the Wrong Places

"Their minds are domain-dependent, so they can exercise critical thinking at a conference while not doing so in the office." p 275

Information is turned into knowledge when we associate them with our daily lives, or else it's just noise. True but useless.

Long term call options is good for shares like TESLA, if you believe that it will go up a lot in long term. Two year call seems good at the moment.

https://finance.yahoo.com/quote/TSLA/options?date=1705622400

Math cannot predict the future. Numbers are just numbers, it only tell us a tiny projection of the real world. From other side, randomness is only random if we observe the numbers. Behind the numbers are the real world, which follow rules. So, if we follow the First Principle, we can make at least short term prediction on specific objects.

Math should replace Economy in Nobel Prize in my opinion.

20220204 - Chapter 18: The Uncertainty of the Phony

Wisdom is domain dependent.

For me, there are always a few domains I want to associate with what I learned: health, money/economy, relationship among people, doomsday, etc.

It seems that most people cannot apply the knowledge they learned in one domain to another domain.

Gliding in freestyle swimming can be applied to how we breath, and study/work, and even investment.

PART FOUR: THE END

20220205 - Chapter 19: Half and Half, or How to Get Even with the Black Swan

I worry less about embarrassement than about missing an opportunity. p296

In Aesop's fable, the fox consider that the grapes it cannot/didn't reach are sour. p297

But Fox is carnivore. They don't eat grapes!!

We don't need one billion dollars or eternal youth, so why pursue them? Why not use money wisely and stop wasting time on mobile phone? 

Most of the daily events are minor issues, just like the stock market fluctuation. They are unpredictive, and not worth paying attention. Our emotion should not get affected by them. Instead, we need to focus on our long term aim, spend time on them, and let the compound effect help to archive miracle.

Postscript Essay: On robustness and fragility, deeper philosophical and empirical reflections

20220205 - I. Learning from mother nature, the oldest and the wisest

Don't agree with the DEBT part. DEBT can vastly accelerate the economy development, and government DEBT is quite different from individual debt and company debt, unless demand exceeds supply, which is not likely today thanks for the widespread of production automation.

Don't agree with the organization scale issue. Small companies cannot compete with giant oversea companies, especially if those giant companies got their government's full support. Tariff is necessary for any distributional manufacturing. Without it, globalization (and huge international companies) is inevitable. 

We cannot measure probability. We can only predict it. This means, for anything outside of the Bell Curve, we can only guess.

Most of people cannot just out of the Bell Curve. This is the opportunity we should grab. In doomsday, most of the people will die because they don't prepare for it properly.   :-)

20220206 - II. Why I do all this walking, or how systems become fragile

Keep ourselves in slight hunger is good.

1.5 to 2 hour walking + a few times sprint make use healthier, comparing to regularly gym exercise.

Low volatility doesn't mean low risk. p329

Central banks can print money to save the market, but that would cause bigger disasters. 

20220206 - III. Pearls before swine

Instead of  "This is what you guys don't know.", it's much better to say, "Your knowledge works beautifully in these three quadrants, but beware of the fourth one, as this is where the Black Swans breed." p336

People hardly change. Even if they got Nobel Prize. p338

20220207 - IV. Asperger and the ontological black swan

The Black Swan corresponds mainly to an incomplete map of the world. p343

To assume a long run in a complex system, you need to also assume that nothing new(unexpected) will emerge. p345

However, the First Principle still works. Rapid population growth leads to over population many years later. Unexpected factors may revert the result, but we should not expect that.

So, we should evaluate the situation from time to time, and only stake small money. Don't be greedy, be patient.

20220208 - V. (Perhaps) The most useful problem in the history of modern philosophy

We have a small chance to lose most of our investment every year. What should we do? The more money we have, the more cautious we should be. But initially, we should invest more aggressively. p358

Fat tail is more about the effect, less about the probability.

Taleb believes that hyperinflation is inevitable. I doubt it. But I can see that COVID-19 damaged the international logistics, and the coming distributed manufacturing will raise the cost. These two factors will push up the price, but should not be too much.

20220208 - VI. The fourth quadrant, the solution to that most useful of problems

No map and wrong map, which one is worse?

It depends on how wrong the map is. If we don't know how wrong it is, I think it's better to take the map, and keep in mind that the map is wrong. If we are skeptical about the map, the problem is intimidated.

20220209 - VII. What to do with the fourth quadrant

How professionals can cause harm for such a long time in the name of knowledge and get away with it? p369

They are waiting for miracle (the Black Swan). This is wishful thinking of course.

Avoid optimization; learn to love redundancy. p371

Then how about the depreciation of fiat currencies? It's better to own asset which can create value, such as real estate property and stocks, than holding zero-interest bonds or cash.

20220209 - VIII. The ten principles for a Black-Swan-Robust society

Whatever may need to be bailed out should be nationalized. p374

No incentives without disincentives: capitalism is about rewards and punishments, not just rewards. p375

Make an omelet with the broken eggs. p376

The problem is, there are more and more cash looking for investment opportunities, because goods and services are oversupply, thanks for manufacturing automation and Internet. Rich people cannot just invest their money in making more goods and services. They have no choice but put their money into stock market.

20220209 - IX. Amor Fati: How to become indestructible

Seneca made himself ready to lose everything every day. Every day. p378

His attitude is same as Budda and Jesus.

Can I reach this level one day?