Black Swans and the Problem of Induction

Nassim Nicholas Taleb is the author of The Black Swan,one of the most influential books of the past 50 years. The book is concernedwith randomness and uncertainty, and our chronic inability to accurately fathomand measure these phenomena. According to Taleb, a Black Swan event is one thatis unpredictable yet has wide-spread ramifications. This article is about the problem of induction and how this relates to Black Swan events.

Nassim Nicholas Taleb is the author of the best-selling bookThe Black Swan. The book is concernedwith randomness and uncertainty, and our chronic inability to accurately fathomand measure these phenomena. According to Taleb, a Black Swan event is one thatis unpredictable yet has wide-spread ramifications. Not only are Black Swanevents difficult to predict, but Taleb also argues that we human beings havecertain psychological limitations and biases that prevent us from foreseeingthese events, while also thinking that the events were perfectly predictable after they occur.

The name for the Black Swan Theory comes from history. Priorto 1697, a black swan had never been observed by anyone in Westerncivilization. Many people therefore believed that all swans were white andthere was no such thing as a black swan. However, a black swan was finallyobserved in western Australia in 1697, and the fallacy that black swans didntexist was proven wrong.

This idea illustrates the problem of induction, one ofTalebs primary arguments. Just because every swan observed in the west until1697 was white does not allow you to conclude that every swan is white, or thatother types of swans (like black swans) dont exist. However, this is a mistakethat many people make.

Taleb also illustrates the problem of induction with theparable of the Thanksgiving turkey. Imagine that a turkey is born on a farm.Every day, it is fed regularly and has a shelter to sleep in. For 1,000 days,the turkey has a very happy and perfectly content existence. The turkey wakesup on the 1,001st day and expects more of the same. However, thatday is Thanksgiving and the turkey finds himself on the chopping block. Theturkey used inductive reasoning to conclude that because every day so far hadbeen happy, the next day must be happy as well, and his conclusion wasobviously false. Thanksgiving day is a Black Swan event for the turkey becausehe couldnt have predicted his fate, but it is a white swan event for thefarmer. After all, hes the one doing the chopping.

Asthese examples illustrate, conclusions drawn from inductive reasoning aresusceptible to falsification, where one instance can nullify a wide-rangingconclusion drawn from insufficient data.