Fooled by Randomness
Posted on August 16, 2004 in web.
Naseem Taleb is a very interesting guy -- a stock options trader, an essayist, an observor of life. He studies randomness and sums up his work in one sentence: "We don't know that we don't know."
"Much of what happens in history", he notes, "comes from 'Black Swan dynamics', very large, sudden, and totally unpredictable 'outliers', while much of what we usually talk about is almost pure noise. Our track record in predicting those events is dismal; yet by some mechanism called the hindsight bias we think that we understand them. We have a bad habit of finding 'laws' in history (by fitting stories to events and detecting false patterns); we are drivers looking through the rear view mirror while convinced we are looking ahead."
"Why are we so bad at understanding this type of uncertainty? It is now the scientific consensus that our risk-avoidance mechanism is not mediated by the cognitive modules of our brain, but rather by the emotional ones. This may have made us fit for the Pleistocene era. Our risk machinery is designed to run away from tigers; it is not designed for the information-laden modern world."
Comments ...
| ||||||
