The Financial Translator’s Bookshelf: The second expanded edition of Nassim Nicholas Taleb’s Black Swan

I admit it: I am a “Black Swan” groupie. Maybe I’m one of those people who heartily express their agreement with Taleb and then go back to applying the same flawed models “made in Mediocristan” to illuminate our way through Extremistan. But I still delude myself into thinking that the book had a profound impact on me. That I am wiser because of it. Maybe if I read the book enough times I will some day cease to be a turkey… In any case, I bought the second edition, not just for the new section but also to re-read the entire book. Ok, the impact of a second reading is not the same sensation of being struck by a thunderbolt that you felt three years ago. For one thing, Taleb’s ideas have gone mainstream. They’re simply everywhere. I was recently listening to a lecture from British astronomer Martin Rees and, boom, the Black Swan is there. The concept even pops up in books written before 2000 (read Stephen Jay Gould’s Full House: The Spread of Excellence from Plato to Darwin for a pre-Talebian critique of the Gaussian curve that sounds distinctly familiar). For another, a megacatastrophe like the 2008 financial meltdown has made us more amenable to the idea that the universe is probably less stable than we delude ourselves into believing, and that “economy” and “equilibrium” should probably not be used in the same sentence.
So is it worth buying the expanded edition? The author has apparently been told one too many times that there aren’t enough positive recommendations in the original book. Busy executives want “actionable lists.” Editors want tidy tips to put at the back of the book. Although Taleb protests repeatedly that negative advice is just as useful as positive prescriptions, he caves in to a certain extent and –in his trademark obnoxious style– goes on to lay out several useful dictums to guide you in life, some more tongue-in-cheek than other (“Don’t give dynamite sticks to children even if warning labels are attached”). Having drunk the Kool-Aid, I found the section enjoyable (not surprisingly), but probably the most useful tip is that it highlights over and over the importance of the “barbell strategy” laid out in Chapter 13: don’t be moderately conservative or moderately aggressive; rather, be hyperconservative but leave some exposure to positive Black Swans. In any case, if you want very explicit answers to the burning questions of the moment, you will find some here: further stimulus runs the risk of setting in motion inflationary forces that are scarily non-linear; don’t let anything become too big to fail; love redundancy, etc. Hey, there’s even a hint at a pre-historic diet and exercise plan. Somebody get this man a Dear Abby column. Better yet: when is the “Black Swan Cookbook” coming out? I’m only half joking. I would totally buy it.