An extraordinary piece of good luck

What I said yesterday is in the last chapter of The Black Swan, but it isn't quite Nassim Nicholas Taleb's last message.

His final message is that "we are quick to forget that just being alive is an extraordinary piece of good luck, a remote event, a chance occurrencne of monstrous proportions". Instead, we sweat the small stuff and get angry because we feel cheated by a bad meal, cold coffee, a social rebuff, or a rude reception.

"Remember that you are a Black Swan", he advises.

"Missing a train is only painful if you run after it!"

What is interesting about the conclusion of Nassim Nicholas Taleb's book The Black Swan was not how he said he is very aggressive when he can gain exposure to positive Black Swans and very conservative when he is under threat from a negative one. It was the "life-changing advice" he received from a classmate in Paris, who once prevented him from running to catch a subway, saying "I don't run for trains."

Taleb said that while this may seem a very small piece of advice, it registered. Good for him. On a daily basis we come across advice, wisdom, quotes and lessons that have the potential of changing our life, but they simply don't REGISTER. It is always "in one ear, out the other". Look at what Taleb has learned from this "very small piece of advice":

"In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behaviour, a sense of being in control of my time, my schedule, and my life," Taleb wrote. He has taught himself to resist running to keep on schedule. He has taught himself that one stands above the rat race and the pecking order if one does so by choice.

He relates this wisdom to Black Swans and said that you are exposed to the improbable only if you let it control you.

I am ashamed to say that while I always secretly sneer at those Hong Kong people who mindlessly flock to a train like some conditioned sheep as soon as they see its door open, I am nevertheless guilty of running to catch a train when I am in a hurry. The irony is that I think I am above them because at least I do it with a reason. It's a classic case of seeing the speck in other people's eyes but not noticing the log in our own.

How ignorant and heady can one get?

Extremistan vs Mediocristan

In the sermon in this Sunday's mass, the readings of which are about the rich and the poor and handling wealth, the priest quoted three phenomena as reflecting the situation of social inequality today:

One in seven people in such an affluent country as the United States are living in poverty.
About forty percent of the wealth in China are controlled by about one hundred people.
About forty percent of the wealth in Hong Kong are controlled by about one thousand people.

This is in line with Nassim Nicholas Taleb's notion, as elaborated in The Black Swan, that in the modern era, wealth belongs to "Extremistan", not "Mediocristan" as many people assume. The two terms need some explanation. Extremistan is a hypothetical province in which "inequalities are such that one single observation can disproportionately impact the aggregate, or the total". Mediocristan, on the contrary, is a utopian province where individual instances, even the largest observations, do not significantly change the aggregate or the total. Broadly speaking, man-made, social matters such as company size, income and book sales belong to Extremistan whereas physical matters such as height, weight and calorie consumption belong to Mediocristan. To illustrate this, imagine two samples of 100,000 people each. One is a sample of people of different heights. The other is a sample of people of different incomes. Compare the effects on the averages of the two samples by adding the world's tallest person to the first sample and the world's wealthiest person to the second sample. Adding the world's tallest person, a Turkish man with a height of 8 ft 1 in, to the fist sample will only make a minimal difference to the average height of the first sample, but adding Bill Gates to the second sample will certainly have a significant effect on the average income of the second sample. Taleb argues that in modern times, not only are there more domains belonging to Extremistan but also the effect of some very few individuals on the collective is more significant, to the extent that it is almost like "winners take all".

In terms of wealth, my own observation is that in my father's time it was possible for people to accumulate wealth through hard work and saving and narrow the difference between those who were rich and those who were not. Now, the gap is not only much wider but also much more difficult ot bridge. These days most young people have become increasingly frustrated and furious because they see themselves being exploited and deprived of opportunities for upward mobility. Such sentiments, if left unchecked and unchannelled, can potentially threaten social stability. Ruling parties have the responsibility to address such inequalities, but in Hong Kong the government has hardly any determination or commitment to do anything in this direction.

The opacity of events

As the Manila shooting incident reveals, human inadequacy in confronting black swan events is far more than just a lack of anticipation and readiness. After all, who can blame the holiday makers for not being able to see beforehand that a gunman would board their coach when they are having fun in another country? The major part of our inadequacy, according to Nassim Nicholas Taleb, lies in our grasp of the events. Taleb says that history is opaque because we can only see what comes out of the events but not the script that produces them. He identifies three ailments of the human mind as it comes into contact with such events.

First of all, the human mind suffers from the illusion of understanding. We think we know what is going on in a world that is more compicated than we realise. When the civil war broke out in Lebanon during Taleb's childhood, he was constantly told by adults that the war, which ended up lasting close to seventeen years, would end in a matter of days. Likewise, as a survivor of the Manila incident painfully and regrettably recalled, the hostages wasted many opportunities to overcome the gunman, even though his sense of self-protection had been low. They did secretly conspire to save themselves by rising against him, and they saw various occasions in which they could have done so, but they had been fooled by the apparent "friendliness" of the gunman, who had apologised to them and had released some weaker hostages. They had also fatally misjudged the ability of the Filipino police to peacefully resolve the case. "We thought that if we could see how easy it was, so could the government," the survivor said. "And if they didn't take action even though there had been so many opportunities, surely they had other plans." And so they decided not to take risks - a decision the survivor would live to regret.

Second, the human mind is inclined to look at past events in a distorted way. This is what Taleb calls "the retrospective distortion". I don't mean to be disspectful, but in the past two weeks since the shooting incident happened, the media have been inundated with with reports of how brave and selfless those who lost their lives had been and even what great people they were during their lifetime. Why is it that such accolade is always lavished to people who died in such cases?

Taleb's third ailment of the human mind - the overvaluation of factual information and the handicap of the authoritative and learned people - is also very evident after the shooting event. The people around me, many of them very well educated, were so desperate in milking every ounce of information from the media. They would then discuss and comment on the event as if they had grasped all the "facts".

The crucial question we should ask ourselves is, why is it that history keeps repeating itself even though there is no lack of lessons from such black swan events for us to learn from?

Black swan boarding a bus

I have no wish to comment on the recent tragedy of a few Hong Kong tourists being shot dead after they were held hostage in a bus in Manila. As in so many other incidents in life, too there are so many unknown facts that making a story or passing judgement is an ignorant and reckless thing to do. Unfortunately, not only is that exactly what media reports are so inclined to do but also the readers and viewers like to dance to the tunes set by the media and the authorities according to their own agenda.

But there is one thing I feel strongly about the case and it is that the incident is a lamentable vindication of Nassim Nicholas Taleb's observations about Black Swans.

Black Swans are rare events whose occurrence and impact tend to be ruled out, overlooked or under-estimated because such events exist outside most people's realm of knowledge and experience. Even though some of us may have taken the trouble of buying travel insurance, how many of us, when we plan or make a trip, would ever imagine that a disaster of such nature or magnitude would happen to us? Rare as it may be, however, something like this incident in Manila does happen, just like the Lebanon in Taleb's childhood, a "paradise" where the Christians and the Moslems had co-existed peacefully for nearly thirteen centuries suddenly "evaporating" because of "a few bullets and mortar shells". The conflict was to evolve into a brutal cival war which lasted over a decade and a half.

Black Swans can and do exist, whether we are ready or not.