Book review: The Black Swan Torbjörn Ryber

The Black Swan, The Impact of the Highly Improbable by Nassim Nicholas Taleb

Eyafjallajukull started to spew out tons of ashes in the sky. Air Traffic over Europe was severely hindered and stopped totally for a number of days. This is a perfect example of a Black Swan Event.

What we call here a Black Swan is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives.

The author is a former professional trader who has been studying uncertainty, luck, risk and knowledge for many years. All models used in finance are built on the faulty assumption that it is possible to predict stock prices, oil prices and economy as a whole. We assume that we live in Mediocristan were all things are nicely described by Gaussian bell curves. While this is true for some distributions like height and weight of a human being, it is totally wrong for things like stock market movement, fortune of a person, development of technology and other things where it is often used. We need to understand that we live in Extremistan where our lives are largely dependent on random events and luck.

Taleb does not tell us how to predict Black Swans but he tries to help us make some of them grey and to anticipate that the future has many surprises for us. The purpose of the book is to help the interested reader understand why we should never believe in forecasters and stop trying to predict everything. The goal: avoid being a sucker.

Some of his statements are:

  • The Ludic Fallacy: basing studies of chance on the narrow world of games and dice,
  • Epistemic arrogance: our hubris for how much we know or are capable of.
  • Narrative Fallacy: our need to fit a pattern to a series of connected  or disconnected facts
  • Confirmation Error: looking for instances that fit your belief and find them

What can a tester learn from this information?

  • Understand that estimations are very hard to make and using more advanced models like S-curves will not give us better estimations only more detailed. Understand also that it is impossible to know what critical problems will appear in what you are working on which implies that having an open mind when testing increases your chances of finding these unknown unknowns much greater.
  • The beautiful word Serendipity – where you find things by chance – is behind most, if not all, human inventions. So using exploratory approaches in life as well as in testing will most likely yield a higher return than will following detailed procedures.
  • Whatever models we create they will always be incomplete. So I wonder what it after agile and what is next after Exploratory testing.
  • Like he says – I would rather be approximately right than precisely wrong which is why I like the low tech dashboard better than curves or tables of test cases run and failed.

There are many great insights in this book and I truly recommend it. After writing this article I seriously consider whether or not I have fallen for the Confirmation Error!

4 Comments
Johan Hoberg August 10th, 2010

I read this book during the spring, and I also enjoyed it.

Of course you have to take it with a grain of salt, like everything else, but the key message is still interesting and thought-provocing.

Geir Gulbrandsen August 10th, 2010

Hi Torbjörn,
nice review and good linking to its meaning for a tester.

I have seen several people naming Eyafjallajökull as a good example of a Black Swan, but I don’t think I agree. Granted, I have only just started reading the book but just given what you write in this review is enough to make me question it.

Considering what we know about Iceland and its geology, position and history (http://bit.ly/bBwwGX), I find it somewhat ignorant to claim that “…nothing in the past can convincingly point to its possibility” when talking about volcanic eruptions 🙂
It is difficult to predict the exact time, sure, but highly improbable of occurring?

Also, and here I have a much weaker point, my interpretation of “massive impact” in the case of a Black Swan is connected to events that literally “change the world” in some way (or at least our perception of it). The discovery of Cygnus Atratus disproved the common “knowledge” that all swans are white and 9/11 certainly changed the world for a large part of its population. The Eyafjallajökull eruptions lasted for a few weeks, was an economic nuisance for a few airlines and an inconvenience for a lot of passengers (my parents were stranded on Crete for a few days), but now most people has probably forgot about it already (except a lot of Icelanders I guess, there was quite a bit of ash).

Anyway, nice post 🙂

Torbjörn Ryber August 10th, 2010

Hi Geir:

I don´t think the Volcano Eruption in itself was that big of a surprise but the cloud of ash that went around a large part of the world. There have been many eruptions but I have never before heard of one that affected so many people in such a large area.

Massive impact – compared to what as Weinberg would say. I guess most of us know someone that got stranded for some days or even a week. And we realized how much we depend on air traffic. Maybe we should call it an ugly duckling instead?

I started to write a really long comment to 9/11 but since this is such a sensitive subject I just say. Does it really fit the description of a Black Swan – was it really a surprise that not all Terrorist Attacks can be stopped, what was the actual impact on a larger scale? I´ll stop here and let you enjoy Taleb´s writing instead. He is really good at beeing ironic.

And congratulations to the BBST Exam!

Henrik Emilsson August 19th, 2010

This book has been on my list for a while now. Time to read it!