Black Swan - Chapter VI
Series of Summaries on Taleb's work
In this series, we are looking at Taleb’s The Black Swan. Earlier chapters were discussed here, here, here, and here.
In Chapter VI - ‘The Narrative Fallacy’, Taleb discusses, well, the narrative fallacy. By narrative fallacy, Taleb refers to our inability to look at sequences of facts in isolation, without weaving a narrative or story around them. Humans tend to force explanations or arrows of relationships to link facts. We do this to make facts easy to remember. However, this system goes wrong when it gives us an impression of understanding when there is none. He notes that it is hard for us to remember facts as independent silos instead of parts of a story. Moreover, information is costly to obtain, to store, and to manipulate and retrieve. Once we fit it into a pattern and ‘understand’ the logic of the series, we do not have to memorise all of it. A major problem with this process is that we extend the idea and make the world to be more logical and less random than it actually is, to make sense and comprehend the world. Such simplification usually excludes the Black Swan from our vision.
A succinct illustration is as follows. Consider these 2 sentences.
The King died and the Queen died.
The King died, then the Queen died of grief.
Both of these statements are by EM Forster. The second sentence contains more information - 2 deaths and the reason for one of their deaths. So, it should be harder to remember than the first. However, since it contains a story, a narrative weaving two facts, it is easier to remember.
Problems with Building Narratives
Building narratives makes life easier for our memory. However, this has some problems.
First, we tend to easily recall facts from our past that fit the narrative we build while neglecting facts which do not appear to play a causal role in that narrative.
Second, our memory is a self-serving dynamic revision machine. So, we remember and recall the last time we remembered an event, and not the original event itself. Therefore, with narratives, we change the story and the fact at every subsequent remembrance.
Third, narrative building makes us uncomfortable with abstractions. When there is a market crash, we rush to find causes to assuage ourselves, even if such causation was incorrectly inferred. bstract statistical information does not move us as much as an anecdote does.
Fourth, narratives recall only the sensational Black Swans or the wrong improbable events. Post 9-11, insurances against terrorism rose more than hurricane insurances, although hurricanes were likelier. Due to narratives, the Black Swans that are not not spoken about escape our mental and financial models.
Systems of Thinking
Taleb discusses two systems of thinking here. System 1 is experiential, automatic, fast, and opaque. It is the intuitive system, where in a super sliced moment of time, we make quick decisions. This system format the basis of Malcolm Gladwell’s book ‘Blink' and the heuristics in the system have been examined and written about by behavioural economists like Kahnemann, Tversky, and Thaler. System 2 on the other hand is the one which is cogitative, logical, and thinks deliberately. We tend to make fewer mistakes with System 2 than with System 1. With System 1, we are likelier to fall prey to the narrative fallacy, as this system trusts narratives, is sensational, and emotional.
Solutions
First, we could make conjectures, run experiments and make testable predictions (the Book discusses this in a later chapter). Roughly, we should favour experimentation over storytelling, experience over history, and clinical knowledge over theories.
Second, we should force ourselves to use System 2 thinking more than System 1 thinking and strive consciously to do so.
I hope you enjoyed this post.