Tuesday, March 20, 2018

Isn’t a swan white? (The Black Swan Book Review)

Isn’t a swan white?

In the past, this was a common humorous expression to retort a ridiculous question or comment.

It was based on historical records that reported swans had white feathers. A black swan was impossible.

 It was only when the English discovered Australia that they discovered black swans. As a result, people no longer use this expression.

What the author of The Black Swan, Nassim Nicholas Talen, is warning us about is events that we cannot possibly predict.

Events that we can’t possibly know. Events that are going to happen, the ones which will effect us the most.

What is a Black Swan?

A “Black Swan” is defined as an event characterized by rarity, extreme impact, and retrospective predictability. Such events have a much greater effect than we usually suppose.

These extreme events have a catastrophic impact to the direction of the future in the way things emerge.

There’s argument present which states we can more or less rely on the past.

History can help us right?

Not so fast.

A Black Swan is something you can’t predict beforehand. You cannot plot it and plan for it. Doing so could lead to catastrophic results.

This leads us to another theme of the book: over confidence.

We humans are prone to be over confident. This makes us take on risks.

These risks can be very harmful. Thus, making one think that we can predict and control our future.

If you think about it, our world today is such a complex intricate system that it’s safe to say that trying to predict our future is a difficult, if not impossible, challenge.

With such a complex system, we humans create “short-cuts” or biases. And these biases can lead us down the wrong path. It’s tough because we cannot escape our own biology.

With that said, risk plays such a critical part of our lives.

If you do not manage risk, your life is essentially a ticking time bomb.

This doesn’t come to a surprise, but what exactly do we do with risk?

We all have different goals, lives, and circumstances; we need to look at general frame works with simple rules:

1. Don’t do anything in life that doesn’t have an upside. For example, let’s say that you’re in your car heading home from work. You’re tired, hungry, and just want to relax. All of a sudden some guy recklessly cuts you off for no apparent reason. You’re irritated and you decide to get out of your car and start an argument. The guy also gets out of his car and runs towards you. What you don’t know is that he has a knife. Now what is the upside of getting out of your car to argue? There is no tangible upside. Even if you managed to win the fight you could possibly break your hand or get injured, negatively affecting your health. You could possibly get sued, negatively affecting your finances. Even your happiness is effected because you can possibly go to jail. In other words, unless it’s a life or death situation (upside because your health is at risk vs. no health if you’re dead), don’t get out your car because there is no upside.

This may seem obvious, but it often goes unnoticed for many. To look at this technically, for every unit of risk you take, at the bare minimum, you would like to receive a unit of reward-ideally more. This concept is so fundamentally simple, however so many of us are crippled by inaction. We are crippled by the “risks.” Too many people put so much value and focus on the risks as opposed to the rewards.

2. Reactions increase risks. To be able to think through the worst case and realize that the worst case isn’t so bad is a skill that many might know but very few people can execute. Once you realize most risks aren’t that risky, life takes on a trajectory. For example, you’re a single parent at a job that doesn’t pay that well and you can’t make the rent. Your first reaction(s), would be to freak out which would lead to anxiety and loss of sleep. You basically put yourself at a disadvantage.

However, what if you have the option to live with your parents? Most people would say “but, I have kids and it will be tough.” What they don’t see is that this might be a lifelong lesson that teaches their kids to truly appreciate money and help them in their life. Now, I’m not naive to the fact that it’s challenging, but it’s not always as bad as it seems. Sometimes the most challenging part of your story is the “coolest” part and possibly could inspire someone else.

3. Living an under-performing/sub-par life. What’s a sub-par life? Being afraid of all the wrong things in life. Shift your focus on not living a crappy life as opposed to public speaking or approaching someone. It’s a game we are constantly playing. We are always optimizing for an under-performance.

4. Over optimism. When it comes to love, most people think people will love me for me. So we can let ourselves go and under-perform and thus we get over optimistic because we will find someone regardless. With all due respect and practicality, life doesn’t work that way. In reality, if we are truly being honest with ourselves, we tend to be attracted to people who are surviving and thriving. It’s not just one factor. If you had one choice of choosing someone who is over performing or someone who is falling apart in the aspects you care about, who would you choose? It’s tough, but to get what you want you have to be good enough so that what you like pursues you. When you feel like you are owed something, it will lead you down the wrong path.

Most of us under-perform because we feel like everything will work out just because. It won’t unless we make it. The laws of the universe supersede our own optimism. We are over optimistic. We are over confident. We create unnecessary risks.

My name is Romario Villanueva.  Entrepreneur & blogger. I'm a graduate from Rutgers University and love books. I love all things business, psychology, and basketball. Feel free to reach out to me on Facebook and LinkedIn