Human Mind is a wonderful EXPLANATION MACHINE. It has an explanation for almost everything, even for the UNCERTAINTIES. What's worrisome is that the explanation is always impeccable. The more intellect a person has, more convincing and precise the explanation is.
1/n The Human Mind suffers from 3 ailments as it comes into contact with history called as the triplet of opacity.
1. The Illusion of Understanding: People have an explanation of everything and anything that is going on in the world which is more complex than we can imagine.
1. The Illusion of Understanding: People have an explanation of everything and anything that is going on in the world which is more complex than we can imagine.
2/n
2. Retrospective Distortion: Imagine yourself in the middle of a catastrophic event. Writing the daily account of events then and there is more coherant than narrating the event 𝘢𝘧𝘵𝘦𝘳 it has happened. There are a thousand reasons behind any event.
2. Retrospective Distortion: Imagine yourself in the middle of a catastrophic event. Writing the daily account of events then and there is more coherant than narrating the event 𝘢𝘧𝘵𝘦𝘳 it has happened. There are a thousand reasons behind any event.
3/n But our mind is capable of filtering and remembering only a few which are rational enough to bring us to conclusions. Recording today's happenings without knowing it's effect on tomorrow is a more coherent way of presenting history without making it more 𝘩𝘪𝘴𝘵𝘰𝘳𝘪𝘤𝘢𝘭.
4/n
3.There are events in history about which a top government official knows the same as a roadside vendor - NOTHING. But if you are from an elite background you 𝘢𝘶𝘵𝘰𝘮𝘢𝘵𝘪𝘤𝘢𝘭𝘭𝘺 know more than a nonelite and hence 'picking stones in front of a roadroller'.
3.There are events in history about which a top government official knows the same as a roadside vendor - NOTHING. But if you are from an elite background you 𝘢𝘶𝘵𝘰𝘮𝘢𝘵𝘪𝘤𝘢𝘭𝘭𝘺 know more than a nonelite and hence 'picking stones in front of a roadroller'.
5/n MEDIOCRISTAN: The supreme law of Mediocristan states that in a large sample space no single instance can change the aggregate.
All the abstract concepts like weight, height, calories come under Mediocristan. War before the advent of technology was Mediocristan.
All the abstract concepts like weight, height, calories come under Mediocristan. War before the advent of technology was Mediocristan.
6/n EXTREMISTAN: It emphasizes that in a large sample space, a single instance can adversely affect the aggregate. Wealth falls under it.
The heaviest person on this planet will have no effect on the total weight of a large sample space....
The heaviest person on this planet will have no effect on the total weight of a large sample space....
7/n ..But the richest person will have a major impact on the total bank balance of that same sample space. Such monstrous is the inequality in Extremistan.
Wars now belong to Extremistan since a push button can wipe off life from the planet.
Extremistan can produce Black Swan!
Wars now belong to Extremistan since a push button can wipe off life from the planet.
Extremistan can produce Black Swan!
8/n One can always be satisfied by the data it gets from Mediocristan as it represents more or less the average. Whereas a single instance in Extremistan can disproportionately affect the total.
In this world you should always be suspicious of the knowledge you derive from data.
In this world you should always be suspicious of the knowledge you derive from data.
9/n Mediocristan is where we must endure to the tyranny of the collective, the obvious and the predicted. Extremistan is where we are subjected to the tyranny of the random, the unseen and the unpredictable.
10/n Pofessions Iike that of a dentist, barber, restaurant owner are not scalable since there is a cap on the number of customers you can entertain at a time. And these professions are paid according to their time. A prostitute is paid hourly and their presence is necessary.
11/n Whereas consider a profession like that of a writer. They don't have to write a book everytime a customer wants it. They have to pitch in the idea only once. Whereas for a baker he/she has to bake the cake everytime they need to satisfy the hunger of customers.
12/n Scalable are the ones in which you can add extra zeroes to your output with little/no extra effort.Scalable is good only if you are successful since it is more competitive, full of inequalities. Someone can take a large share of the pie while the others get next to nothing!
13/n Human mind is good at storing patterns and not mere words. The more orderly, less random, patterned and narratized a series of words, easier it is to store that series in one's mind. You need 1000 words to carry the exact message of a random 1000 words.
14/n If the message is logical and patterned, your brain can store the summary of the same message in mere 30 words. We have a hunger for summary, rules because we need to reduce the dimension of matter so they can squeeze into our head.
15/n
Random the information, difficult to squeeze it into the head.
"𝘛𝘩𝘦 𝘴𝘢𝘮𝘦 𝘤𝘰𝘯𝘥𝘪𝘵𝘪𝘰𝘯 𝘵𝘩𝘢𝘵 𝘮𝘢𝘬𝘦𝘴 𝘶𝘴 𝘴𝘪𝘮𝘱𝘭𝘪𝘧𝘺 𝘱𝘶𝘴𝘩𝘦𝘴 𝘶𝘴 𝘵𝘰 𝘵𝘩𝘪𝘯𝘬 𝘵𝘩𝘢𝘵 𝘵𝘩𝘦 𝘞𝘰𝘳𝘭𝘥 𝘪𝘴 𝘭𝘦𝘴𝘴 𝘳𝘢𝘯𝘥𝘰𝘮 𝘵𝘩𝘢𝘯 𝘪𝘵 𝘢𝘤𝘵𝘶𝘢𝘭𝘭𝘺 𝘪𝘴."
Random the information, difficult to squeeze it into the head.
"𝘛𝘩𝘦 𝘴𝘢𝘮𝘦 𝘤𝘰𝘯𝘥𝘪𝘵𝘪𝘰𝘯 𝘵𝘩𝘢𝘵 𝘮𝘢𝘬𝘦𝘴 𝘶𝘴 𝘴𝘪𝘮𝘱𝘭𝘪𝘧𝘺 𝘱𝘶𝘴𝘩𝘦𝘴 𝘶𝘴 𝘵𝘰 𝘵𝘩𝘪𝘯𝘬 𝘵𝘩𝘢𝘵 𝘵𝘩𝘦 𝘞𝘰𝘳𝘭𝘥 𝘪𝘴 𝘭𝘦𝘴𝘴 𝘳𝘢𝘯𝘥𝘰𝘮 𝘵𝘩𝘢𝘯 𝘪𝘵 𝘢𝘤𝘵𝘶𝘢𝘭𝘭𝘺 𝘪𝘴."
16/n
We are not naive enough to believe that someone is innocent of a murder if we have not seen him kill. We tend to generalise selectively based on empirical observations.
We are not naive enough to believe that someone is innocent of a murder if we have not seen him kill. We tend to generalise selectively based on empirical observations.
17/n For instance ask a small child to predict the attributes of a tribe by showing him picture of one of the members. He is less likely to generalise overweight as an attribute than dark skinned for the entire population.
18/n We come equipped with mental machinery that makes us selectively generalise based on experiences.
19/n
Hedonic Happiness: Making $10 million in a year and earning nothing in the preceding years does not give you the same satisfaction as earning $100,000 dollars every year for a decade. We need happiness at regular intervals.
Hedonic Happiness: Making $10 million in a year and earning nothing in the preceding years does not give you the same satisfaction as earning $100,000 dollars every year for a decade. We need happiness at regular intervals.
20/n
It doesn't matter how big the happiness is but the frequency. Small lumps of happiness distributed over a decade uniformly gives you immense satisfaction as compared to once-in-a-decade-abundant joy
It doesn't matter how big the happiness is but the frequency. Small lumps of happiness distributed over a decade uniformly gives you immense satisfaction as compared to once-in-a-decade-abundant joy
21/n
Silent evidence: A person, non-believer in the Gods, was shown a portrait of worshippers who were praying, and survived a subsequent shipwreck. The implication was that PRAYING saves you from drowning.
The non-believer asked about the worshippers who prayed and drowned?
Silent evidence: A person, non-believer in the Gods, was shown a portrait of worshippers who were praying, and survived a subsequent shipwreck. The implication was that PRAYING saves you from drowning.
The non-believer asked about the worshippers who prayed and drowned?
22/n The dead worshippers burried at the bottom of the sea would find it hard to advertise their perspective.
There is no problem with History, but with the way we collect samples & evidences, leading to a bias. Silent evidence in what events use to conceal their own randomness.
There is no problem with History, but with the way we collect samples & evidences, leading to a bias. Silent evidence in what events use to conceal their own randomness.
23/n If you look at a pool of millionaires and compare, you will find attributes like optimism, risk taking, courage etc. as common. A ghost looking autobiography of a CEO will have all the fawning MBA techniques.
Now take a look at the autobiography of an unsuccessful person.
Now take a look at the autobiography of an unsuccessful person.
24/n Firstly it would be difficult to find one. Because people who fail do not seem to write one. Even if they write, publishers would not show the courtesy to even return a simple phone call. However almost everyone will show traits of courage, risk taking & optimism.
25/n What is different is the factor - LUCK.
The problem with luck is that it's not quantifiable, hence people tend to ignore it.
If you want to understand successes and analyse the factors what caused them, it is important to study the traits present in failures.
The problem with luck is that it's not quantifiable, hence people tend to ignore it.
If you want to understand successes and analyse the factors what caused them, it is important to study the traits present in failures.
26/n
There's a famous saying amongst the Gamblers that goes as - "First time gamblers are always lucky" or what we commonly refer to as "Beginners Luck". So does it mean everyone of us should try gambling once and cash out all the profits?
There's a famous saying amongst the Gamblers that goes as - "First time gamblers are always lucky" or what we commonly refer to as "Beginners Luck". So does it mean everyone of us should try gambling once and cash out all the profits?
27/n
Absolutely not.
When a lot of people get into gambling, only a few gets to be lucky while others who loose gets demotivated and leave this business.But those who won the first time stay in this business longer to satisfy their greed.
Absolutely not.
When a lot of people get into gambling, only a few gets to be lucky while others who loose gets demotivated and leave this business.But those who won the first time stay in this business longer to satisfy their greed.
28/n Those who lost the first time are out of the community and their views are not taken into account. It is those who lost later after getting lucky the first time gave this narrative. Silent evidences are a silent killer. There is always something obvious that goes unobserved.
29/n "Expert" is the closest thing to a fraud. The problem with experts is that they don't know what they don't know. Lack of knowledge and delusion about the quality of knowledge come at the same time.
30/n Things that move, & require knowledge, do not have experts. Eg- A financial advisor, accounts officer. Whereas things that do not move, can have experts. Eg- Surgeon. Professions that deal with the future based on the studies of nonrepeatable past have this expert problem.
31/n Plans fail because of what we call tunneling, neglecting the effect of random uncertain events. A writer was once given the opportunity to write a biography of a famous actor. The deadline of submitting the manuscript was exactly the same date but two years later...
32/n The writer had a good research on the subject (he even knew about the actors first girlfriends) and a lot of one to one interviews. He was all enthusiastic about the book. But say three months before the deadline, he informed about a little delay to the publishing house...
33/n Such delays were usual for the publisher and he was expecting it. However, the subject had unexpectedly faded away from public attention. The biography was not worth it as the publishing house was not certain if it will create an impact....
34/n From the writers perspective, the manuscript got delayed due to unavoidable and unexpected reasons that could not have been forecasted earlier. Maybe he had to take a trip to Bahrain to visit his ailing mother , a broken engagement etc etc.
35/n
The unexpected always has a side effect :-
Longer time of completion and Higher costs.
On very rare occasions, you get the opposite :-
Shorter completion and lower costs.
The unexpected always has a side effect :-
Longer time of completion and Higher costs.
On very rare occasions, you get the opposite :-
Shorter completion and lower costs.
36/n In one of the studies, Students were divided into 2 groups, optimists and pessimists. For a given project optimists gave a proposal of 15 days to complete while the pessimists asked for 35 days. However, the average actual time to completion turned out to be 56 days.
37/n Life Expectancy is a variable of Mediocristan. It is a non scalable variable.
ife expectancy of 80 years means that the specie is expected to live upto 80 years. If the subject is still healthy enough to sustain, it is expected to survive for 10 more years i.e upto 90..
ife expectancy of 80 years means that the specie is expected to live upto 80 years. If the subject is still healthy enough to sustain, it is expected to survive for 10 more years i.e upto 90..
38/n Another 6 years after that, => 96. If still alive, add another 3 => 99 years.
As the specie crosses the life expectancy, the surviving years go on decreasing. This is opposite in case of ventures and businesses.
As the specie crosses the life expectancy, the surviving years go on decreasing. This is opposite in case of ventures and businesses.
39/n If the venture survives for 80 years of expectancy, it is bound to live longer. As the years pass by, the business grows and is expected to make profits larger and longer than usual. Hence business ventures lie in Extremistan, scalable variables.
40/n
Law of iterative expectations: If you expect to expect something at some date in the future, then you already expect that something at present.
Law of iterative expectations: If you expect to expect something at some date in the future, then you already expect that something at present.
41/n If you think you'll be certain tomorrow that your boyfriend/girlfriend is cheating, then you are certain about it today and will break up with them immediately instead of relaxing today, thinking it's all good as of now.
42/n The same applies to other discoveries. If you know about the discovery you are about to make in future, then you have already made it.
Discoveries in general are things that you find inadvertently while you were trying to do something else.
Discoveries in general are things that you find inadvertently while you were trying to do something else.
43/n No one made a time table and researched specifically to discover a wheel. Viagra was discovered for hypertension and its use now is completely different.
The classical rule of a discovery : You search for something you know and find something you don't know.
The classical rule of a discovery : You search for something you know and find something you don't know.
44/n
In reality, languages grow organically; grammar is something people without anything more exciting to do in their lives codify into a book.
In reality, languages grow organically; grammar is something people without anything more exciting to do in their lives codify into a book.
45/n
A scholastic minded person will memorize the rules, the not-nerd will acquire a language say Croatioan by picking up girls in a bar or talk to a cabdriver, fitting grammatical rules to the knowledge he already possess.
A scholastic minded person will memorize the rules, the not-nerd will acquire a language say Croatioan by picking up girls in a bar or talk to a cabdriver, fitting grammatical rules to the knowledge he already possess.
46/n There is an asymmetry between the past and the future, the difference is so subtle that it does not come naturally to us. In people's mind the relationship between the past and the future does not learn from the relationship between the past and past previous to it.
47/n When we think about tomorrow we do no consider what we thought about yesterday on the day previous to it. Because of this introspective problem there is a difference between our past predictions and the subsequent outcomes. We project tomorrow as another yesterday.
48/n People are often ashamed of losses hence they engage themselves in strategies that are not volatile but contain the risk of large losses. People hate volatility, leading to blowups and occasional suicides after a big loss.
49/n Employee once laid off faces a total void, because he is not fit for something else whereas someone with a volatile earning faces lower risk of starvation since their skills matches demand and the earnings depend on the clients earnings. It may fluctuate but not sink.
50/n The successful businesses are the ones which work around unpredictabilities and even exploit them. Black Swans can be negative as well as positives. Learn to distinguish between them. Negative are the ones that hurt you and causes a lot of damage.
Eg. Catastrophe etc.
Eg. Catastrophe etc.
51/n Positive Black Swans are good for your career as well as for the human race. Eg. Publishing, scientific breakthroughs etc.
Do not try to predict Black Swans as predicting them makes you more vulnerable to them. You do not get up every morning to solve a particular problem.
Do not try to predict Black Swans as predicting them makes you more vulnerable to them. You do not get up every morning to solve a particular problem.
52/n Let there be room for serendipity. Let things happen organically. Seize even the smallest opportunity you get. The window for such positive Black Swans open for a very short time. Grab them with both your arms.
53/n The central idea of this book is around the notion of uncertainty. You don't what unknown is, as by definition, it is unknown. The idea is to consider the effect of those uncertainties, the unknown, in your Life and make all the decisions around the uncertain.
54/n You cannot predic the odds of an earthquake. But you can guess the effect it can create. The idea is to consider the effect of the uncertain (which is known) and not predict (which is unknow) the uncertainty while making decisions.
55/n Remember that for any event to be a Black swan, it is not necessary that it should be rare. But it's impact should be unexpected. A Black Swan can be turned into a gray swan by reducing its effect. The idea is not pedestrian, and the people who can do so are extremely rare.
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