The Black Swan . And this book will teach us how to predict the future. For those who haven't read this book before, you might wonder why it's called that, since most swans are white. We rarely see black swans. So why use a black swan as the title of this book?
What is called a 'Black Swan' refers to a story or event that you cannot predict in advance. You can't estimate it, but it's an event that can have an enormous impact on society or the entire world. In history, Black Swan events have occurred many times, and those events have had an impact and taught people in the world a lesson or two.
For thousands of years, people in the world had only ever seen white swans. They assumed that all swans in the world were white. It wasn't until Europeans reached Australia that they encountered swans that were black. This discovery invalidated thousands of years of human understanding. The truth is, the world doesn't just have white swans; black swans exist too.
English philosopher Bertrand Russell gave a simple example to understand this. There was a turkey. For a long time, its owner had raised it with great care, giving it food and water meticulously for 1,000 days in a row. The turkey thought that tomorrow and in the future, it would continue to receive food like this forever. This had been the routine for 1,000 days. It didn't know that tomorrow was Thanksgiving. It would be caught and made into a meal for guests the next day. For this turkey, tomorrow is a shocking event. It never expected that on day 1,001, something like this would happen.
In fact, the way humans perceive and judge things is not so different from this turkey's thinking. In 2008, when the world faced a severe economic crisis, it was considered a Black Swan event as well. This is because nothing like it had ever happened before. This is the 'turkey mindset' in its purest form. We don't know about it because it has never happened before. But we cannot assume it will never happen. One day, it is bound to happen.
So, how can we make more open-minded judgments? How can we predict things that will happen in the future? The book 'The Black Swan' will answer these questions for all of you.
The author of this book has lived through three Black Swan events: the 1987 stock market crash, the terrorist activities of Al-Qaeda, which flew planes into the World Trade Center on September 11, 2001, and the 2008 global economic crisis. All of these major Black Swan events were, for the average person, unthinkable. But for the author, Nicholas Taleb, they were rare opportunities. His brilliant theory on prediction began to gain worldwide fame. And this book, 'The Black Swan,' has become one of the most classic books you must read to have the ability to predict the unpredictable on a global scale. We have extracted the most important ideas from this book to share with you all.
First, from a psychological perspective, what is it that blinds us from foreseeing Black Swan events? Second, how does general knowledge cause us to misjudge the probability of Black Swan events occurring? Third, how can we cope with and adapt to Black Swan events? Or in other words, when a Black Swan event happens, can we find an opportunity within the crisis?
Let's get to the first point. What is it that blinds us from seeing the occurrence of a Black Swan event? These factors include the narrative fallacy, the ludic fallacy, and biases due to human nature. First, let's look at the bias in explaining cause and effect.
Usually, to remember any story, our brain adds its own interpretations and assumptions based on experience and what we've been through. Everything seems very logical, very clear, and has its own rationale. For example, when we study history, our brain imagines the scenes, creating images to help it store those events. This is purely our imagination. It makes it seem like everything that happened had a very good reason. And sometimes, we ourselves wonder why people in the past had such a hard time understanding and made such foolish decisions. This is because there were so many signs that should have allowed them to predict what would happen.
But if you were in that time or in that situation, you probably wouldn't have been able to think and make the right decision either. Because in reality, when something is happening, it is full of uncertainty, chaos, and is difficult to estimate. In fact, history is the result of many uncertainties that have left us with what we see today. And there are many coincidental things that happened which have made the world what it is today. I'll give an example. The world of the 21st century is the result of many Black Swan events that happened in the 20th century, such as World War I and World War II.
These events were things that people in the world at that time could not have imagined. And usually, when these events happen, people tend to underestimate or misjudge them. For example, when World War I happened, European nations thought it would only last for a few weeks. As it turned out, the war lasted four years before it ended. In World War II, it was the same. The French thought that Hitler was just a temporary enemy. Who would have known that it could become World War II? But after we follow the history of those events, it seems like they didn't happen by chance at all. They had a cause and effect, and there were even experts who explained and analyzed them well, from the root cause to what should have happened at that time.
It can be said that all those events were so obvious that they should have been predicted in advance. It might have happened and caused such heavy losses because we were not prepared or lacked the information to analyze it. Looking back at that painful history, we tell ourselves, 'We can't let this happen a second time.' This is the special characteristic of a Black Swan event. Before it happens, no one can estimate it. But after it happens, they can analyze the reasons and can explain it. This is because we overestimate our own abilities and underestimate the percentage chance of a Black Swan event occurring. The human brain is like a machine that always seeks out reasons for everything in order to explain the things that happen around us.
When we know the cause and effect, we will imagine many possible stories. Our brain is good at making things easier to understand. But because it makes it easy to understand, our thinking deviates from the truth. Because what we perceive is not the complete truth; it is a story that has been processed by the brain to make it easy to understand. Consequently, it causes us to lose a lot of information and creates different images to transform the information to make it even easier to understand, so that our brain can easily store it.
Therefore, even if we are people who think logically, there is still a percentage of biased thinking. This type of illusion is called 'misunderstanding the truth.' When the brain creates an imagined story into a memorable image, it has already strayed from what is the truth. We will try to find many arguments to protect our own perspective. And this makes us even more confident in our perspective and understanding. It pushes us even further from the truth. We must know that our perspective and the actual truth are two different things. The truth is still the truth, no matter how you perceive it. And what is frightening is that people have different perceptions, and this is the reason for many disagreements in society. Arguing to protect one's own perspective turns into a misunderstanding, making it even more chaotic and hard to know what is true and what isn't. When we try to think of arguments to support our perspective, it makes us even more confused about the truth.
It's just like the turkey in the example earlier. It understands that it has been fed every day for 1,000 days in a row. It thinks that on day 1,001, it will still be fed, without knowing that on this 1,001st day, it will be caught and cooked for a meal. But the truth is, they were raising it to be slaughtered from the very beginning. This one turkey was completely wrong the whole time.
I'll give another example for you to listen to. They gave a very blurry photograph to two different groups of people. Looking at it, you couldn't tell what the image was. Then they adjusted the image to make it clearer, little by little. Group 1 had the image adjusted 5 times. Group 2 had it adjusted 10 times. In the end, they asked both groups what the image really was. What do you think? Between these two groups, which one saw the image and recognized it faster? The answer is Group 1. This is because Group 2 had too much information. When you have too much information, you will misjudge.
If we speak in terms of principles, the brain should adjust its understanding when it receives clearer and more information than before. But the human brain doesn't work that way. It's the complete opposite. When the brain receives any information and agrees with it, regardless of whether that information is true or not, the brain will reject all arguments that contradict its own thinking. This is why most people don't easily accept criticism. It's hard to agree with any idea that contradicts their own perception. That is why the author, Nicholas Taleb, said that information is a double-edged sword. Taking in too much makes you have a reaction. The more information, the more it makes us confused and bewildered. We can't see what is true and what isn't.
The question is, so how can we know what is true versus what is not? The philosopher Karl Popper raised a formula: learn to do falsification. What is falsification? Falsification means that when our brain imagines and creates a certain perspective, what you need to do is find an example to challenge that perspective. If you think it is right, you must find a wrong example to reject it.
How to challenge your own perspective? Oppose your own understanding. We will see a much broader angle. But not many people can do this. This is why in history, such people are not easy to find. Because those who rejected the thinking of the powerful, if they didn't die, their names disappeared from history. This means that the perspective that survives is not necessarily the complete truth. And the people who write history are the ones who are still alive.
What about the perspective of the dead? The dead also had correct perspectives; it's just that their words were not transmitted to our time. To explain it simply, let's talk about the one turkey from earlier. Suppose it was a lucky turkey and wasn't caught and cooked. It lived for 10 years. It would tell the many other chickens that its life is great like this. Living for 10 years, there has been no danger at all. It will tell the other chickens that all of you will live for 10 years just like me. Do you think the other chickens believe it? They believe it. They definitely believe it. Because they haven't been caught and eaten yet. But the truth is still the truth. But is it true that they will live for 10 years? It's not true. The truth is that all the chickens will be caught and eaten. The turkey that lived for 10 years is a lucky one and is a special case only.
See? All the chickens misunderstood completely because of one turkey that had a perspective contrary to the truth. The example above just wants to show you all that what makes us misunderstand comes from three factors: the bias in explaining things, the bias towards the 'truth,' and the bias due to human nature itself. These factors make us overestimate ourselves and underestimate the truth. And what we have seen up to this day has happened due to many coincidences; we cannot take it as a complete principle. And history is even more biased, jumbled, chaotic, and difficult to understand. Therefore, we cannot predict the future by relying entirely on the past.
If all these things blind us from the truth that we cannot see, and we cannot even predict, then what is the use of studying history and the past? We can't even foresee Black Swan events. Can we use science to predict? Nicholas Taleb says no, you can't. You cannot predict Black Swan events. Because Black Swan events have no certainty and cannot be estimated, it is even more impossible to use scientific theories or research to evaluate them.
So why is that? The answer is in the second key point of this book. Are uncertainty and coincidence the same? They are not the same. When talking about coincidence, people think of probability. Those who study mathematics will surely understand this word. When talking about probability, we often use the example of a two-sided coin or a die. But you should know that a die and a Black Swan event, although they both have uncertainty, they are two separate things. The probability of rolling a die, you can know in advance. A die only has six sides, from 1 to 6.
If we talk about the probability of a Black Swan event, you cannot know it in advance. Who would know how many times a tsunami happens in a year? It cannot be measured.
I'll give another example. If you want to open a casino, do you know what risks you will face? You will probably say that the biggest risk is that one day, someone with extreme luck will win a lot of money from your casino and walk away. Or maybe someone will use a trick to win, causing us to lose a lot of money. In fact, many casino owners have thought about this too. That is why they spend a lot of money to hire experts to study and design techniques and technologies to give them an edge over the players. They invest a lot in technology and install security cameras everywhere to protect against crime and reduce risks in their casinos. After doing all these things, can it reduce the major risks? Let's look at a real example. In one casino, they created a show with a tiger in a cage for customers to watch for entertainment. Unexpectedly, that tiger mauled its own owner, nearly killing him. The casino paid out millions of dollars. In another case, an accountant for a casino failed to provide the relevant documents to the tax department for two or three years in a row, causing the casino to pay millions of dollars in fines. And at another casino, there was a case where the owner's daughter was kidnapped for ransom, causing the casino owner to withdraw a huge amount of money from his casino to save his daughter from danger. Do you see? They spent a lot of money and time to protect against risks that could happen. But in reality, all those risks happened in a way they never imagined.
This is the misunderstanding between the probability of a die and the probability of a Black Swan event. Some things can be estimated, while others cannot be estimated at all. The shortest man in the world is 0.54 meters. The tallest man is 2.52 meters. The average height of a man in the world is 1.71 meters. In this context, it is not easy for there to be a person who is taller than 2.52 meters. If one is found, the percentage is less than 1 in 7 billion. Therefore, we can assume that the height of men in the world is in the range of 0.54 centimeters to 2.52 meters. This is something they can estimate and can find an average for.
But what if the case is similar to this one? They ask us to find the average amount of money that a person has in their hands. How much money would one person have if they took all the assets in the world and divided them equally among all the people on Earth? This question has no answer because they don't know who has the most money, and who has the least money in the world. It is simply not possible to evaluate. For example, actors, singers, athletes, etc. - for these jobs, one cannot find an average income. There is only the 1% who are extremely rich and the 99% who are extremely poor. But if it's teachers, employees, or engineers, they can find an average salary.
You have the right to choose any job that you love, according to your own preferences. But what you need to be careful about is: do not take someone else's map to walk on your own path. To summarize, this point wants to show us that flawed knowledge can cause us to underestimate the probability of a Black Swan event occurring.
Technology and science can only estimate things that can be estimated, like the probability of a die roll. No matter how you toss it, the probability of getting a '1' is 1 in 6. But science cannot be used to measure Black Swan events. Reaching this point, you are probably fed up. So how can we estimate and know about Black Swan events? The answer is quite sad. You cannot predict Black Swan events. And if it could be predicted, it wouldn't be a Black Swan event from the beginning.
To put it simply, a Black Swan event is like a person's death. They don't know when it will happen, where, or in what way. But there is one thing they can be sure of, which is that it will surely happen one day. Regarding this, the author recommends not wasting time on predicting Black Swan events. It's useless.
People have a bad habit: they overestimate their ability to predict the future. They think they have a sixth sense and can know things in advance. According to experience, it's been shown that neither experts nor ordinary people have this ability. People are all the same; no one knows more than anyone else. The world is full of so much uncertainty like this. If every day you don't spend time enjoying your present but instead take it to analyze things that will happen, you will go crazy. Because it is nature, it cannot be controlled or predicted. You cannot know the future, and you definitely cannot predict Black Swan events.
But listening to this book isn't useless just yet. There is one final important point. So how can we cope with a Black Swan event? Avoid it? Or can we even gain a small profit from this event? The answer is: you must learn to be resilient. To give you one phrase: conserve your strength. When this event happens, you must make the fewest moves possible, use the least energy possible.
If we talk in economic terms, conserving strength is not a good thing. Leaving capital idle, not doing any activity, not doing anything at all, is already a loss. But if we speak in investment terms, it means conserving and having enough cash flow to survive longer than others. It's like the COVID era. We didn't know when it would end. We thought the next week it would be over, but it dragged on for many months, or maybe even years, who knew. This is an example of a Black Swan event that is easy to understand because we all have experienced it. Therefore, when it happens, you must conserve your strength. You cannot take the money you have to invest in real estate. Because at this time, everyone is facing problems. And if we have more 'blood' than others, survive longer than others, you are the winner, that's it.
Like the case of Warren Buffett during the 2008 economic crisis. In his bank account, he had 60 billion dollars. Even if the sky fell on his head, it couldn't make Warren Buffett worry. This is just about surviving. What if you want to profit even more from this? A Black Swan event happens only once every few decades. How could you let it pass so easily? You must profit from it.
People who think like this are not wrong. The author has also mentioned this. Just surviving is not enough. You must divide your assets and resources into two parts. The large part, about 80%, you should take and put in a place with low risk, such as buying government bonds. This money is highly secure and you can withdraw it to use whenever you want. And the small portion, about 20%, must be put in a place with high risk, but with the potential for high returns. Such as investing in technology companies, tech startups, buying stocks on the public stock market. Because when a Black Swan event happens, there will be companies that have problems, and their stock prices will drop. They sell, you buy. After the situation gets better, you will profit many times over, tens of times or hundreds of times over.
You can use it to offset the losses we have in other sectors. But you must analyze carefully which company's stock to buy and at what time. According to past analysis, Black Swan events happen once on average every 100 years. But in the last 100 years, it has happened four times already. See? No one can predict it. Don't take the past to judge the present; you can't. Based on trade globalization and the growth of the technology sector, the internet, and information technology, it makes the results caused by Black Swan events even more severe. But it can also be said that within a crisis, there is an opportunity. You can take this opportunity to gain even greater and faster profits than before.
The key points in the book 'The Black Swan' conclude here. Let's do a brief summary again. First, information bias, truth bias, and human bias can cause us to be confused, not knowing what is true and what is not true. It makes us overestimate ourselves. And in fact, what has happened in history is more chaotic and coincidental than we think. Second, because of our misunderstanding, we underestimate the probability of Black Swan events. Black Swan events are not the same as rolling a die. It's a coincidence, yes, but for a Black Swan, you don't know its probability.
Third, so what can we do to predict Black Swan events? The answer is you can't. What you can do is to build your resilience. You must survive longer than others, build up your abilities and resources, and have quick flexibility. When we have financial security, we must divide our resources and assets according to the 80/20 principle. 80% on things with high security, and 20% on things with high risk but high opportunity as well.
What is called a 'Black Swan' refers to a story or event that you cannot predict in advance. You can't estimate it, but it's an event that can have an enormous impact on society or the entire world. In history, Black Swan events have occurred many times, and those events have had an impact and taught people in the world a lesson or two.
For thousands of years, people in the world had only ever seen white swans. They assumed that all swans in the world were white. It wasn't until Europeans reached Australia that they encountered swans that were black. This discovery invalidated thousands of years of human understanding. The truth is, the world doesn't just have white swans; black swans exist too.
English philosopher Bertrand Russell gave a simple example to understand this. There was a turkey. For a long time, its owner had raised it with great care, giving it food and water meticulously for 1,000 days in a row. The turkey thought that tomorrow and in the future, it would continue to receive food like this forever. This had been the routine for 1,000 days. It didn't know that tomorrow was Thanksgiving. It would be caught and made into a meal for guests the next day. For this turkey, tomorrow is a shocking event. It never expected that on day 1,001, something like this would happen.
In fact, the way humans perceive and judge things is not so different from this turkey's thinking. In 2008, when the world faced a severe economic crisis, it was considered a Black Swan event as well. This is because nothing like it had ever happened before. This is the 'turkey mindset' in its purest form. We don't know about it because it has never happened before. But we cannot assume it will never happen. One day, it is bound to happen.
So, how can we make more open-minded judgments? How can we predict things that will happen in the future? The book 'The Black Swan' will answer these questions for all of you.
The author of this book has lived through three Black Swan events: the 1987 stock market crash, the terrorist activities of Al-Qaeda, which flew planes into the World Trade Center on September 11, 2001, and the 2008 global economic crisis. All of these major Black Swan events were, for the average person, unthinkable. But for the author, Nicholas Taleb, they were rare opportunities. His brilliant theory on prediction began to gain worldwide fame. And this book, 'The Black Swan,' has become one of the most classic books you must read to have the ability to predict the unpredictable on a global scale. We have extracted the most important ideas from this book to share with you all.
First, from a psychological perspective, what is it that blinds us from foreseeing Black Swan events? Second, how does general knowledge cause us to misjudge the probability of Black Swan events occurring? Third, how can we cope with and adapt to Black Swan events? Or in other words, when a Black Swan event happens, can we find an opportunity within the crisis?
Let's get to the first point. What is it that blinds us from seeing the occurrence of a Black Swan event? These factors include the narrative fallacy, the ludic fallacy, and biases due to human nature. First, let's look at the bias in explaining cause and effect.
Usually, to remember any story, our brain adds its own interpretations and assumptions based on experience and what we've been through. Everything seems very logical, very clear, and has its own rationale. For example, when we study history, our brain imagines the scenes, creating images to help it store those events. This is purely our imagination. It makes it seem like everything that happened had a very good reason. And sometimes, we ourselves wonder why people in the past had such a hard time understanding and made such foolish decisions. This is because there were so many signs that should have allowed them to predict what would happen.
But if you were in that time or in that situation, you probably wouldn't have been able to think and make the right decision either. Because in reality, when something is happening, it is full of uncertainty, chaos, and is difficult to estimate. In fact, history is the result of many uncertainties that have left us with what we see today. And there are many coincidental things that happened which have made the world what it is today. I'll give an example. The world of the 21st century is the result of many Black Swan events that happened in the 20th century, such as World War I and World War II.
These events were things that people in the world at that time could not have imagined. And usually, when these events happen, people tend to underestimate or misjudge them. For example, when World War I happened, European nations thought it would only last for a few weeks. As it turned out, the war lasted four years before it ended. In World War II, it was the same. The French thought that Hitler was just a temporary enemy. Who would have known that it could become World War II? But after we follow the history of those events, it seems like they didn't happen by chance at all. They had a cause and effect, and there were even experts who explained and analyzed them well, from the root cause to what should have happened at that time.
It can be said that all those events were so obvious that they should have been predicted in advance. It might have happened and caused such heavy losses because we were not prepared or lacked the information to analyze it. Looking back at that painful history, we tell ourselves, 'We can't let this happen a second time.' This is the special characteristic of a Black Swan event. Before it happens, no one can estimate it. But after it happens, they can analyze the reasons and can explain it. This is because we overestimate our own abilities and underestimate the percentage chance of a Black Swan event occurring. The human brain is like a machine that always seeks out reasons for everything in order to explain the things that happen around us.
When we know the cause and effect, we will imagine many possible stories. Our brain is good at making things easier to understand. But because it makes it easy to understand, our thinking deviates from the truth. Because what we perceive is not the complete truth; it is a story that has been processed by the brain to make it easy to understand. Consequently, it causes us to lose a lot of information and creates different images to transform the information to make it even easier to understand, so that our brain can easily store it.
Therefore, even if we are people who think logically, there is still a percentage of biased thinking. This type of illusion is called 'misunderstanding the truth.' When the brain creates an imagined story into a memorable image, it has already strayed from what is the truth. We will try to find many arguments to protect our own perspective. And this makes us even more confident in our perspective and understanding. It pushes us even further from the truth. We must know that our perspective and the actual truth are two different things. The truth is still the truth, no matter how you perceive it. And what is frightening is that people have different perceptions, and this is the reason for many disagreements in society. Arguing to protect one's own perspective turns into a misunderstanding, making it even more chaotic and hard to know what is true and what isn't. When we try to think of arguments to support our perspective, it makes us even more confused about the truth.
It's just like the turkey in the example earlier. It understands that it has been fed every day for 1,000 days in a row. It thinks that on day 1,001, it will still be fed, without knowing that on this 1,001st day, it will be caught and cooked for a meal. But the truth is, they were raising it to be slaughtered from the very beginning. This one turkey was completely wrong the whole time.
I'll give another example for you to listen to. They gave a very blurry photograph to two different groups of people. Looking at it, you couldn't tell what the image was. Then they adjusted the image to make it clearer, little by little. Group 1 had the image adjusted 5 times. Group 2 had it adjusted 10 times. In the end, they asked both groups what the image really was. What do you think? Between these two groups, which one saw the image and recognized it faster? The answer is Group 1. This is because Group 2 had too much information. When you have too much information, you will misjudge.
If we speak in terms of principles, the brain should adjust its understanding when it receives clearer and more information than before. But the human brain doesn't work that way. It's the complete opposite. When the brain receives any information and agrees with it, regardless of whether that information is true or not, the brain will reject all arguments that contradict its own thinking. This is why most people don't easily accept criticism. It's hard to agree with any idea that contradicts their own perception. That is why the author, Nicholas Taleb, said that information is a double-edged sword. Taking in too much makes you have a reaction. The more information, the more it makes us confused and bewildered. We can't see what is true and what isn't.
The question is, so how can we know what is true versus what is not? The philosopher Karl Popper raised a formula: learn to do falsification. What is falsification? Falsification means that when our brain imagines and creates a certain perspective, what you need to do is find an example to challenge that perspective. If you think it is right, you must find a wrong example to reject it.
How to challenge your own perspective? Oppose your own understanding. We will see a much broader angle. But not many people can do this. This is why in history, such people are not easy to find. Because those who rejected the thinking of the powerful, if they didn't die, their names disappeared from history. This means that the perspective that survives is not necessarily the complete truth. And the people who write history are the ones who are still alive.
What about the perspective of the dead? The dead also had correct perspectives; it's just that their words were not transmitted to our time. To explain it simply, let's talk about the one turkey from earlier. Suppose it was a lucky turkey and wasn't caught and cooked. It lived for 10 years. It would tell the many other chickens that its life is great like this. Living for 10 years, there has been no danger at all. It will tell the other chickens that all of you will live for 10 years just like me. Do you think the other chickens believe it? They believe it. They definitely believe it. Because they haven't been caught and eaten yet. But the truth is still the truth. But is it true that they will live for 10 years? It's not true. The truth is that all the chickens will be caught and eaten. The turkey that lived for 10 years is a lucky one and is a special case only.
See? All the chickens misunderstood completely because of one turkey that had a perspective contrary to the truth. The example above just wants to show you all that what makes us misunderstand comes from three factors: the bias in explaining things, the bias towards the 'truth,' and the bias due to human nature itself. These factors make us overestimate ourselves and underestimate the truth. And what we have seen up to this day has happened due to many coincidences; we cannot take it as a complete principle. And history is even more biased, jumbled, chaotic, and difficult to understand. Therefore, we cannot predict the future by relying entirely on the past.
If all these things blind us from the truth that we cannot see, and we cannot even predict, then what is the use of studying history and the past? We can't even foresee Black Swan events. Can we use science to predict? Nicholas Taleb says no, you can't. You cannot predict Black Swan events. Because Black Swan events have no certainty and cannot be estimated, it is even more impossible to use scientific theories or research to evaluate them.
So why is that? The answer is in the second key point of this book. Are uncertainty and coincidence the same? They are not the same. When talking about coincidence, people think of probability. Those who study mathematics will surely understand this word. When talking about probability, we often use the example of a two-sided coin or a die. But you should know that a die and a Black Swan event, although they both have uncertainty, they are two separate things. The probability of rolling a die, you can know in advance. A die only has six sides, from 1 to 6.
If we talk about the probability of a Black Swan event, you cannot know it in advance. Who would know how many times a tsunami happens in a year? It cannot be measured.
I'll give another example. If you want to open a casino, do you know what risks you will face? You will probably say that the biggest risk is that one day, someone with extreme luck will win a lot of money from your casino and walk away. Or maybe someone will use a trick to win, causing us to lose a lot of money. In fact, many casino owners have thought about this too. That is why they spend a lot of money to hire experts to study and design techniques and technologies to give them an edge over the players. They invest a lot in technology and install security cameras everywhere to protect against crime and reduce risks in their casinos. After doing all these things, can it reduce the major risks? Let's look at a real example. In one casino, they created a show with a tiger in a cage for customers to watch for entertainment. Unexpectedly, that tiger mauled its own owner, nearly killing him. The casino paid out millions of dollars. In another case, an accountant for a casino failed to provide the relevant documents to the tax department for two or three years in a row, causing the casino to pay millions of dollars in fines. And at another casino, there was a case where the owner's daughter was kidnapped for ransom, causing the casino owner to withdraw a huge amount of money from his casino to save his daughter from danger. Do you see? They spent a lot of money and time to protect against risks that could happen. But in reality, all those risks happened in a way they never imagined.
This is the misunderstanding between the probability of a die and the probability of a Black Swan event. Some things can be estimated, while others cannot be estimated at all. The shortest man in the world is 0.54 meters. The tallest man is 2.52 meters. The average height of a man in the world is 1.71 meters. In this context, it is not easy for there to be a person who is taller than 2.52 meters. If one is found, the percentage is less than 1 in 7 billion. Therefore, we can assume that the height of men in the world is in the range of 0.54 centimeters to 2.52 meters. This is something they can estimate and can find an average for.
But what if the case is similar to this one? They ask us to find the average amount of money that a person has in their hands. How much money would one person have if they took all the assets in the world and divided them equally among all the people on Earth? This question has no answer because they don't know who has the most money, and who has the least money in the world. It is simply not possible to evaluate. For example, actors, singers, athletes, etc. - for these jobs, one cannot find an average income. There is only the 1% who are extremely rich and the 99% who are extremely poor. But if it's teachers, employees, or engineers, they can find an average salary.
You have the right to choose any job that you love, according to your own preferences. But what you need to be careful about is: do not take someone else's map to walk on your own path. To summarize, this point wants to show us that flawed knowledge can cause us to underestimate the probability of a Black Swan event occurring.
Technology and science can only estimate things that can be estimated, like the probability of a die roll. No matter how you toss it, the probability of getting a '1' is 1 in 6. But science cannot be used to measure Black Swan events. Reaching this point, you are probably fed up. So how can we estimate and know about Black Swan events? The answer is quite sad. You cannot predict Black Swan events. And if it could be predicted, it wouldn't be a Black Swan event from the beginning.
To put it simply, a Black Swan event is like a person's death. They don't know when it will happen, where, or in what way. But there is one thing they can be sure of, which is that it will surely happen one day. Regarding this, the author recommends not wasting time on predicting Black Swan events. It's useless.
People have a bad habit: they overestimate their ability to predict the future. They think they have a sixth sense and can know things in advance. According to experience, it's been shown that neither experts nor ordinary people have this ability. People are all the same; no one knows more than anyone else. The world is full of so much uncertainty like this. If every day you don't spend time enjoying your present but instead take it to analyze things that will happen, you will go crazy. Because it is nature, it cannot be controlled or predicted. You cannot know the future, and you definitely cannot predict Black Swan events.
But listening to this book isn't useless just yet. There is one final important point. So how can we cope with a Black Swan event? Avoid it? Or can we even gain a small profit from this event? The answer is: you must learn to be resilient. To give you one phrase: conserve your strength. When this event happens, you must make the fewest moves possible, use the least energy possible.
If we talk in economic terms, conserving strength is not a good thing. Leaving capital idle, not doing any activity, not doing anything at all, is already a loss. But if we speak in investment terms, it means conserving and having enough cash flow to survive longer than others. It's like the COVID era. We didn't know when it would end. We thought the next week it would be over, but it dragged on for many months, or maybe even years, who knew. This is an example of a Black Swan event that is easy to understand because we all have experienced it. Therefore, when it happens, you must conserve your strength. You cannot take the money you have to invest in real estate. Because at this time, everyone is facing problems. And if we have more 'blood' than others, survive longer than others, you are the winner, that's it.
Like the case of Warren Buffett during the 2008 economic crisis. In his bank account, he had 60 billion dollars. Even if the sky fell on his head, it couldn't make Warren Buffett worry. This is just about surviving. What if you want to profit even more from this? A Black Swan event happens only once every few decades. How could you let it pass so easily? You must profit from it.
People who think like this are not wrong. The author has also mentioned this. Just surviving is not enough. You must divide your assets and resources into two parts. The large part, about 80%, you should take and put in a place with low risk, such as buying government bonds. This money is highly secure and you can withdraw it to use whenever you want. And the small portion, about 20%, must be put in a place with high risk, but with the potential for high returns. Such as investing in technology companies, tech startups, buying stocks on the public stock market. Because when a Black Swan event happens, there will be companies that have problems, and their stock prices will drop. They sell, you buy. After the situation gets better, you will profit many times over, tens of times or hundreds of times over.
You can use it to offset the losses we have in other sectors. But you must analyze carefully which company's stock to buy and at what time. According to past analysis, Black Swan events happen once on average every 100 years. But in the last 100 years, it has happened four times already. See? No one can predict it. Don't take the past to judge the present; you can't. Based on trade globalization and the growth of the technology sector, the internet, and information technology, it makes the results caused by Black Swan events even more severe. But it can also be said that within a crisis, there is an opportunity. You can take this opportunity to gain even greater and faster profits than before.
The key points in the book 'The Black Swan' conclude here. Let's do a brief summary again. First, information bias, truth bias, and human bias can cause us to be confused, not knowing what is true and what is not true. It makes us overestimate ourselves. And in fact, what has happened in history is more chaotic and coincidental than we think. Second, because of our misunderstanding, we underestimate the probability of Black Swan events. Black Swan events are not the same as rolling a die. It's a coincidence, yes, but for a Black Swan, you don't know its probability.
Third, so what can we do to predict Black Swan events? The answer is you can't. What you can do is to build your resilience. You must survive longer than others, build up your abilities and resources, and have quick flexibility. When we have financial security, we must divide our resources and assets according to the 80/20 principle. 80% on things with high security, and 20% on things with high risk but high opportunity as well.