Avoiding Narrative Fallacies

Although we can't avoid being drawn to narratives (that is part of what it means to be human), we can avoid narrative fallacies by...

• "Favoring experimentation over story telling."

• "Favoring experience over history."

• "Favoring clinical knowledge over theories."

Strategies for Living in the Antechamber of Hope

Using the example of Nero the Trader, Taleb says that is not bad to gamble on a big win in the face of continuous but small losses. However, this strategy requires that one has...

• "belief"

• "the capacity for delayed gratification"

• "the willingness to be spat upon without blinking"

One needs to think for the long haul.

One needs to engage in non-stop bottom-up tinkering, to be open to luck, and to hang around where good luck happens.

About Predicting

Don't worry too much about simple, non-consequential matters. Go ahead and make predictions. Be human. It's what we do.

However, for stuff that does matter, when the black swan potential is high (for good or ill). follow these rules:

1. Know the difference between activities that result in negative and positive black swans. Minimize your exposure to the first and maximize your exposure to the second (e.g., put 85% of your money in T-Notes and the rest in a diversified portfolio of high-risk bonds).

2. "Seize any opportunity, or anything that looks like an opportunity." Take advantage of good luck; it doesn't happen that often. Hang around where good luck happens. Go to parties. Socialize.

3. Don't trust plans and predictions made by any organization. They don't know what they are talking about.

4. Get in situations with asymmetrical rewards. Pursue risky ventures where the downside is tolerable and the rewards are great. Rather than worry about the probability of every act, perform a lot of acts.

5. Don't tunnel. Don't obsess over the small stuff.

In General

• Worry about what you can fix. Don't worry about the rest.

• Aggressively pursue opportunities when there is the possibility of great gain and limited pain. Otherwise, be careful.

• Choose your fate. Don't rush after trains you will miss.

• Don't avoid opportunities because of embarrassment.

• Marvel at the black swan of your own existence.