Chapter 3: Swans and Space Invaders
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Chapter 3: Swans and Space Invaders
Overview
“Mediocristan is where we must endure the tyranny of the collective, the routine, the obvious, and the predicted; Extremistan is where we are subjected to the tyranny of the singular, the accidental, the unseen, and the unpredicted.”
—Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable
One of the most famous current scholars of uncertainty is Nassim Nicholas Taleb. Now a scholar, essayist, and author of the Incerto collection of works (of which The Black Swan is the second title), Taleb used to work in finance—arguably the industry most exposed to uncertainty. Fortunes are made and lost in the blink of an eye.
Taleb’s view is that one of the main issues around finance and economics is that they belong to what he calls “Mediocristan” (think of it as a place); on the other hand, much of our world belongs to “Extremistan,” What Taleb refers to as Mediocristan has dominated Western thought to a large extent. Mediocristan describes statistical thought that is concentrated around averages and the “normal” distribution. As learned saw earlier, that method of reasoning has important consequences.
Much of our world is characterized by normality. You can see what a normal distribution looks like in Figure 3-1.
Figure 3-1: The standard normal distribution. The standard normal distribution has a mean of 0 and a standard deviation of 1. It is used in countless mathematical models
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