Nassim Taleb’s 2007 smash-hit, The Black Swan, is filled with 400+ pages of life-changing wisdom on market risk, probability, human psychology, and much more. Here are 12 takeaways that will help you grow richer…and sound smarter at cocktail parties.
Introduction
Sadly, my literary ambitions perpetually outpace the amount of time I’m able to devote to the cause. You can catch me going on manic Amazon ordering sprees, only to watch those titles collect dust while professional, family, and social commitments derail my best-laid intentions.
I look forward to the day when this isn’t the case. Until then, whatever books I do make the time to pick up better be damn good. The Black Swan fits the bill.
Former options trader, rogue researcher, maverick academic, modern-day Renaissance man. However you choose to define the book’s author, Nassim Taleb, there’s no denying his brilliance.
His core thesis is that financial professionals (along with the rest of humanity) spend life learning, projecting, and hypothesizing under the presumption that the status-quo will continue forever. Granted, these ideals might hold true for 99% of the time, but Taleb argues that it’s radically more important to understand the 1% of the time they fail.
This 1% represents what Taleb calls “Black Swan” events. He defines them as moments that:
- Are exceedingly rare, making their probability impossible to predict
- Carry catastrophic consequences
- Become easily explainable in hindsight, after they occur
The Great Depression. World War II. The Dotcom bubble. The Covid-19 pandemic. These all represent Black Swans.
We cannot possibly know the Black Swan that will cripple humanity next (see point 1 above). But we can build a smarter, more resilient life approach in the meantime.
Here are 12 key lessons that will help you master market risk and live a richer life…both financially and otherwise.
Note that I aim to keep my personal takeaways brief in this post. My goal? Give Taleb’s infinitely more profound ideas the respect that they deserve.
Let’s begin.
Lesson #1
“Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the currently tight real-estate market allow you to put there.”
Nassim Nicholas Taleb
Master the art of knowing what you don’t know. Pursue knowledge voraciously. Prosper.
No coincidence that the three billionaires I interviewed all attributed their success to intellectual curiosity, I suppose.
Lesson #2
“I was struck that financial distress could be more demoralizing than war (just consider that financial problems and accompanying humiliations can lead to suicide, but war doesn’t appear to do so directly).“
NASSIM NICHOLAS TALEB
Accept that money impacts emotional well-being. Don’t run from this fact. Instead, embrace it by building a financial fortress that insulates you from the psychological damage that market risk can create.
Lesson #3
“[‘F@#% You Money’] is a psychological buffer: the capital is not so large as to make you spoiled-rich, but large enough to give you freedom to choose a new occupation without excessive consideration of financial rewards. It shields you from prostituting your mind”
NASSIM NICHOLAS TALEB
F@#% You Money (and financial independence) is not a destination. It’s a window
into a new world of opportunity.
Lesson #4
“Try to be a true skeptic with respect to your interpretations and you will be worn out in no time.”
NASSIM NICHOLAS TALEB
Radical skepticism is an exhausting yet fruitful burden to bear.
Lesson #5
“You can create Black Swans with science, by giving people confidence that the Black Swan cannot happen – this is when science turns normal citizens into suckers.”
Nassim Nicholas Taleb
Accept the inevitable influence of Black Swans, market risk, and the limitations of human knowledge.
Question everything. Don’t be a sucker in personal finance…or life.
Lesson #6
“We continuously renarrate past events in the light of what appears to make what we think of as logical sense after these events occur.”
Nassim Nicholas Taleb
Everything looks perfectly explainable in hindsight. Don’t build predictions of a perfectly explainable future based on what you perceive as a perfectly explainable past.
Lesson #7
“Could it be that fables and stories are closer to the truth than is the thoroughly fact-checked ABC news? Just consider that the newspapers try to get impeccable facts but weave them into a narrative…to convey the impression of causality (and knowledge).”
Nassim Nicholas Taleb
Narratives. Emotions. Causal links. These all attract eyeballs. Be more than another pair of eyeballs.
Lesson #8
“Abstract statistical information does not sway us as much as the anecdote – no matter how sophisticated the person.”
Nassim Nicholas Taleb
You can’t out-enlighten human nature. Stay humble.
Also, if you want to win people to your way of thinking, learn to story-tell. This is part of the reason my mercenary mindset helps make the wealth-building process more compelling.
Stories sell. Spreadsheets don’t.
Lesson #9
“Our hormonal reward system also needs tangible and steady results…The world has changed too fast for our genetic makeup. We are alienated from our environment.”
Nassim nicholas taleb
Genetics haven’t caught up with our Black Swan world.
Proceed with caution.
Lesson #10
“Believe me, it is tough to deal with the social consequences of the appearance of continuous failure. We are social animals; hell is other people.”
Nassim Nicholas taleb
Delaying gratification in the name of outsize long-term results takes:
- Guts
- Determination
- A willingness to go rogue
Lesson #11
“The problem of lumpy payoffs is not so much in the lack of income they entail, but the pecking order, the loss of dignity, the subtle humiliations near the watercooler.”
Nassim nicholas taleb
Your ability to win big is directly correlated to your ability to ignore the noise. Put your hater-blockers on.
Lesson #12
“The…Black Swan hunters are not the ones who make the bucks…you not only see that venture capitalists do better than entrepreneurs, but publishers do better than writers…the person involved in such gambles is paid in a currency other than material success: hope.”
nassim nicholas taleb
Looking to enjoy Black Swan upside with less pain? Don’t dig for gold. Sell the shovel. Relatedly, money begets more money.