“The Black Swan” is a well known book written by Nassim Nicholas Taleb in 2007, second edition in 2010, where the author analyses the impact of the highly improbable, the name of the books comes from a definition of the Roman poet Iuvenalis where, to indicate something impossible, it is compared to the black swan, a bird that was not deemed be existing until the species “Cycnus atratus” was discovered at the beginning of the XX century. The book by Nassim Taleb is a philosophical book, to consider it as a book that speaks about management or finance is extremely restrictive.
In the final part of his book, Nassim Taleb states, in a metaphoric way, ten principles to build a “black-swan robust society”:
- What is fragile should break early, while it’s still small.
- No socialization of losses and privatization of gains.
- People wo were driving a school bus blindfolded (and crashed it) should never be given a second bus.
- Don’t let someone making an “incentive” bonus manage a nuclear plant, or your financial risks.
- Compensate complexity with simplicity.
- Do not give children dynamite sticks, even if they come with a warning label.
- Only Ponzi schemes (borrowing funds from a new investor to repay an existing investor trying to exit the investment) should depend on confidence. Governments should never need to “restore confidence”
- Do not give an addict more drugs if he has withdrawal pains
- Citizens should not depend on financial assets as a repository of value and should not rely on fallible “expert” advice for their retirement
- Make an omelet with the broken eggs
Personally, the main point I learned from this book is that, as much as we look for higher efficiency, we become weaker to the black swans, therefore we should always have a proper contingency margin as well as alternative plans.