The timing of Nassim Taleb’s initial release of the Black Swan was uncanny, on the eve of the rolling recession of 2007-2010.
As uncanny is the release of this new editionon the eve of a market tremor brought on by the byzantine and fragile design of this human / computerized market hybrid. The odds demand that uncanny things happen on a regular, albeit unpredictable, basis.
WTF events like Thursday’s trading system burp also help teach us of the hubris hindsight bias bestows upon us. To many historical surprises, financial or otherwise, you might say “Maybe we didn’t predict the event, but I am better today at predicting surprise events than I was yesterday.” The shear “unpredictable” wackiness of Thursday, May 6th helps to undermine our misguided desperation to assign causality. As to our ability to predict waxing and waning of financial events, we aren’t any better, you aren’t any better, and I am not any better at doing so.
“But, but….” you cry, “…this guy, Markopolos Mxyzptlk of Barbell Finance, predicted that this was going to happen, a year ago to this day, so it WAS predicted!!!!”
Well, lines of reasoning like that, particularly if you believe in them deeply, are why you need to read the Black Swan by Nassim Nicholas Taleb.
If millions of people and thousands of firms whose only purpose is to earn money from trading and the herding of money hither and thither, and their trading relies on NYSE and other money moving systems, why would those systems ever experience inexplicable 1 cent prints? Would they not be designed to perfection? Haven’t billions upon billions of dollars been spent on these systems to insure that these events do not happen (or are at least well hidden)? Or does the world resist its perfection?
The Black Swan helps us think about the stories we tell ourselves, from the comfortable lies of “normal” distributions, to too abstracted philosophies of the world, to hindsight written pasts, to woefully inaccurate futures, and ultimately how the world works.