The black swan Book Presentation

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  • 1. crises: Terrorism, Global warming, pandemic viruses, recession and global wars
  • Pandemic, Global warming, Global recession, Terrorism and fads (books, music and movies) Index fallen by 29.2 per cent and the odds are 10^50
  • 1. Thought Experiment : Bringing 1000 persons in a room and measuring the heights and wealth and book sales
  • Daniel Kahneman and Amos Tversky from Israel ( Heuristics and Biases – Nobel Prize for Economics in 2002) Confirmation bias : Terrorists and counting sequence (2,4,6..), Global warming and how Pakistanis and Indians read the same news with different perspective Narrative fallacy:1) 13:01 US Treasuries fall; Hussein capture may not curb terrorism and 13:31 US Treasuries rise; Hussein capture boosts allure of risky assets;2) which is more likely –a massive flood somewhere in America or a massive flood in California 3) see in the back page Ludic fallacy: Life is not a game defined rules, players and pay-offs, Dr. John Vs Fat tony & Casino Case study Silent evidence: How to become a millionaire in ten steps. Get the economist article from Predictably irrational
  • Philip Tetlock research- Taken 27,000 predictions from 300 specialists and asked to predict events in political, economic and military events Empirical tests shown that we are bad at guessing as our error rate is 15% to 30% Take example of IIM grad Vs Avenue Rd. babu and get the example of Mona Lisa painting valuation
  • Sherwin Rosen “The economics of superstars” (Ex: a r rahman classical hits for Rs 100 or Joshua Julias guitar melodies for Rs 90; Microsoft Vs Apple ; 3 idiots (Life is a race, Rs 240 Crs gross sales in first week) Get the web link of the most common words
  • Get the exponential laws in web from the video Wealth distribution, book sales, hits of websites, frequency of words, telephone calls received, magnitude of earthquakes, population of cities &* add market charts- daily, monthly and yearly &* add gud designs of fractal geometry &* Give them one exercise to draw a simple fractal

Transcript

  • 1. The Black SwanBook PresentationPresentation by Pradeep
  • 2. “The world will not evolve past its current state of crises by using the samethinking that created the situation” ….. Albert Einstein Pradeep-XYZ
  • 3. Music Theme Irregular Risk Fracture Noise Disorder Imperfect Chaos Crises Failure Complex Roughness Unknown Error Irrational err… Unlucky Pradeep-XYZ
  • 4. Connect the dots Pradeep-XYZ
  • 5. Contents What is a Black Swan ? The World Today Problem of induction and biases We just can’t predict Aesthetics of randomness Conclusion- Lessons from The Black Swan Pradeep-XYZ
  • 6. What is a Black swan ? History behind the title (Once upon a time in Europe) Highly improbable (difficult to predict- an outlier) Highly Consequential Retrospective ( see it coming!) Pradeep-XYZ
  • 7. Examples 9/11 Oct. 19, 1987 Harry Potter Computer Internet iPod (10 years back) Google(15 years back) Pradeep-XYZ
  • 8. The world today Extremistan Vs Mediocristan1 The Flat World (Globalised and interconnected with Web) Recursive (The Harry Potter effect) Pradeep-XYZ
  • 9. Mediocristan Vs Extremistan Mild Randomness Wild Randomness [ Height, Weight, IQ] [ Wealth, Book Sales, Hits] Pradeep-XYZ
  • 10. Problem of induction Pradeep-XYZ
  • 11. Biases Behavioral Economists- irrationality (Daniel Kahneman and Amos Tversky1) Confirmation bias2 Narrative fallacy3 Silent evidence Fight with the pecking order Ludic fallacy4 Pradeep-XYZ
  • 12. System 1 and System 2 (Biases) System 1 : Experiential one, effortless, automatic, fast, Opaque, parallel-processed and can lend itself to errors System 2 : the cognitive one (thinking), reasoned, effortful, slow, logical, serial and self aware Pradeep-XYZ
  • 13. Economist.com – what’s your choice ? Pradeep-XYZ
  • 14. Economist.com- what’s wrong ? Pradeep-XYZ
  • 15. Narrative fallacy (Biases) A BIRD IN THE THE HAND IS WORTH TWO IN THE BUSH Pradeep-XYZ
  • 16. We just cant predict Examples Track record – Philip Tetlock’s research1 and WWII Attitude towards prediction2 ? (I don’t know Vs Guesstimation) Tools of predictions (Bell curve-extremistan and Spreadsheet- anchoring) Serendipitous world (Sextus empiricus) & Complex world (Sensex and Swine flu) What to do when you can’t predict ? Pradeep-XYZ
  • 17. Examples on prediction errors Computer (IBM) Telephone Beatles (expectation) Recent economic recession Tsunami Charles Darwin’s “The origin of species” paper Pradeep-XYZ
  • 18. “This telephone has too many shortcomings to be seriously consideredas a means of communication. The device is inherently of no value to us.” (Western Union memo, 1876) Pradeep-XYZ
  • 19. “I think there’s a world market for maybe five computers.” (Thomas Watson, Chairman of IBM, 1943) Pradeep-XYZ
  • 20. "Everything that can be invented has been invented." -- Charles H. Duell, Commissioner, U.S. Office of Patents, 1899. Pradeep-XYZ
  • 21. “We don’t like their sound and guitar music is on the way out.” (Decca Recording Company rejecting the Beatles, 1962) Pradeep-XYZ
  • 22. Aesthetics of randomness From Mediocristan to Extremistan Challenges with Bell-curve Fractal Geometry (aka Geometry of nature) Pradeep-XYZ
  • 23. Mediocristan to Extremistan The economics of superstars1 Cumulative advantage (Academic citations) Lingua franca2 (Zipf’s law) The Long Tail- Chris Anderson Globalisation (Reason behind recent recession ?) Pradeep-XYZ
  • 24. The aesthetics of randomness Benoit Mandelbrot ( Rock star of Mathematics- Author- (Mis) behavior of markets) Fractal Geometry or Geometry of Nature (irregularity, Chaos ) What’s common (Connect Dots ?) (Music, Literature, Markets, Sociology, Temples, Nature, Star wars graphics) Symmetry, Scalable2 , exponential1 80/20 or 50/01 Pradeep-XYZ
  • 25. Pradeep-XYZ
  • 26. Pradeep-XYZ
  • 27. Fractals captured in camera… Pradeep-XYZ
  • 28. Indian Temples Pradeep-XYZ
  • 29. Animated fractal mountain Pradeep-XYZ
  • 30. The End“Our knowledge can only be finite, while our ignorance must necessarily be infinite.”…Karl Popper Pradeep-XYZ
  • 31. Appendix Pradeep-XYZ
  • 32. What to do when you can’t predict ? Being a fool in the right places (be human) Be prepared (Barbell strategy) The idea of positive accident (love to fail as Americans do) Pradeep-XYZ
  • 33. Time Scale Pradeep-XYZ