Nassim Nicholas Taleb's book The Black Swan discusses rare and unpredictable events, known as "black swan events", that have major consequences. Black swan events are outliers that are impossible to predict and carry an extreme impact. Taleb argues that human nature leads us to concoct explanations for outliers after the fact, making them seem predictable. He advocates preparing for unpredictable events rather than believing the world operates based on what is known. The book uses the stock market crash of 1987 as an example of an unforeseen black swan event. Taleb also classifies realities as either "Mediocristan", where outcomes are predictable, or "Extremistan", where a few major outcomes determine the

1. THEBLACK SWANThe impact of the Highly Improbable Nassim Nicholas Taleb

2. About NassimTaleb Lebanese American Bestseller author Black swan – 12th most influential books post WW II, more than 3 million copies sold Professor at several universities including oxford Current advisor to IMF & Universa He was a hedge fund manager & wall street trader

3. Black Swan- What is this book about? Managing risks & reducing the risk of being a victim of life’s circumstances Allows one to challenge the status quo in the society It adds certainty to the world of uncertainty

4. Change in belief People in the old world believed that all swans were white prior to the discovery of Australia Severe limitations to our learning from observations Existence of white swans does not confirm the non existence of black swans

5. What is a Black Swan event? It is an outlier, because nothing in the past can point to its possibility It carries and extreme impact, both positive and negative Human nature makes us weave explanations for the outlier making it explainable and predictable

6. Black Swan events and opportunities Black swan logic makes what we don’t know far more relevant than what we know What one knows cannot really hurt us No discovery came from designing and planning-they were mere black swan events Strategy is to tinker and collect as many black swan opportunities as possible

7. Study, analyse and research Study rare and extreme events in order to figure out common ones One’s library must contain as much of what one does not know i.eantilibrary Society's ingratitude to those who solve problems

8. Stock market crash of 1987 Largest market drop in modern history Those who did not need their investments and those who invested in this period benefited Those who needed their investment during this time suffered losses

10. Scalable professions or business Here one is not paid by the hour (author of harry potter books) Revenues depend on the quality of decisions Business can be scaled and there is no cap on the number of clients you have This is black swan driven However in ‘work by the hour’ income is subject to gravity (dentist, barber) Here revenue depends on continuous efforts and not quality of decisions

11. Categories based on mindset Some are like a turkey-exposed to a major blow up without being aware of it Others prepare for the big event that might surprise them-black swans

12. The Turkey problem The hands that feeds you can be the same one that rings your neck The turkey is fed everyday and it feels that humans are looking after its interests till the day of thanksgiving A acquaintance behavior may indicate genuine affection but it may confirm his calculating desire to get ones business Humans have an optimistic bend and are risk takers but avoid uninformed risk taking

13. More observations Awareness of a problem does not mean much What we see is not necessarily all that is there- history hides black swans We have a natural instance to look for instances to confirm our story –these are easy to find We like to summarize & simplify but it distorts our mental representation of the world especially in case of black swan events Whenever there is a upward or downward movement of stock the media feels obligated to give reasons for the same- question the value of this information Governments are great at telling what they did, but not at what they did not Preference for insuring against probable small losses at the expense of less probable but larger impact ones

14. Taleb on risk taking Known known’s – things we know we know Known unknown’s – there are something we do not know Unknown unknown’s – the ones we don’t know we don’t know Unknown unknown is an uncertainty that is unknown and is unanticipated and hence unaccounted for in formal decision making

15. Why do not see black swans? We worry about those that happened We do not worry about those that may happen We love the tangible, the conformation, the real, the visible We respect what happened and ignore what could have happened The challenge is to know the difference between what we actually know & how much we think we know When dealing with uncertainty do not focus, look at the big picture

16. Grey Swans We can turn black swans to grey swans by reducing the surprise effect and employing new prediction methods It is an event which can be anticipated to a certain degree, but is considered to be unlikely to happen and will have sizeable impact on the market

17. Lucky to be alive… We are quick to forget that being alive is an extraordinary piece of luck, a remote even, a chance event of monstrous proportion Taleb uses an analogy of a speck of dust on a huge planet as the odds of each one of us being born Each one of us is a Black Swan

18. THANK YOU….