After reading Fooled by Randomness, I decided to read The Black Swan, which was supposed to give more boring details of the black swan events. This book lived up to my expectations of a philosophical discourse on black swan events. There are many summaries of the book available on the internet, but reading the whole book is a totally different experience.
Afterthought 1: It is extremely important to differentiate linear and non-linear events when we are navigating our lives.
Many things we make decisions based on track record of a person, company, ourselves, weather, anything, but it's because we assume that events are linear. An example of an assumption of linear events is: this company has been consistently growing its business for the past 20 years, I believe that there is a system within the company, and competent management, and a critical mass of key executives who can continue to deliver good results. An example of a non-linear event that the company may face is a financial cover-up that even management wasn't aware, and a scandal can blow out of proportion, which just destroys all the good track record it had.
Afterthought 2: There may be just one benefit to have retired military generals as our country leaders.
Taleb, the author, wrote that the only profession he had met who really understood and protect themselves against black swans are the military leaders. All the others probably just acknowledge that black swans exist, but they are outliers and don't make any preparation to face them. The most extreme example he cited were professors in statistics/probability who continuously and religiously set aside monthly income to buy index funds, although they preach black swans and what not.
In the military context, everyday is a non-linear event. Just because you prepared yourself yesterday, does not mean that you will survive today. You could get killed by many random events which are beyond your control. Military leaders hence spend a lot a lot a lot to protect against the impact of black swans, relative to say a fund manager or hot shot trader who is paid fat bonuses but doesn't protect his customers from downsides (customers sign disclaimers that they bear the risks of lost in investments).
Of course, it's also a linear assumption that a retired military general will have the heart to protect the lives of citizens the same way as when he was in the military.
Afterthought 3: Risk is influenced by probability and impact. Many people focus on the probability and don't protect themselves against impact.
There are many instances people are contented with the work they don't think that there is anything wrong with it. For example, we may come up with an analytics model to identify the people who are at higher risks of being dishonest, and we put everybody through this model and tell ourselves if they pass, they are less risky, let our guard down, then one day be caught off guard by a crook who didn't appear as high risk in our model because we didnt factor his profile in the model.
The next time you hear someone tell you that it's so costly to subject 99.999% of passengers to pat down checks to guard against the 0.001% who may bomb a plane of passengers, you know that he isn't quite conversant with black swans.
