Black swan in business. The Black Swan Theory and the Fundamental Vulnerability of Automated Systems

So, Black Swans are unpredictable events that give impetus to history and change the life of every person, whether he wants it or not. Taleb is convinced that success directly depends on how to handle such situations.

The central theme of the book is the danger of human blindness in relation to randomness, especially large-scale ones. We all tend to focus on the little things, seemingly believing that small things will make big things happen and then the results will come. Everything is true, but it’s easy to get caught up in the small things without ever reaching the big things. And if you ask the question in the author’s words: “Why does reading a newspaper reduce our knowledge about the world?”

The main feature of the Black Swan is unpredictability, which determines the scale, and this applies to any activity. You need knowledge that no one else has except you. Taleb writes: If you know something (for example, that New York is an attractive target for terrorists) - your knowledge is worthless if the enemy knows the same thing.<…>This applies to any activity. Take, for example, the “secret recipe” for phenomenal success in restaurant business. If it were known and obvious, someone would have already invented it and it would have become something trivial. To get ahead of everyone, you need to come up with an idea that is unlikely to occur to the current generation of restaurateurs. It should be completely unexpected.

And of course, you can forget about traditional predictions. Someone will say that it is stupid to stop predicting what will happen next, because this allows us to better understand tomorrow. There is nothing wrong with this, but one single event can destroy all forecasts, and they will instantly become nothing. This is probably why sometimes science fiction writers guess better than professional experts. Taleb states: We forecast oil budget deficits over a thirty-year period, not realizing that we cannot know what they will be next summer. The cumulative errors in political and economic forecasts are so enormous that looking at their lists makes me want to pinch myself to make sure I'm not dreaming.

Yes, Black Swans are unpredictable, so you need to adapt to their existence, and the author offers this recipe: “We can achieve a lot if we focus on anti-knowledge, that is, on what we don’t know. Among other things, you can tune in to catching happy Black Swans (those that give a positive effect), if possible, going towards them.<…>We will see that, contrary to the claims of social scientists, almost all important discoveries and technical inventions were not the result of strategic planning- they were just Black Swans. Scientists and businessmen should rely as little as possible on planning and improvise as much as possible, trying not to miss the opportunity. That is, all you need is to experiment more and not be afraid to deviate from the rules, turning traditional logic on its head and demonstrating how inapplicable it is to our current, complex and increasingly recursive environment.

Also important aspect books are a “game mistake”. The bottom line is that games should not be overused to simulate real-life situations. Here Taleb shows side effects human cognition. Uncertainty in real life has little in common with the sterile uncertainty we are accustomed to encountering in games and exams. This principle is one of the main arguments and refutation of predictive mathematical models used to predict the future, and it is also an attack on the concepts of naive and simplified statistical models in complex areas. According to the author, statistics only work in some areas, such as casinos, where the chances are visible and certain.

So, the results. What does it take to be successful?

1. It is necessary to distinguish “good” accidents from “bad” ones. In movies, science, or venture capital deals, unpredictability can turn into big wins. But in areas where the inability to calculate risks is fraught with failure, you should be more careful. Service in the army, work in state security or insurance belong precisely to such areas - here you must initially assume the possibility of dramatic events.

2. Don’t strive for accuracy and specificity. Think bigger and don't try to predict a specific Black Swan. Louis Pasteur, who argued that luck loves those who are ready for it, understood: people are not looking for something specific every day for discovery - they work hard to clear the place for a happy accident.

3. Look for a meeting with the Black Swan, grab any opportunity. They happen much less often than we think: people often do not understand that they have a lucky chance and miss it. If suddenly a publisher, the owner of a reputable bank or a prominent scientist wants to meet with you, do not refuse - there may not be a second chance. Work as much as you like, but don’t get stuck in a routine, remember: perseverance is great, limitation is deadly. A big city is double luck; there is a greater likelihood of unexpected encounters; it is a zone of concentrated randomness, and this is its advantage.

4. Beware of developed government plans; you shouldn’t rely too much on them. Think about the banks that hid explosive risks in their portfolios. Better be on your guard.

5. Yogi Berra once said: “There are people to whom you can’t explain anything if they haven’t already understood it.” Don't waste time fighting with sociologists, stock analysts and forecasters, just ignore them. Be especially wary of the words “equilibrium” and “normal distribution.”

You can study the theory in more detail in Taleb’s books Fooled by Randomness and The Black Swan. There he talks about specific life examples: they explain the theory and show what to do with it. The most striking and unconditional case that has excited the whole world is the prediction of the global financial crisis of 2008. During this time, Taleb earned several million dollars, and attributed this to the use of statistical methods in finance. According to Michael Bloomberg, Taleb's Black Swan theory helped investors make half a billion dollars.

In an article in The Times, Bryan Appleyard called Taleb the most prominent thinker in the world today.

The Black Swan in terms of symbolism

They write that Black swan, a bird from the genus of swans (Cygnus) of the duck family (Anatidae). Until the 18th century it was unknown to science.

Australian black swan on the wave
Like in a fairy tale in a picture, visible to me.

The real one floats in front of me,
All snakeskin, all patterned, cut out.

And truly brings the dream into play
Real kangaroo jumps.

And in the guarded enchanted pond
Lotuses shine in a wet flower garden.

The slender trunk of the eucalyptus turns blue,
The unprecedented acacia bush blossomed.

Like a hummingbird, the honeyeater fell to the flower,
The flute bird began to play in melancholy.

And the kingfishers laugh along the branches,
Like in a fairy tale that was told to us in childhood.

Only this is all just a small corner, -
Louder than the singing of birds at the factory, the whistle blows.

There is no Australia of those childhood days,
Everything burned between the smoke and fires.

The rails crashed into the waves of yellow mountains,
Shackled, connected, all calculated, spacious.

Where the blacks formed a harmonious dance, -
Lonely white-faced bootie.

Where the fast kangaroo played -
Sheep, sheep, morning and evening.

A crowd of millions of them passed here,
Their bodies are locked in refrigerators.

Frozen corpses will be taken away,
New sheep graze here and there.

And from city to city always
Trains howl, scattering soot.

And from street to street there is a whistle, -
All the white music is a beep.

You have chosen this destiny for yourself,
That their white face has turned so dirty gray.

They devastated the entire region with their crowd.
Black Swan, sing a farewell song.

June 1st, 2015

We discussed this once, and now we’ll talk about a more serious, established concept.

The term "Black Swan" refers to certain critical events that cannot be predicted, but which nevertheless fundamentally change the course of history. Black swans can represent both positive events (for example, the emergence of the Internet) and negative ones (the rise to power of Adolf Hitler).

“Black Swan” is also known as the Latin expression - the oldest famous quote belongs to the pen of the ancient Roman satirist Juvenal, - “a rare bird on earth is like a black swan” (lat. rara avis in terris nigroque simillima cygno)

The term “black swan” has become firmly entrenched in the consciousness of our society after the publication of Nassim Taleb’s book “The Black Swan. Under the sign of unpredictability." Although this metaphor has been known in philosophy for quite some time, it was Taleb who began to use it to refer to rare and unexpected events with significant consequences. At the same time, “black swans” can be not only negative events, but also represent unpredictable “luck”

Let's find out more about all this...

In the Middle Ages, the very assumption of the existence of a black swan in nature looked so absurd that it became a metaphor for something absolutely impossible. Until 1697, it was believed that swans were only white, but a Dutch expedition led by Willem de Vlaminck discovered Western Australia population of black swans. The black swan now appears on the flag of Northern Australia. The discovery of the first black swan was a big surprise for ornithologists.

Nassim Nicholas Taleb (b. 1960) is a mathematician, trader, businessman and philosopher, originally from Lebanon, now living in the United States. Nassim Taleb's family, professing Orthodoxy, was deported from the Lebanese city of Amiun in 1975, after the civil war. Taleb's ancestors in the past held high positions in the Lebanese government; his father was an oncologist and was engaged in anthropological research.

The book Black Swan, published in 2007, has sold more than 300,000 copies. It spent seventeen weeks on the bestseller list.” New York Times” and has been translated into 27 languages. In October 2009, according to the magazine "Secret of the Firm", the book topped the list of Top 5 business bestsellers.

Behind last years humanity has experienced a series of severe upheavals. Such as September 11, 2001, the global financial crisis, the war in Ossetia, in Ukraine. All of them, which seemed absolutely impossible until they happened, now seem natural to us. It is precisely such unpredictable events that Taleb proposes to call Black Swans. According to his authoritative conviction, it is precisely such events that leave a mark, both in history as a whole and in the life of each individual person.

Within the life of one individual, Taleb proposes to conduct an imaginary experiment: look at your life and study the role of such unpredictable events with large consequences in it. It is worth remembering the moment of choosing a profession, meeting a life partner, betrayal, expulsion from the homeland, sudden enrichment or ruin. Could you have planned these things? How often do you look forward to such moments in your life? There is a saying: “If you want to make God laugh, tell God about your plans,” which is exactly about this.

The essence of the question is this: this is not an expected event that cannot be predicted. In contrast to this concept, there is the term White Swan- an event that is to one degree or another predictable. For example, experts predict what will happen to oil in 20 years - this is the White Swan, but how much it will cost in a year is impossible to predict. Or a prediction that Medvedev or Putin, or even Prokhorov will become the president of the country - these are predictable situations, with varying degrees of error. Was it possible to predict Yeltsin’s statement on the eve of 2000 about relinquishing his presidential powers? This is not a predictable situation.

Yes, after, it fit perfectly into the logic, but before, it simply couldn’t come to mind. The meaning of the Black Swan is that, as a rule, it is not subject to human control, despite the fact that it, like a different format of events on earth (together with the white swan), is completely a real thing. The black swan is taking place. Human life has always been determined by the degree of predictability. The more unpredictable it is, the more interesting it is. Of course, to a certain extent, because a completely unpredictable life is terrible.

But the more predictable it becomes, the more boring it becomes. And so on in a circle. This means that our lives are shaped by two trends: white and black swans. The white swan allows a person not to fall into despondency from hopelessness, and therefore he is proud of himself for his ability to predict. The black swan leaves no chance for a person to feel omnipotent. And if we remove one of these supports, our life as we live will turn into nothing. We will turn into either animals or gods. And the earth, as you know, was created for people.

So, the Black Swan cannot be predicted, it must be understood and expected. Expect that the unexpected can always happen.

Financial experts find themselves vulnerable to black swans time after time. The mortgage crisis destroyed thousands of businesses and brought entire countries to their knees. Companies must have a backup plan to be less fragile. Disasters, no matter how incredible they may seem, must be planned for. Not in any specific way, but by asking the only correct question “what if?”

By their very nature, black swans cannot be predicted, because such events have never happened before by definition. However, it is possible to study how organizations, peoples, or survivors of disasters dealt with their consequences. Such analysis can help prepare companies to build strategies to help them get back on their feet as quickly and with minimal disruption as possible after a disaster.

The theory of expecting the unexpected is not prophetic, but it has had the widest resonance in history and philosophy. Taleb made many small bets on incredible events and became rich because... some of them nevertheless occurred. Basic principles his Black Swan theories include three main criteria.

Let's list them and evaluate them:

1. The event is unexpected.

Before Bitcoin, history did not know a currency that did not have any nation behind it and the transfer of which was not based on trust. Before the advent of the Internet, this was generally impossible. For some time, outside the small community of cryptologists, this idea was meaningless and did not find understanding on the part of the government and banking institutions. It never occurred to anyone to control or try to stop Bitcoin - it was simply not taken seriously. And then it was too late.

First criterion: Yes.

2. The event has a big impact.

By now, the currency has reached a peak total value of about $12 billion. That's only about 2.5% of Google's search engine company value. However, the vast majority of countries are now aware of Bitcoin, and many have had their local banking systems issue warnings or bans on its use. Bitcoin has gained an army of global supporters, and a close-knit community has formed around it. It includes politicians, bankers, regulators, investors and scientists trying to understand it, control it, profit from it and use it as a catalyst to change the world.

Second criterion: Yes.

3. After an event has already occurred, it is retrospectively given a rational explanation - as if it was expected.

If we consider two well-known Black Swans, we can, in hindsight, explain them from a rational point of view. If we talk about the Internet, then, given how many personal computers was purchased in the 80's and early 90's, it is clear that they would have ended up being linked together for delivery Email and sharing news.

In the case of the events of September 11, in retrospect, "experts" connected the dots of growing anti-Americanism in radical parts of the Muslim world and suddenly "remembered" the unsuccessful attempt to blow up the World War II building. shopping center with a car bomb in an underground parking lot several years earlier, and it became “obvious” to them that the same kind of thing was going to happen again.

Has Bitcoin ever been analyzed rationally through the lens of history? But are we already at the point where we have enough data for such analysis? There is probably no jury yet that could evaluate this. Bitcoin is still in its infancy and time will judge where this experiment will fit in the annals of history.

Third criterion: unknown.

However, it was perhaps the Black Swan that gave birth to Bitcoin: the mortgage crisis that rocked the entire banking industry. The bankers understood perfectly well that this was a vicious practice - giving housing ownership and rent to everyone. But this was not their problem, since they sold loans and enriched themselves at the expense of other people's problems. When loans stopped being repaid on time, this gave rise to chain reaction, which spread to large insurance agencies and investment companies - all this led to a debt abyss.

Of course, looking back, it is OBVIOUS that this was bound to happen. That's what credit reports are for. Loans that stop paying off are bad for everyone. And of course, after the fact, an army of critics in suits and ties ranted on the news about how they saw the crisis coming.

How to live in a world full of Black Swans?

So, Black Swans cannot be predicted. But you can learn to live with them. Here are some tips Taleb gives us:

Learn to distinguish “good” accidents from “bad” ones. There are good Black Swans in movies, science, or venture capital deals. If you are engaged in such a business, then your happiness lies in ignorance, especially if your competitors also know nothing, but, unlike you, have no idea about it. But in areas where the inability to calculate risks is fraught with failure, they should be feared. Service in the army and state security, as well as banking activities belong to such areas.

Think bigger and don't try to predict a specific Black Swan. Louis Pasteur, who said that luck loves those who are ready for it, understood that in order to make a discovery, there is no point in stubbornly looking for something specific. Scientists are working hard to create the conditions for a fluke to catch the Black Swan.

Look for a meeting with the Black Swan. A publisher, a representative of a reputable foundation or a famous scientist expresses a desire to meet with you - do not miss this opportunity - it may not come your way a second time. Don't get stuck in a routine, communicate with people. In a big city, the likelihood of meeting a good Black Swan is greater than in the middle of nowhere.

Be suspicious of government plans and forecasts. We should not forget that the main thing for an official and a banker is to stay afloat, and not at all to get to the bottom of the truth. This does not mean that this entire crowd is completely useless: you just need to be on your guard and not fall victim to their “production costs.”

Do not waste your nerves and time fighting with “specialists” of all stripes. There have been and will always be stupid forecasts, the main thing is not to trust them too much. When you hear a specialist pronounce the words “equilibrium” and “normal distribution,” do not argue with him, but stick a rat down his collar.

Taleb's 10 Black Swan Principles for a Sustainable World

It is better for something fragile to break when it is small than when it becomes large and significant

It is unacceptable to impose losses on everyone and privatize profits to a select few

People who drove a school bus blindfolded (and crashed it) can't be trusted with a new bus.

Cannot be offered to the manager nuclear power plant incentive bonus without a significant penalty in case of failure

Balance complexity with simplicity

Do not give a stick of dynamite to children, even if you have warned them and provided them with instructions.

Only scams financial pyramids can be built on the trust of investors. For government securities, “restoration of confidence” is unacceptable

Even if a drug addict is experiencing withdrawal, do not give him a new dose.

Citizens must be protected from fluctuations in the value of financial assets or erroneous “expert” advice regarding their pension provision

Start frying the omelet with previously broken eggs.

sources

http://lebeddeva.ru/vse-o-lebedyah/chto-takoe-chernyj-lebed.html

http://bitnovosti.com/2014/04/08/bitcoin-black-swan/

https://ru.wikipedia.org/wiki/%D0%A7%D1%91%D1%80%D0%BD%D1%8B%D0%B9_%D0%BB%D0%B5%D0%B1%D0 %B5%D0%B4%D1%8C_(%D1%82%D0%B5%D0%BE%D1%80%D0%B8%D1%8F)

http://dic.academic.ru/dic.nsf/ruwiki/1678229

Let me give you some more interesting topics: for example, and here The original article is on the website InfoGlaz.rf Link to the article from which this copy was made -

And now we will talk about a more serious, already established concept.

“Black Swan” is also known as a Latin expression - the oldest known quote comes from the pen of the ancient Roman satirical poet Juvenal - “a rare bird on earth is like a black swan” (lat. rara avis in terris nigroque simillima cygno)

Let's find out more about all this...

In the Middle Ages, the very assumption of the existence of a black swan in nature looked so absurd that it became a metaphor for something absolutely impossible. Until 1697, it was believed that swans were only white, but a Dutch expedition led by Willem de Vlaminck discovered a population of black swans in Western Australia. The black swan now appears on the flag of Northern Australia. The discovery of the first black swan was a big surprise for ornithologists.

Nassim Nicholas Taleb (b. 1960) is a mathematician, trader, businessman and philosopher, originally from Lebanon, now living in the United States. Nassim Taleb's Orthodox family was deported from the Lebanese city of Amiun in 1975 after the outbreak of civil war. Taleb's ancestors in the past held high positions in the Lebanese government; his father was an oncologist and was engaged in anthropological research.

The book Black Swan, published in 2007, has sold more than 300,000 copies. It spent seventeen weeks on the New York Times bestseller list and was translated into 27 languages. In October 2009, according to the magazine "Secret of the Firm", the book topped the list of Top 5 business bestsellers.

In recent years, humanity has experienced a series of severe upheavals. Such as September 11, 2001, the global financial crisis, the war in Ossetia, in Ukraine. All of them, which seemed absolutely impossible until they happened, now seem natural to us. It is precisely such unpredictable events that Taleb proposes to call Black Swans. According to his authoritative conviction, it is precisely such events that leave a mark, both in history as a whole and in the life of each individual person.

The essence of the question is this: this is not an expected event that cannot be predicted. In contrast to this concept, there is the term White Swan - an event that is more or less predictable. For example, experts predict what will happen to oil in 20 years - this is the White Swan, but how much it will cost in a year is impossible to predict. Or a prediction that Medvedev or Putin, or even Prokhorov will become the president of the country - these are predictable situations, with varying degrees of error. Was it possible to predict Yeltsin’s statement on the eve of 2000 about relinquishing his presidential powers? This is not a predictable situation.

So, the Black Swan cannot be predicted, it must be understood and expected. Expect that the unexpected can always happen.

The theory of expecting the unexpected is not prophetic, but it has had the widest resonance in history and philosophy. Taleb made many small bets on incredible events and became rich because... some of them nevertheless occurred. The basic principles of his Black Swan theory include three main criteria.

Let's list them and rate them using Bitcoin as an example:

1. The event is unexpected.

First criterion: Yes.

2. The event has a big impact.

Second criterion: Yes.

3. After an event has already occurred, it is retrospectively given a rational explanation - as if it was expected.

If we consider two well-known Black Swans, we can, in hindsight, explain them from a rational point of view. When it comes to the Internet, considering how many personal computers were purchased in the 80s and early 90s, it is clear that they would eventually be linked together to deliver email and share news.

In the case of 9/11, in retrospect, "experts" connected the dots of rising anti-Americanism in radical parts of the Muslim world and suddenly "remembered" the failed attempt to blow up the World Trade Center with a car bomb in an underground parking lot several years earlier, and it became "obvious" to them. that the same thing was going to happen again.

Third criterion: unknown.

However, it was perhaps the Black Swan that gave birth to Bitcoin: the mortgage crisis that rocked the entire banking industry. The bankers understood perfectly well that this was a vicious practice - giving housing ownership and rent to everyone. But this was not their problem, since they sold loans and enriched themselves at the expense of other people's problems. When loans stopped being repaid on time, it created a chain reaction that spread to large insurance agencies and investment companies - all of which led to the debt abyss.

How to live in a world full of Black Swans?

So, Black Swans cannot be predicted. But you can learn to live with them. Here are some tips Taleb gives us:

Look for a meeting with the Black Swan. A publisher, a representative of a reputable foundation or a famous scientist expresses a desire to meet with you - do not miss this opportunity - it may not turn up a second time. Don't get stuck in a routine, communicate with people. In a big city, the likelihood of meeting a good Black Swan is greater than in the middle of nowhere.

Be suspicious of government plans and forecasts. Do not forget that the main thing for an official and a banker is to stay afloat, and not at all to get to the bottom of the truth. This does not mean that this entire crowd is completely useless: you just need to be on your guard and not fall victim to their “production costs.”

Taleb's 10 Black Swan Principles for a Sustainable World

It is better for something fragile to break when it is small than when it becomes large and significant

It is unacceptable to impose losses on everyone and privatize profits to a select few

People who drove a school bus blindfolded (and crashed it) can't be trusted with a new bus.

You cannot offer a nuclear power plant manager an incentive bonus without a significant penalty in case of failure

Balance complexity with simplicity

Do not give a stick of dynamite to children, even if you have warned them and provided them with instructions.

Only financial pyramid scams can be built on the trust of investors. For government securities, “restoration of confidence” is unacceptable

Even if a drug addict is experiencing withdrawal, do not give him a new dose.

Citizens must be protected from fluctuations in the value of financial assets or erroneous “expert” advice regarding their pension provision

A simple logical riddle that demonstrates the illogicality of people, but

“People often make mistakes when they make predictions based on what they know about the past. We are mistaken in thinking that the future is a reflection of the past because there are many unknown factors that go against our assumptions.

Example. Imagine you are a turkey on a farm. For many years, the farmer fed you, groomed you and cherished you. Looking at the past, there is no reason to expect change. Alas, you were beheaded, roasted and eaten on Thanksgiving Day.".
<...>

Sometimes events surprise not because they are random, but because our worldview is too narrow. Such surprises are called “black swans” and can force us to reconsider our picture of the world.

Thank you dralexmd for the tip

Human talent is to transform all signals environment into meaningful information. This made it possible to create scientific method, philosophize about the nature of existence and invent complex mathematical models.

Our ability to think about and manipulate the world does not mean that we are good at it. We tend to think narrowly in our ideas about it. Having come to any judgment, we cling to it with a death grip.

Human knowledge is constantly increasing, and such a dogmatic approach is not effective. Two hundred years ago, doctors and scientists were absolutely confident in their knowledge of medicine, but just imagine that, having gone to the doctor with complaints of a runny nose, you were given a prescription for leeches!

Confidence in judgments forces us to take concepts beyond the framework of the system of concepts that we accept as true. How to understand medicine without knowing about the existence of microbes? You can come up with a reasonable explanation for the disease, but it will be flawed due to the lack of important information.

This kind of thinking can lead to unexpected surprises. Sometimes events surprise not because they are random, but because our worldview is too narrow. Such surprises are called “black swans” and can force us to reconsider our picture of the world.

Before man first saw a black swan, everyone assumed that they only came in white. White color was considered their integral part. Seeing a black swan, people radically changed their understanding of this bird. Black swans are as common as swans white, and as fatal as bankruptcy due to a falling stock market.

"Black swans" can have life-changing consequences for those who are blind to them

The black swan effect is not the same for everyone. Some may be seriously harmed by it, while others may not even notice it. Access to relevant information is important: The less you know, the greater the risk of becoming a victim of a “black swan”.
Example. Imagine that at a race you bet on your favorite horse named Rocket. Because of the horse's physique, his track record, the skill of the jockey and the lackluster competition, you're betting all your money on him to win. Now imagine your surprise when Rocket not only did not run after the launch, but chose to simply lie down. This is a "black swan". Given the information available, Rocket should have won, but somehow you lost all the money. On the contrary, the owner of the Rocket became rich by betting against it. Unlike you, he knew that Rocket would go on strike to protest animal cruelty. This knowledge saved him from the “black swan”.

The influence of “black swans” can affect not only individuals, but also entire societies. In such cases, a “black swan” can change the world, affecting, for example, philosophy, theology and physics.

Example. Copernicus suggested that the Earth was not the center of the Universe, and the consequences were enormous: the discovery called into question both the authority of the ruling Catholics and the Bible itself.

Subsequently, this “black swan” marked the beginning of a new European society.

It is very easy to confuse us even with basic logical errors.

People often make mistakes when making predictions based on what they know about the past. Believing that the future is a reflection of the past, we are mistaken, because many unknown factors go against our assumptions.

Example. Imagine you are a turkey on a farm. For many years, the farmer fed you, groomed you and cherished you. Looking at the past, there is no reason to expect change. Alas, on Thanksgiving Day you were beheaded, roasted and eaten.

When we make predictions based on the past, we make mistakes, and this leads to serious consequences. A similar fallacy is the cognitive bias, where we look only for evidence of already existing beliefs.

We do not accept information that contradicts what we already believe, and are unlikely to carry out further research. But if we decide to look into it, we will look for sources that dispute this information.

Example. If you firmly believe that “climate change” is a conspiracy, then you will see documentary entitled “The Undeniable Evidence of Climate Change,” you are likely to be very upset. And if you search for information online, your search terms will include “climate change is a hoax” rather than “evidence for and against climate change.”

That is, we unwittingly draw the wrong conclusions: this is inherent in our nature.

Our brains group information in ways that make it difficult to make accurate predictions.

Over the course of evolution, the human brain has learned to classify information. But when we need to learn and quickly adapt to a dangerous environment, this method is completely useless.

Misclassification of information is called false narrative: a person creates linear descriptions of the current situation. Due to the huge amount of information we receive every day, our brain selects only what it considers important.

Example. You probably remember what you had for breakfast, but you are unlikely to name the color of the shoes of every passenger on the subway.

To give meaning to information, we connect it. So, when you think about your life, you mark certain events as significant and build them into a narrative that explains how you became who you are.

Example. You love music because your mother sang to you before bed.

This way you cannot fully understand the world. The process works only with an eye to the past and does not take into account the almost limitless interpretations of any event. Even tiny events can have unpredictable, significant consequences.

Example. A butterfly flapping its wings in India causes a hurricane in New York a month later.

If we arrange causes and effects in the order of their occurrence, we will see clear, cause-and-effect relationships between events. But since we only see the result - the hurricane - we can only guess which of the simultaneously occurring events actually influenced this outcome.

We find it difficult to distinguish between scalable and non-scalable information

We are not very good at distinguishing between types of information - “scalable” and “non-scalable”. The difference between them is fundamental.

Unscaled information such as weight or height has a statistical upper and lower limit. That is, body weight is not scalable, since there are physical limitations: It is impossible to weigh 4500 kg. Constraining the parameters of such unscaled information allows predictions to be made about average values.

But non-physical or fundamentally abstract things like wealth distribution or album sales are scalable.

Example. If you sell an album through iTunes, there are no sales numberslimit: it is not limited by the volume of physical copies. And since transactions take place online, there is no shortage of physical currency, and nothing will stand in the way of selling trillions of albums.

The difference between scalable and non-scaleable information is critical to seeing an accurate picture of the world. If rules that are effective for non-scalable information are applied to scalable information, errors will occur.

Example. You want to measure the wealth of the population of England. The simplest way is to calculate wealth per capita by adding up income and dividing it by the number of citizens. However, wealth is scalable: a tiny percentage of the population can own an incredibly large percentage of wealth.

Per capita income data will not reflect the reality of your income distribution.

We are too confident in what we think we know.

Everyone wants to protect themselves from danger. One way is to assess and manage risks. That's why we buy insurance and try not to put all our eggs in one basket.

Most make every effort to assess risks as accurately as possible, so as not to miss an opportunity and at the same time not to do something that they might regret. To do this, you need to assess all the risks, and then the likelihood that these risks will materialize.

Example. Let's say you are going to buy insurance, but without spending extra money. Then it is necessary to assess the threat of illness or accident and make an informed decision.

Unfortunately, we are convinced that we know all the possible risks from which we must protect ourselves. This is the gaming fallacy: we tend to react to risk as if it were a game with a set of rules and probabilities that can be determined before it begins.

Viewing risk this way is very dangerous.

Example. Casinos want to make as much money as possible, so they have developed a security system and disqualify players who win too much and too often. But their approach is based on a gaming bug. The main threat to casinos is not lucky people or thieves, but kidnappers who take the casino owner’s child hostage, or an employee who fails to submit an income tax return to the Tax Service. Serious dangers for casinos are completely unpredictable.

It doesn't matter how hard we try. It is impossible to accurately predict any risk.

Why is it necessary to be aware of your ignorance?

By understanding that there is a lot you don't know, you can better assess risks.

Everyone knows the phrase: “Knowledge is power.” But when knowledge is limited, it is more beneficial to admit it.

By focusing only on what you know, you limit your perception of all possible outcomes of a given event, creating fertile ground for a “black swan” to occur.

Example. You want to buy shares of a company, but you know too little about the stock market. In this case, you will watch for a few declines and rises, but, in general, only pay attention to the fact that the trends are positive. Believing that the situation will continue, you spend all your money on stocks. The next day the market crashes and you lose everything you had.

If you studied the topic a little better, you would have seen the numerous ups and downs of the market throughout history. By focusing only on what we know, we expose ourselves to serious risks.

Admitting that you don't know something can significantly reduce your risk.

Example. Good players Poker players know that this principle is critical to success in the game. They understand that their opponents' cards may be better, but they also know that there is certain information that they do not know, such as their opponent's strategies and how determined they are to go all the way.

Recognizing the presence of unknown factors, players focus exclusively on their cards, better assessing possible risks.

The idea of limitation will help us make the right choice

The best defense against cognitive pitfalls is to have a good understanding of forecasting tools, as well as their limitations. Although this will not save you from making a mistake, it will help reduce the number of unsuccessful decisions.

If you are aware that you are susceptible to a cognitive bias, it is much easier to understand that you are looking for information that confirms already existing statements. Or, knowing that people like to reduce everything to clear, cause-and-effect narratives, you will be inclined to look for Additional information for a better idea of the “big picture”.

You need to know about your shortcomings.

Example. If you understand that there are always unforeseen risks, despite the prospects of the opportunity, you will be more careful about investing heavily in it.

It is impossible to overcome all the contingencies or our limitations in understanding the complexity of the world, but we can at least mitigate the damage caused by ignorance.

The most important

Although we make predictions all the time, we are bad at it. We are overconfident in our knowledge and underestimate our ignorance. The inability to understand and define randomness and even our very nature contribute to poor decision making and the emergence of “black swans”, that is, events that seem impossible and force us to rethink our understanding of the world.

Be distrustful of “because.” Instead of wanting to see events in a clear cause-and-effect relationship, consider a range of possibilities without fixating on one.

Realize that you don't know something. To make meaningful predictions about the future, be it buying insurance, investing, changing jobs, and so on, it is not enough to take into account everything you “know” - this gives only a partial understanding of the risks. Instead, admit that you don't know something so you don't unnecessarily limit the information you're dealing with.