The Diagoras problem—How Black Swans make their way out of history books—Methods to help you avoid drowning—The drowned do not usually vote—We should all be stockbrokers—Do silent witnesses count?—Casanova’s étoile—New York is “so invincible”
Another fallacy in the way we understand events is that of silent evidence. History hides both Black Swans and its Black Swan–generating ability from us.
More than two thousand years ago, the Roman orator, belletrist, thinker, Stoic, manipulator-politician, and (usually) virtuous gentleman, Marcus Tullius Cicero, presented the following story. One Diagoras, a nonbeliever in the gods, was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning. Diagoras asked, “Where were the pictures of those who prayed, then drowned?”
The drowned worshippers, being dead, would have a lot of trouble advertising their experiences from the bottom of the sea. This can fool the casual observer into believing in miracles.
We call this the problem of silent evidence. The idea is simple, yet potent and universal. While most thinkers try to put to shame those who came before them, Cicero puts to shame almost all empirical thinkers who came after him, until very recently.
Later on, both my hero of heroes, the essayist Michel de Montaigne and the empirical Francis Bacon, mentioned the point in their works, applying it to the formation of false beliefs. “And such is the way of all superstition, whether in astrology, dreams, omens, divine judgments, or the like,” wrote Bacon in his Novum Organum. The problem, of course, is that unless they are drilled into us systematically, or integrated into our way of thinking, these great observations are rapidly forgotten.
Silent evidence pervades everything connected to the notion of history. By history, I don’t just mean those learned-but-dull books in the history section (with Renaissance paintings on their cover to attract buyers). History, I will repeat, is any succession of events seen with the effect of posteriority.
This bias extends to the ascription of factors in the success of ideas and religions, to the illusion of skill in many professions, to success in artistic occupations, to the nature versus nurture debate, to mistakes in using evidence in the court of law, to illusions about the “logic” of history—and of course, most severely, in our perception of the nature of extreme events.
You are in a classroom listening to someone self-important, dignified, and ponderous (but dull), wearing a tweed jacket (white shirt, polka-dot tie), pontificating for two hours on the theories of history. You are too paralyzed by boredom to understand what on earth he is talking about, but you hear the names of big guns: Hegel, Fichte, Marx, Proudhon, Plato, Herodotus, Ibn Khaldoun, Toynbee, Spengler, Michelet, Carr, Bloch, Fukuyama, Schmukuyama, Trukuyama. He seems deep and knowledgeable, making sure that no attention lapse will make you forget that his approach is “post-Marxist,” “postdialectical,” or post-something, whatever that means. Then you realize that a large part of what he is saying reposes on a simple optical illusion! But this will not make a difference: he is so invested in it that if you questioned his method he would react by throwing even more names at you.
It is so easy to avoid looking at the cemetery while concocting historical theories. But this is not just a problem with history. It is a problem with the way we construct samples and gather evidence in every domain. We shall call this distortion a bias, i.e., the difference between what you see and what is there. By bias I mean a systematic error consistently showing a more positive, or negative, effect from the phenomenon, like a scale that unfailingly shows you a few pounds heavier or lighter than your true weight, or a video camera that adds a few sizes to your waistline. This bias has been rediscovered here and there throughout the past century across disciplines, often to be rapidly forgotten (like Cicero’s insight). As drowned worshippers do not write histories of their experiences (it is better to be alive for that), so it is with the losers in history, whether people or ideas. Remarkably, historians and other scholars in the humanities who need to understand silent evidence the most do not seem to have a name for it (and I looked hard). As for journalists, fuhgedaboudit! They are industrial producers of the distortion.
The term bias also indicates the condition’s potentially quantifiable nature: you may be able to calculate the distortion, and to correct for it by taking into account both the dead and the living, instead of only the living.
Silent evidence is what events use to conceal their own randomness, particularly the Black Swan type of randomness.
Sir Francis Bacon is an interesting and endearing fellow in many respects.
He harbored a deep-seated, skeptical, nonacademic, antidogmatic, and obsessively empirical nature, which, to someone skeptical, nonacademic, antidogmatic, and obsessively empirical, like this author, is a quality almost impossible to find in the thinking business. (Anyone can be skeptical; any scientist can be overly empirical—it is the rigor coming from the combination of skepticism and empiricism that’s hard to come by.) The problem is that his empiricism wanted us to confirm, not disconfirm; thus he introduced the problem of confirmation, that beastly corroboration that generates the Black Swan.
The Phoenicians, we are often reminded, produced no literature, although they allegedly invented the alphabet. Commentators discuss their philistinism from the basis of this absence of a written legacy, asserting that by race or culture, they were more interested in commerce than in the arts. Accordingly, the Phoenician invention of the alphabet served the lower purpose of commercial record keeping rather than the more noble purpose of literary production. (I remember finding on the shelves of a country house I once rented a mildewed history book by Will and Ariel Durant describing the Phoenicians as the “merchant race.” I was tempted to throw it in the fireplace.) Well, it now seems that the Phoenicians wrote quite a bit, but using a perishable brand of papyrus that did not stand the biodegradative assaults of time. Manuscripts had a high rate of extinction before copyists and authors switched to parchment in the second or third century. Those not copied during that period simply disappeared.
The neglect of silent evidence is endemic to the way we study comparative talent, particularly in activities that are plagued with winner-take-all attributes. We may enjoy what we see, but there is no point reading too much into success stories because we do not see the full picture.
Recall the winner-take-all effect from Chapter 3: notice the large number of people who call themselves writers but are (only “temporarily”) operating the shiny cappuccino machines at Starbucks. The inequity in this field is larger than, say, medicine, since we rarely see medical doctors serving hamburgers. I can thus infer that I can largely gauge the performance of the latter profession’s entire population from what sample is visible to me. Likewise with plumbers, taxi drivers, prostitutes, and those in professions devoid of superstar effects. Let us go beyond the discussion on Extremistan and Mediocristan in Chapter 3. The consequence of the superstar dynamic is that what we call “literary heritage” or “literary treasures” is a minute proportion of what has been produced cumulatively. This is the first point. How it invalidates the identification of talent can be derived immediately from it: say you attribute the success of the nineteenth-century novelist Honoré de Balzac to his superior “realism,” “insights,” “sensitivity,” “treatment of characters,” “ability to keep the reader riveted,” and so on. These may be deemed “superior” qualities that lead to superior performance if, and only if, those who lack what we call talent also lack these qualities. But what if there are dozens of comparable literary masterpieces that happened to perish? And, following my logic, if there are indeed many perished manuscripts with similar attributes, then, I regret to say, your idol Balzac was just the beneficiary of disproportionate luck compared to his peers. Furthermore, you may be committing an injustice to others by favoring him.
My point, I will repeat, is not that Balzac is untalented, but that he is less uniquely talented than we think. Just consider the thousands of writers now completely vanished from consciousness: their record does not enter into analyses. We do not see the tons of rejected manuscripts because these writers have never been published. The New Yorker alone rejects close to a hundred manuscripts a day, so imagine the number of geniuses that we will never hear about. In a country like France, where more people write books while, sadly, fewer people read them, respectable literary publishers accept one in ten thousand manuscripts they receive from firsttime authors. Consider the number of actors who have never passed an audition but would have done very well had they had that lucky break in life.
The next time you visit a Frenchman of comfortable means, you will likely spot the stern books from the collection Bibliothèque de la Pléiade, which their owner will never, almost never, read, mostly on account of their uncomfortable size and weight. Membership in the Pléiade means membership in the literary canon. The tomes are expensive; they have the distinctive smell of ultrathin India paper, compressing the equivalent of fifteen hundred pages into the size of a drugstore paperback. They are supposed to help you maximize the number of masterpieces per Parisian square foot. The publisher Gallimard has been extremely selective in electing writers into the Pléiade collection–only a few authors, such as the aesthete and adventurer André Malraux, have made it in while still alive. Dickens, Dostoyevsky, Hugo, and Stendhal are in, along with Mallarmé, Sartre, Camus, and … Balzac. Yet if you follow Balzac’s own ideas, which I will examine next, you would accept that there is no ultimate justification for such an official corpus.
Balzac outlined the entire business of silent evidence in his novel Lost Illusions. Lucien de Rubempré (alias of Lucien Chardon), the penurious provincial genius, “goes up” to Paris to start a literary career. We are told that he is talented—actually he is told that he is talented by the semiaristocratic set in Angoulême. But it is difficult to figure out whether this is due to his good looks or to the literary quality of his works—or even whether literary quality is visible, or, as Balzac seems to wonder, if it has much to do with anything. Success is presented cynically, as the product of wile and promotion or the lucky surge of interest for reasons completely external to the works themselves. Lucien discovers the existence of the immense cemetery inhabited by what Balzac calls “nightingales.”
Lucien was told that this designation “nightingale” was given by bookstores to those works residing on the shelves in the solitary depths of their shops.
Balzac presents to us the sorry state of contemporary literature when Lucien’s manuscript is rejected by a publisher who has never read it; later on, when Lucien’s reputation has developed, the very same manuscript is accepted by another publisher who did not read it either! The work itself was a secondary consideration.
In another example of silent evidence, the book’s characters keep bemoaning that things are no longer as they were before, implying that literary fairness prevailed in more ancient times—as if there was no cemetery before. They fail to take into account the nightingales among the ancients’ work! Notice that close to two centuries ago people had an idealized opinion of their own past, just as we have an idealized opinion of today’s past.
I mentioned earlier that to understand successes and analyze what caused them, we need to study the traits present in failures. It is to a more general version of this point that I turn next.
Numerous studies of millionaires aimed at figuring out the skills required for hotshotness follow the following methodology. They take a population of hotshots, those with big titles and big jobs, and study their attributes. They look at what those big guns have in common: courage, risk taking, optimism, and so on, and infer that these traits, most notably risk taking, help you to become successful. You would also probably get the same impression if you read CEOs’ ghostwritten autobiographies or attended their presentations to fawning MBA students.
Now take a look at the cemetery. It is quite difficult to do so because people who fail do not seem to write memoirs, and, if they did, those business publishers I know would not even consider giving them the courtesy of a returned phone call (as to returned e-mail, fuhgedit). Readers would not pay $26.95 for a story of failure, even if you convinced them that it had more useful tricks than a story of success.* The entire notion of biography is grounded in the arbitrary ascription of a causal relation between specified traits and subsequent events. Now consider the cemetery. The graveyard of failed persons will be full of people who shared the following traits: courage, risk taking, optimism, et cetera. Just like the population of millionaires. There may be some differences in skills, but what truly separates the two is for the most part a single factor: luck. Plain luck.
You do not need a lot of empiricism to figure this out: a simple thought experiment suffices. The fund-management industry claims that some people are extremely skilled, since year after year they have outperformed the market. They will identify these “geniuses” and convince you of their abilities. My approach has been to manufacture cohorts of purely random investors and, by simple computer simulation, show how it would be impossible to not have these geniuses produced just by luck. Every year you fire the losers, leaving only the winners, and thus end up with long-term steady winners. Since you do not observe the cemetery of failed investors, you will think that it is a good business, and that some operators are considerably better than others. Of course an explanation will be readily provided for the success of the lucky survivors: “He eats tofu,” “She works late; just the other day I called her office at eight P.M. …” Or of course, “She is naturally lazy. People with that type of laziness can see things clearly.” By the mechanism of retrospective determinism we will find the “cause”—actually, we need to see the cause. I call these simulations of hypothetical cohorts, often done by computer, an engine of computational epistemology. Your thought experiments can be run on a computer. You just simulate an alternative world, plain random, and verify that it looks similar to the one in which we live. Not getting lucky billionaires in these experiments would be the exception.*
Recall the distinction between Mediocristan and Extremistan in Chapter 3. I said that taking a “scalable” profession is not a good idea, simply because there are far too few winners in these professions. Well, these professions produce a large cemetery: the pool of starving actors is larger than the one of starving accountants, even if you assume that, on average, they earn the same income.
The second, and more vicious, variety of the problem of silent evidence is as follows. When I was in my early twenties and still read the newspaper, and thought that steadily reading the newspapers was something useful to me, I came across an article discussing the mounting threat of the Russian Mafia in the United States and its displacement of the traditional Louie and Tony in some neighborhoods of Brooklyn. The article explained their toughness and brutality as a result of their being hardened by their Gulag experiences. The Gulag was a network of labor camps in Siberia where criminals and dissidents were routinely deported. Sending people to Siberia was one of the purification methods initially used by the czarist regimes and later continued and perfected by the Soviets. Many deportees did not survive these labor camps.
Hardened by the Gulag? The sentence jumped out at me as both profoundly flawed (and a reasonable inference). It took me a while to figure out the nonsense in it since it was protected by cosmetic wrapping; the following thought experiment will give the intuition. Assume that you’re able to find a large, assorted population of rats: fat, thin, sickly, strong, well-proportioned, et cetera. (You can easily get them from the kitchens of fancy New York restaurants.) With these thousands of rats, you build a heterogeneous cohort, one that is well representative of the general New York rat population. You bring them to my laboratory on East Fifty-ninth Street in New York City and we put the entire collection in a large vat. We subject the rats to increasingly higher levels of radiation (since this is supposed to be a thought experiment, I am told that there is no cruelty in the process). At every level of radiation, those that are naturally stronger (and this is the key) will survive; the dead will drop out of your sample. We will progressively have a stronger and stronger collection of rats. Note the following central fact: every single rat, including the strong ones, will be weaker after the radiation than before.
An observer endowed with analytical abilities, who probably got excellent grades in college, would be led to believe that treatment in my laboratory is an excellent health-club replacement, and one that could be generalized to all mammals (think of the potential commercial success). His logic would run as follows: Hey, these rats are stronger than the rest of the rat population. What do they seem to have in common? They all came from that Black Swan guy Taleb’s workshop. Not many people will have the temptation to go look at the dead rats.
Next we pull the following trick on The New York Times: we let these surviving rats loose in New York City and inform the chief rodent correspondent of the newsworthy disruption in the pecking order in the New York rat population. He will write a lengthy (and analytical) article on the social dynamics of New York rats that includes the following passage: “Those rats are now bullies in the rat population. They literally run the show. Strengthened by their experience in the laboratory of the reclusive (but friendly) statistician/philosopher/trader Dr. Taleb, they …”
There is a vicious attribute to the bias: it can hide best when its impact is largest. Owing to the invisibility of the dead rats, the more lethal the risks, the less visible they will be, since the severely victimized are likely to be eliminated from the evidence. The more injurious the treatment, the larger the difference between the surviving rats and the rest, and the more fooled you will be about the strengthening effect. One of the two following ingredients is necessary for this difference between the true effect (weakening) and the observed one (strengthening): a) a degree of inequality in strength, or diversity, in the base cohort, or b) unevenness, or diversity, somewhere in the treatment. Diversity here has to do with the degree of uncertainty inherent in the process.
We can keep going with this argument; it has such universality that once we get the bug it is hard to look at reality with the same eyes again. Clearly it robs our observations of their realistic power. I will enumerate a few more cases to illustrate the weaknesses of our inferential machinery.
The stability of species. Take the number of species that we now consider extinct. For a long time scientists took the number of such species as that implied from an analysis of the extant fossils. But this number ignores the silent cemetery of species that came and left without leaving traces in the form of fossils; the fossils that we have managed to find correspond to a smaller proportion of all species that came and disappeared. This implies that our biodiversity was far greater than it seemed at first examination. A more worrisome consequence is that the rate of extinction of species may be far greater than we think—close to 99.5 percent of species that transited through earth are now extinct, a number that scientists have kept raising through time. Life is a great deal more fragile than we have allowed for. But this does not mean we (humans) should feel guilty for extinctions around us; nor does it mean that we should act to stop them—species were coming and going before we started messing up the environment. There is no need to feel moral responsibility for every endangered species.
Does crime pay? Newspapers report on the criminals who get caught. There is no section in The New York Times recording the stories of those who committed crimes but have not been caught. So it is with cases of tax evasion, government bribes, prostitution rings, poisoning of wealthy spouses (with substances that do not have a name and cannot be detected), and drug trafficking.
In addition, our representation of the standard criminal might be based on the properties of those less intelligent ones who were caught.
Once we seep ourselves into the notion of silent evidence, so many things around us that were previously hidden start manifesting themselves. Having spent a couple of decades in this mind-set, I am convinced (but cannot prove) that training and education can help us avoid its pitfalls.
What do the popular expressions “a swimmer’s body” and “beginner’s luck” have in common? What do they seem to share with the concept of history?
There is a belief among gamblers that beginners are almost always lucky. “It gets worse later, but gamblers are always lucky when they start out,” you hear. This statement is actually empirically true: researchers confirm that gamblers have lucky beginnings (the same applies to stock market speculators). Does this mean that each one of us should become a gambler for a while, take advantage of lady luck’s friendliness to beginners, then stop?
The answer is no. The same optical illusion prevails: those who start gambling will be either lucky or unlucky (given that the casino has the advantage, a slightly greater number will be unlucky). The lucky ones, with the feeling of having been selected by destiny, will continue gambling; the others, discouraged, will stop and will not show up in the sample. They will probably take up, depending on their temperaments, bird-watching, Scrabble, piracy, or other pastimes. Those who continue gambling will remember having been lucky as beginners. The dropouts, by definition, will no longer be part of the surviving gamblers’ community. This explains beginner’s luck.
There is an analogy with what is called in common parlance a “swimmer’s body,” which led to a mistake I shamefully made a few years ago (in spite of my specialty in this bias, I did not notice that I was being fooled). When asking around about the comparative physical elegance of athletes, I was often told that runners looked anorexic, cyclists bottom-heavy, and weight lifters insecure and a little primitive. I inferred that I should spend some time inhaling chlorine in the New York University pool to get those “elongated muscles.” Now suspend the causality. Assume that a person’s genetic variance allows for a certain type of body shape. Those born with a natural tendency to develop a swimmer’s body become better swimmers. These are the ones you see in your sample splashing up and down at the pools. But they would have looked pretty much the same if they lifted weights. It is a fact that a given muscle grows almost the same way whether you take steroids or climb walls at the local gym.
Katrina, the devastating hurricane that hit New Orleans in 2005, got plenty of politicizing politicians on television. These legislators, moved by the images of devastation and the pictures of angry victims made homeless, made promises of “rebuilding.” It was so noble on their part to do something humanitarian, to rise above our abject selfishness.
Did they promise to do so with their own money? No. It was with public money. Consider that such funds will be taken away from somewhere else, as in the saying “You take from Peter to give to Paul.” That somewhere else will be less mediatized. It may be privately funded cancer research, or the next efforts to curb diabetes. Few seem to pay attention to the victims of cancer lying lonely in a state of untelevised depression. Not only do these cancer patients not vote (they will be dead by the next ballot), but they do not manifest themselves to our emotional system. More of them die every day than were killed by Hurricane Katrina; they are the ones who need us the most—not just our financial help, but our attention and kindness. And they may be the ones from whom the money will be taken—indirectly, perhaps even directly. Money (public or private) taken away from research might be responsible for killing them—in a crime that may remain silent.
A ramification of the idea concerns our decision making under a cloud of possibilities. We see the obvious and visible consequences, not the invisible and less obvious ones. Yet those unseen consequences can be—nay, generally are—more meaningful.
Frédéric Bastiat was a nineteenth-century humanist of a strange variety, one of those rare independent thinkers—independent to the point of being unknown in his own country, France, since his ideas ran counter to French political orthodoxy (he joins another of my favorite thinkers, Pierre Bayle, in being unknown at home and in his own language). But he has a large number of followers in America.
In his essay “What We See and What We Don’t See,” Bastiat offered the following idea: we can see what governments do, and therefore sing their praises—but we do not see the alternative. But there is an alternative; it is less obvious and remains unseen.
Recall the confirmation fallacy: governments are great at telling you what they did, but not what they did not do. In fact, they engage in what could be labeled as phony “philanthropy,” the activity of helping people in a visible and sensational way without taking into account the unseen cemetery of invisible consequences. Bastiat inspired libertarians by attacking the usual arguments that showed the benefits of governments. But his ideas can be generalized to apply to both the Right and the Left.
Bastiat goes a bit deeper. If both the positive and the negative consequences of an action fell on its author, our learning would be fast. But often an action’s positive consequences benefit only its author, since they are visible, while the negative consequences, being invisible, apply to others, with a net cost to society. Consider job-protection measures: you notice those whose jobs are made safe and ascribe social benefits to such protections. You do not notice the effect on those who cannot find a job as a result, since the measure will reduce job openings. In some cases, as with the cancer patients who may be punished by Katrina, the positive consequences of an action will immediately benefit the politicians and phony humanitarians, while the negative ones take a long time to appear—they may never become noticeable. One can even blame the press for directing charitable contributions toward those who may need them the least.
Let us apply this reasoning to September 11, 2001. Around twenty-five hundred people were directly killed by bin Laden’s group in the Twin Towers of the World Trade Center. Their families benefited from the support of all manner of agencies and charities, as they should. But, according to researchers, during the remaining three months of the year, close to one thousand people died as silent victims of the terrorists. How? Those who were afraid of flying and switched to driving ran an increased risk of death. There was evidence of an increase of casualties on the road during that period; the road is considerably more lethal than the skies. These families got no support—they did not even know that their loved ones were also the victims of bin Laden.
In addition to Bastiat, I have a weakness for Ralph Nader (the activist and consumer advocate, certainly not the politician and political thinker). He may be the American citizen who saved the highest number of lives by exposing the safety record of car companies. But, in his political campaign a few years ago, even he forgot to trumpet the tens of thousands of lives saved by his seat belt laws. It is much easier to sell “Look what I did for you” than “Look what I avoided for you.”
Recall from the Prologue the story of the hypothetical legislator whose actions might have avoided the attack of September 11. How many such people are walking the street without the upright gait of the phony hero?
Have the guts to consider the silent consequences when standing in front of the next snake-oil humanitarian.
Our neglect of silent evidence kills people daily. Assume that a drug saves many people from a potentially dangerous ailment, but runs the risk of killing a few, with a net benefit to society. Would a doctor prescribe it? He has no incentive to do so. The lawyers of the person hurt by the side effects will go after the doctor like attack dogs, while the lives saved by the drug might not be accounted for anywhere.
A life saved is a statistic; a person hurt is an anecdote. Statistics are invisible; anecdotes are salient. Likewise, the risk of a Black Swan is invisible.*
Giacomo Casanova, a.k.a. Jacques, Chevalier de Seingalt. Some readers might be surprised that the legendary seducer did not look quite like James Bond.
This brings us to gravest of all manifestations of silent evidence, the illusion of stability. The bias lowers our perception of the risks we incurred in the past, particularly for those of us who were lucky to have survived them. Your life came under a serious threat but, having survived it, you retrospectively underestimate how risky the situation actually was.
The adventurer Giacomo Casanova, later self-styled Jacques, Chevalier de Seingalt, the wannabe intellectual and legendary seducer of women, seems to have had a Teflon-style trait that would cause envy on the part of the most resilient of Mafia dons: misfortune did not stick to him. Casanova, while known for his seductions, viewed himself as some sort of a scholar. He aimed at literary fame with his twelve-volume History of My Life, written in bad (charmingly bad) French. In addition to the extremely useful lessons on how to become a seducer, the History provides an engrossing account of a succession of reversals of fortune. Casanova felt that every time he got into difficulties, his lucky star, his étoile, would pull him out of trouble. After things got bad for him, they somehow recovered by some invisible hand, and he was led to believe that it was his intrinsic property to recover from hardships by running every time into a new opportunity. He would somehow meet someone in extremis who offered him a financial transaction, a new patron that he had not betrayed in the past, or someone generous enough and with a weak enough memory to forget past betrayals. Could Casanova have been selected by destiny to bounce back from all hardships?
Not necessarily. Consider the following: of all the colorful adventurers who have lived on our planet, many were occasionally crushed, and a few did bounce back repeatedly. It is those who survive who will tend to believe that they are indestructible; they will have a long and interesting enough experience to write books about it. Until, of course …
Actually, adventurers who feel singled out by destiny abound, simply because there are plenty of adventurers, and we do not hear the stories of those down on their luck. As I started writing this chapter, I recalled a conversation with a woman about her flamboyant fiancé, the son of a civil servant, who managed through a few financial transactions to catapult himself into the life of a character in a novel, with handmade shoes, Cuban cigars, collectible cars, and so on. The French have a word for this, flambeur, which means a mixture of extravagant bon vivant, wild speculator, and risk taker, all the while bearing considerable personal charm; a word that does not seem to be available in Anglo-Saxon cultures. The fiancé was spending his money very quickly, and as we were having the conversation about his fate (she was going to marry him, after all), she explained to me that he was undergoing slightly difficult times, but that there was no need to worry since he always came back with a vengeance. That was a few years ago. Out of curiosity, I have just tracked him down (trying to do so tactfully): he has not recovered (yet) from his latest blow of fortune. He also dropped out of the scene and is no longer to be found among other flambeurs.
How does this relate to the dynamics of history? Consider what is generally called the resilience of New York City. For seemingly transcendental reasons, every time it gets close to the brink of disaster, the city manages to pull back and recover. Some people truly believe that this is an internal property of New York City. The following quote is from a New York Times article:
Which is why New York still needs Samuel M. E. An economist who turns 77 today, Mr. E. studied New York City through half a century of booms and busts. … “We have a record of going through tough times and coming back stronger than ever,” he said.
Now run the idea in reverse: think of cities as little Giacomo Casanovas, or as rats in my laboratory. As we put the thousands of rats through a very dangerous process, let’s put a collection of cities in a simulator of history: Rome, Athens, Carthage, Byzantium, Tyre, Catal Hyuk (located in modern-day Turkey, it is one of the first known human settlements), Jericho, Peoria, and, of course, New York City. Some cities will survive the harsh conditions of the simulator. As to others, we know that history might not be too kind. I am sure that Carthage, Tyre, and Jericho had their local, no less eloquent, Samuel M. E., saying, “Our enemies have tried to destroy us many times; but we always came back more resilient than before. We are now invincible.”
This bias causes the survivor to be an unqualified witness of the process. Unsettling? The fact that you survived is a condition that may weaken your interpretation of the properties of the survival, including the shallow notion of “cause.”
You can do a lot with the above statement. Replace the retired economist Samuel E. with a CEO discussing his corporation’s ability to recover from past problems. How about the touted “resilience of the financial system”? How about a general who has had a good run?
The reader can now see why I use Casanova’s unfailing luck as a generalized framework for the analysis of history, all histories. I generate artificial histories featuring, say, millions of Giacomo Casanovas, and observe the difference between the attributes of the successful Casanovas (because you generate them, you know their exact properties) and those an observer of the result would obtain. From that perspective, it is not a good idea to be a Casanova.
Consider the restaurant business in a competitive place like New York City. One has indeed to be foolish to open one, owing to the enormous risks involved and the harrying quantity of work to get anywhere in the business, not counting the finicky fashion-minded clients. The cemetery of failed restaurants is very silent: walk around Midtown Manhattan and you will see these warm patron-filled restaurants with limos waiting outside for the diners to come out with their second, trophy, spouses. The owner is overworked but happy to have all these important people patronize his eatery. Does this mean that it makes sense to open a restaurant in such a competitive neighborhood? Certainly not, yet people do it out of the foolish risk-taking trait that pushes us to jump into such adventures blinded by the outcome.
Clearly there is an element of the surviving Casanovas in us, that of the risk-taking genes, which encourages us to take blind risks, unaware of the variability in the possible outcomes. We inherited the taste for uncalculated risk taking. Should we encourage such behavior?
In fact, economic growth comes from such risk taking. But some fool might argue the following: if someone followed reasoning such as mine, we would not have had the spectacular growth we experienced in the past. This is exactly like someone playing Russian roulette and finding it a good idea because he survived and pocketed the money.
We are often told that we humans have an optimistic bent, and that it is supposed to be good for us. This argument appears to justify general risk taking as a positive enterprise, and one that is glorified in the common culture. Hey, look, our ancestors took the challenges—while you, NNT, are encouraging us to do nothing (I am not).
We have enough evidence to confirm that, indeed, we humans are an extremely lucky species, and that we got the genes of the risk takers. The foolish risk takers, that is. In fact, the Casanovas who survived.
Once again, I am not dismissing the idea of risk taking, having been involved in it myself. I am only critical of the encouragement of uninformed risk taking. The überpsychologist Danny Kahneman has given us evidence that we generally take risks not out of bravado but out of ignorance and blindness to probability! The next few chapters will show in more depth how we tend to dismiss outliers and adverse outcomes when projecting the future. But I insist on the following: that we got here by accident does not mean that we should continue to take the same risks. We are mature enough a race to realize this point, enjoy our blessings, and try to preserve, by becoming more conservative, what we got by luck. We have been playing Russian roulette; now let’s stop and get a real job.
I have two further points to make on this subject. First, justification of overoptimism on grounds that “it brought us here” arises from a far more serious mistake about human nature: the belief that we are built to understand nature and our own nature and that our decisions are, and have been, the result of our own choices. I beg to disagree. So many instincts drive us.
Second, a little more worrisome than the first point: evolutionary fitness is something that is continuously touted and aggrandized by the crowd who takes it as gospel. The more unfamiliar someone is with the wild Black Swan–generating randomness, the more he or she believes in the optimal working of evolution. Silent evidence is not present in their theories. Evolution is a series of flukes, some good, many bad. You only see the good. But, in the short term, it is not obvious which traits are really good for you, particularly if you are in the Black Swan–generating environment of Extremistan. This is like looking at rich gamblers coming out of the casino and claiming that a taste for gambling is good for the species because gambling makes you rich! Risk taking made many species head for extinction!
This idea that we are here, that this is the best of all possible worlds, and that evolution did a great job seems rather bogus in the light of the silent-evidence effect. The fools, the Casanovas, and the blind risk takers are often the ones who win in the short term. Worse, in a Black Swan environment, where one single but rare event can come shake up a species after a very long run of “fitness,” the foolish risk takers can also win in the long term! I will revisit this idea in Part Three, where I show how Extremistan worsens the silent-evidence effect.
But there is another manifestation that merits a mention.
I want to stay closer to earth and avoid bringing higher-up metaphysical or cosmological arguments into this discussion—there are so many significant dangers to worry about down here on planet earth and it would be a good idea to postpone the metaphysical philosophizing for later. But it would be useful to take a peek (not more) at what is called the anthropic cosmological argument, as it points out the gravity of our misunderstanding of historical stability.
A recent wave of philosophers and physicists (and people combining the two categories) has been examining the self-sampling assumption, which is a generalization of the principle of the Casanova bias to our own existence.
Consider our own fates. Some people reason that the odds of any of us being in existence are so low that our being here cannot be attributed to an accident of fate. Think of the odds of the parameters being exactly where they need to be to induce our existence (any deviation from the optimal calibration would have made our world explode, collapse, or simply not come into existence). It is often said that the world seems to have been built to the specifications that would make our existence possible. According to such an argument, it could not come from luck.
However, our presence in the sample completely vitiates the computation of the odds. Again, the story of Casanova can make the point quite simple—much simpler than in its usual formulation. Think again of all the possible worlds as little Casanovas following their own fates. The one who is still kicking (by accident) will feel that, given that he cannot be so lucky, there had to be some transcendental force guiding him and supervising his destiny: “Hey, otherwise the odds would be too low to get here just by luck.” For someone who observes all adventurers, the odds of finding a Casanova are not low at all: there are so many adventurers, and someone is bound to win the lottery ticket.
The problem here with the universe and the human race is that we are the surviving Casanovas. When you start with many adventurous Casanovas, there is bound to be a survivor, and guess what: if you are here talking about it, you are likely to be that particular one (notice the “condition”: you survived to talk about it). So we can no longer naïvely compute odds without considering that the condition that we are in existence imposes restrictions on the process that led us here.
Assume that history delivers either “bleak” (i.e., unfavorable) or “rosy” (i.e., favorable) scenarios. The bleak scenarios lead to extinction. Clearly, if I am now writing these lines, it is certainly because history delivered a “rosy” scenario, one that allowed me to be here, a historical route in which my forebears avoided massacre by the many invaders who roamed the Levant. Add to that beneficial scenarios free of meteorite collisions, nuclear war, and other large-scale terminal epidemics. But I do not have to look at humanity as a whole. Whenever I probe into my own biography I am alarmed at how tenuous my life has been so far. Once when I returned to Lebanon during the war, at the age of eighteen, I felt episodes of extraordinary fatigue and cold chills in spite of the summer heat. It was typhoid fever. Had it not been for the discovery of antibiotics, only a few decades earlier, I would not be here today. I was also later “cured” of another severe disease that would have left me for dead, thanks to a treatment that depends on another recent medical technology. As a human being alive here in the age of the Internet, capable of writing and reaching an audience, I have also benefited from society’s luck and the remarkable absence of recent large-scale war. In addition, I am the result of the rise of the human race, itself an accidental event.
My being here is a consequential low-probability occurrence, and I tend to forget it.
Let us return to the touted recipes for becoming a millionaire in ten steps. A successful person will try to convince you that his achievements could not possibly be accidental, just as a gambler who wins at roulette seven times in a row will explain to you that the odds against such a streak are one in several million, so you either have to believe some transcendental intervention is in play or accept his skills and insight in picking the winning numbers. But if you take into account the quantity of gamblers out there, and the number of gambling sessions (several million episodes in total), then it becomes obvious that such strokes of luck are bound to happen. And if you are talking about them, they have happened to you.
The reference point argument is as follows: do not compute odds from the vantage point of the winning gambler (or the lucky Casanova, or the endlessly bouncing back New York City, or the invincible Carthage), but from all those who started in the cohort. Consider once again the example of the gambler. If you look at the population of beginning gamblers taken as a whole, you can be close to certain that one of them (but you do not know in advance which one) will show stellar results just by luck. So, from the reference point of the beginning cohort, this is not a big deal. But from the reference point of the winner (and, who does not, and this is key, take the losers into account), a long string of wins will appear to be too extraordinary an occurrence to be explained by luck. Note that a “history” is just a series of numbers through time. The numbers can represent degrees of wealth, fitness, weight, anything.
This in itself greatly weakens the notion of “because” that is often propounded by scientists, and almost always misused by historians. We have to accept the fuzziness of the familiar “because” no matter how queasy it makes us feel (and it does makes us queasy to remove the analgesic illusion of causality). I repeat that we are explanation-seeking animals who tend to think that everything has an identifiable cause and grab the most apparent one as the explanation. Yet there may not be a visible because; to the contrary, frequently there is nothing, not even a spectrum of possible explanations. But silent evidence masks this fact. Whenever our survival is in play, the very notion of because is severely weakened. The condition of survival drowns all possible explanations. The Aristotelian “because” is not there to account for a solid link between two items, but rather, as we saw in Chapter 6, to cater to our hidden weakness for imparting explanations.
Apply this reasoning to the following question: Why didn’t the bubonic plague kill more people? People will supply quantities of cosmetic explanations involving theories about the intensity of the plague and “scientific models” of epidemics. Now, try the weakened causality argument that I have just emphasized in this chapter: had the bubonic plague killed more people, the observers (us) would not be here to observe. So it may not necessarily be the property of diseases to spare us humans. Whenever your survival is in play, don’t immediately look for causes and effects. The main identifiable reason for our survival of such diseases might simply be inaccessible to us: we are here since, Casanova-style, the “rosy” scenario played out, and if it seems too hard to understand it is because we are too brainwashed by notions of causality and we think that it is smarter to say because than to accept randomness.
My biggest problem with the educational system lies precisely in that it forces students to squeeze explanations out of subject matters and shames them for withholding judgment, for uttering the “I don’t know.” Why did the Cold War end? Why did the Persians lose the battle of Salamis? Why did Hannibal get his behind kicked? Why did Casanova bounce back from hardship? In each of these examples, we are taking a condition, survival, and looking for the explanations, instead of flipping the argument on its head and stating that conditional on such survival, one cannot read that much into the process, and should learn instead to invoke some measure of randomness (randomness, in practice, is what we don’t know; to invoke randomness is to plead ignorance). It is not just your college professor who gives you bad habits. I showed in Chapter 6 how newspapers need to stuff their texts with causal links to make you enjoy the narratives. But have the integrity to deliver your “because” very sparingly; try to limit it to situations where the “because” is derived from experiments, not backward-looking history.
Note here that I am not saying causes do not exist; do not use this argument to avoid trying to learn from history. All I am saying is that it is not so simple; be suspicious of the “because” and handle it with care—particularly in situations where you suspect silent evidence.
We have seen several varieties of the silent evidence that cause deformations in our perception of empirical reality, making it appear more explainable (and more stable) than it actually is. In addition to the confirmation error and the narrative fallacy, the manifestations of silent evidence further distort the role and importance of Black Swans. In fact, they cause a gross overestimation at times (say, with literary success), and underestimation at others (the stability of history; the stability of our human species).
I said earlier that our perceptual system may not react to what does not lie in front of our eyes, or what does not arouse our emotional attention. We are made to be superficial, to heed what we see and not heed what does not vividly come to mind. We wage a double war against silent evidence. The unconscious part of our inferential mechanism (and there is one) will ignore the cemetery, even if we are intellectually aware of the need to take it into account. Out of sight, out of mind: we harbor a natural, even physical, scorn of the abstract.
This will be further illustrated in the next chapter.
* The best noncharlatanic finance book I know is called What I Learned Losing a Million Dollars, by D. Paul and B. Moynihan. The authors had to self-publish the book.
* Doctors are rightfully and vigorously skeptical of anecdotal results, and require that studies of drug efficacy probe into the cemetery of silent evidence. However, the same doctors fall for the bias elsewhere! Where? In their personal lives, or in their investment activities. At the cost of being repetitive, I have to once again state my amazement at the aspect of human nature that allows us to mix the most rigorous skepticism and the most acute gullibility.
* Silent evidence can actually bias matters to look less stable and riskier than they actually are. Take cancer. We are in the habit of counting survival rates from diagnosed cancer cases—which should overestimate the danger from cancer. Many people develop cancer that remains undiagnosed, and go on to live a long and comfortable life, then die of something else, either because their cancer was not lethal or because it went into spontaneous remission. Not counting these cases biases the risks upward.