Nassim Taleb’s Black Swan

I recently read Taleb’s book concerning Black Swans in life. I tend to agree with most of his concepts and have mixed feelings about his argumentation style. I would give this book a 7/10.

I would endorse this book because of its simplicity in its concepts and the applicability to the domains of personal finance, professional work with markets, and personal development. Taleb has the talent to rephrase concepts from philosophers and psychologists and knit them with original ideas to make them approachable to any person (this is why I would reckon, why his book was such a success despite its well-timed release). Moreover, his criticism of structural mistakes and misconceptions in social sciences, specifically Economics and Finance, is on point. His advice which he derives from the given problem, that tail probabilities are non-predictable in a sense are useful and at first sight easy to implement.

Thinking about his advice more thoroughly, however, Taleb’s advice is somehow incomplete. How should we for example do convex transformation and tail hedging to a risk that is an unknown-unknown? And if we happen to come across the consequences of such event with what notional should we to convex transformation or tail hedging? Moreover, the framing of his ‘black swan’ concept lacks a precise framework, which makes it hard to find correct applications - his concept is rather epistemic. Lastly, he is very shallow in the discussion of statistical frameworks considering he has a Ph.D. in dynamic delta hedging. What about nonparametric econometrics, extreme value theory, or quantile regressions? This way he confronts the reader in a rather extreme stance.

Overall, Taleb tends to be binary in almost all of his discussed concepts. But again, for the Finance domain, I find hardly any direct criticism, despite my indirect criticism. This is why I will continue reading his books and his recommendation on authors such as Mandelbrot and Spitznagel.