Book Review: The Black Swan: The Impact of the Highly Improbable

Unexpected calamity may have more to do with your success in the business world after completing your MBA degree than any other factor, according to hedge-fund expert and lecturer Nassim Nicholas Taleb.

Advice to MBA Students: Expect the Unexpected
by Gabby Hyman
MBA-Business-Schools Book Reviewer

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb, hardcover, 366 pages, Random House, $26.95.

When you least expect it, something potentially catastrophic to the economic status quo is going to happen. What will it be? Exactly what you never planned for. That’s the nugget of wisdom Nassim Nicholas Taleb offers to business leaders and MBA degree students alike in his latest book, The Black Swan: The Impact of the Highly Improbable.

Being wise enough to predict global economic misfortunes won’t be sufficient, Taleb claims. The future is never guaranteed. But the unexpected is a certainly, and we need to be flexible enough to adjust to it, Taleb says. The title winged creature refers to the first observed black swan that, when discovered, destroyed humanity’s notion that all swans were white.

“It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge,” Taleb writes. He cites the unanticipated 1987 stock market crash and its equally unexpected recovery as examples of how MBA-trained business leaders focus solely on a best-guess for the future.

Our aggressive business outlook is a double-edged sword, writes Taleb in the book that has climbed to the third slot on June’s New York Times Hardcover Best Seller List. By focusing on all the minute details, business leaders miss the probability of significant large events.

In an interview with Wired, Taleb says we prosper despite our shortcomings. “People here aren’t afraid of failure,” he told the magazine. “They’re willing to trade the possibility of failure for the chance at a big upside. No other country is willing to do this. What America does best is produce the ability to accept failure.”

If you’re in an MBA degree program, Taleb’s vision suggests that your success may have more to do with unexpected factors than in your best planning. “The payoff of a human venture is, in general, inversely proportional to what it is expected to be.”

About Nassim Nicholas Taleb

Nassim Nicholas Taleb was born in Lebanon in 1960, holds an MBA from Wharton, and a Ph.D. from the University of Paris. He serves as professor at the University of Massachusetts and as Founder of Empirica LLC, a corporation with interests in hedge funds and a research laboratory in London. At age 25, he became chief currency derivatives trader for Banque Indosuez.

Taleb is a former managing director and head trader at Union Bank of Switzerland, and author of two books in his field, Dynamic Hedging: Managing Vanilla and Exotic Options and Fooled by Randomness.

About the Author

Gabby Hyman has created online strategies and written content for Fortune 500 companies including eToys, GoTo.com, Siebel Systems, Microsoft Encarta, Avaya, and Nissan UK.

Source(s)

Wired Magazine

Posted on July 16, 2007 at 2:31 PM

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