Monday, November 24, 2008

The Black Swan by Nassim Taleb

I'm reviewing this book not because anyone else is likely to read it (it's a statistical discussion) but because I'll be referencing it in phone chats and notes hereafter. The title refers to how everyone can have an understanding of existence and a single observation can completely change that understanding. Every so often , that event also may have large consequences. In this case it was all Europeans being sure swans were only white because those were the only ones they had ever seen. After seeing a single Australian black swan, that theory of many centuries was shown to be wrong.

The book's point is that we view most of our existence in the same way, as if it were a statistical bell curve. If X observations have not indicated our understanding is wrong, then the chances of it being wrong are so remote as to be almost impossible. However, most things in life do not conform to the bell curve and lack of proof of an outlier is not the same as proof of the model we have in our head. Most of life's processes, including economics, history, social sciences and even many scientific areas, do not correspond to a linear formula. The reason an idea or a scientific model becomes dominant is not due to the merits of the idea or model but to luck and social dynamics related to the herd instinct. Other ideas and models can be more accurate or "better" and die off for reasons not related to the idea or model. Even a formula that may work under restricted (and unnatural) constraints will spin out of control in a short time span because of unknown or misunderstood interactions. We see this yearly with government and scientific predictions that fall apart in weeks, months or a few years, yet react strongly to embrace the next prediction with fervor.
So what? Taleb feels we are living in a world of increasing black swans due to the increased complexity of our world. Since his area of expertise is economics (he was a Wall Street options trader, among other things) economics is his main focus. He wrote this book in the last half of 2006, yet one of his points is "...As if we did not have enough problems, banks are now more vulnerable to the Black Swan ...than ever before with "scientists" among their staff taking care of exposures. The giant firm J.P. Morgan put the entire world at risk by introducing in the nineties RiskMetrics, a phony method aiming at managing people's risks, causing the generalized use of (a) fallacy... Likewise, the government-sponsored institution Fanny Mae, when I look at their risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events "unlikely."'
Wow, did he nail that two years ahead of the event. So what do we do if many of these big events can happen without us being able to predict them and yet those events can substantially change our life?
Don't worry about the stuff you can't control. The fact that any of us lives is a statistical miracle. Enjoy it. Rely on the things you know through practical experience. Be conservative if the downside risk of a chance failure is more than you can live with. Conversely, if you are working in an area where minor variance can occasionally produce huge payouts, expose yourself to those circumstances as much as possible. The richest, or longest living, or healthiest (pick your desired category for existence) person got there by having the luck of being in the right place at the right time with the right gifts (good genes, the right parents, the right culture, etc.) and then the skills to exploit the situation. In the case of investing, Taleb figures we don't really know the odds of most investments working out, so he's ultraconservative with about 85% of his investments (government bonds) and then invests the other 15% in those areas where a single breakout could make him ultra rich e.g. some computer companies in the early '90s, yet if he guesses wrong the chance of all of the 15% of the investments being hugely bad are not very high.
If you do read the book, he's pretty pleased with himself and is not afraid to throw zingers at authority. It's a fun read and if you decide to skip most of the statistical discussion and take his word for it, there are some profound insights worth retaining.

Monday, November 10, 2008

The Life of Andrew Jackson by Robert Remini

I picked this up to fill in some gaps about American politics in the first half of the 19th century. It is an abridgement of a three book set that won the National Book Award in 1984.

From the beginning, Jackson's life was an adventure. He fought in the Revolution at 13 and was orphaned in the same year. He fought duals, had a controversial romantic life, fought Indians and the British, and reshaped American political and governmental life. It is a life that a fiction script writer would risk criticism for inserting so many near-death experiences, national firsts and bigger than life characteristics. He is justifiably controversial for having elevated the presidency to its modern executive status, for moving almost all eastern native American tribes to lands west of the Mississippi, for balancing the budget for the first time since the Revolution, changing national banking practices, etc.

When I read about FDR last month I came away with mixed emotions due to his character flaws and strengths combined with some governmental successes. He pales in comparison to Jackson, both for his flaws, his strengths, and his governmental outcomes. What was most surprising was the many similarities to issues that were addressed in this last election. Jackson took actions that reminded me of Bush, except Jackson was more courageous and competent. He also took stands that Democrats would applaud, especially since he created the Democratic party. He probably reminds me most of Teddy Roosevelt but is a unique individual. You will not be bored with this story and will come away with an excellent understanding of people like Calhoun, Clay, Webster, J.Q. Adams, and those presidents who followed Jackson into the 1840's. A worthwhile read and one that will leave me thinking about a president's place in the American governmental triumvirate for a long time.

Tuesday, November 04, 2008

The Reluctant Fundamentalist

This book was one I picked up a few times throughout the last year or so and finally decided to give a try after reading some rave reviews. And while it was a good book, I really wanted to like it more than I did.
The story is told as a single monologue to an anonymous person who the main character, Changez, meets and sits down with at a cafe. Changez is a young Pakistani who is educated in the US (Princeton), falls in love, and is working at a great firm making a great living. But, while out of the country on 9/11, he finds that, upon his return to the US, the way in which he is perceived, and hence, the way he perceives the country as a whole, has changed drastically. He is profiled and experiences prejudices he never thought possible and eventually returns home to Pakistan to find that his perceptions of his homeland have changed as well. He seems to have an almost knee-jerk reaction to what he sees as a typically American snobbery, elitism, and entitlement. So, he becomes...yep, you guessed it! A reluctant fundamentalist.
It's a quick read and an interesting book, catching a glimpse inside the struggles with identity and sense of pride for your home that I'm sure many people experienced in the months and years after 9/11. But, again, I just couldn't really come to care about the character too much and really just found myself wanting to like this book more than I did. Could be a case of just reading it at the wrong time, or could just be the fact that it didn't click with me. Overall, I don't think any of you would really be riveted by this book, but I'm glad I read it. Fulfilled my curiosity and was a pleasant way to spend a few days. Not a glowing review, but they can't all be "Stori Telling"!

Monday, November 03, 2008


So I borrowed this book from Natalie, who highly recommended it. She and I typically have pretty similar book taste and exchange books often. However, this was one (much like "Middlesex") that I did not take to quite like she did.

The story is told mostly through the papers, diaries, and phonograph recordings of people involved in this bizarre story. The general story line is that of a Count that plans to move to a more urban setting (London) where there is a richer "diet." There he finds lots of women (who he can sink his teeth into). But he runs into some opposition, though he always seems to be one step ahead of them. It is interesting to observe the technologies and ideologies of the time, as Stoker describes them, but overall I just found it a bit too...ridiculous. Perhaps I should've read it as more of a comedy, though, because upon reflection, I think that may have been the intent, to a point. And by no means was it poorly written, but I tend not to be drawn so much to this time period in general and the overall writing style.
Having said that, of the blogging enthusiasts in the family I would say this is something dad or Amanda would gravitate to more than mom. It's a dense book but could be worth your time, especially since it is a classic. And, quite appropriately timed (more or less) with Halloween!

Breakfast at Tiffany's by Truman Capote

Not sure how many of you have seen the movie version of "Breakfast at Tiffany's", but I saw the movie before reading the short story by Truman Capote and they are quite different. But different in a great way! The short story is about Holly Golightly and her relationship with her neighbor (the narrator). Throughout the story they became good friends and you soon realize that the narrator hasn't seen Holly in 15 years and that the beginning of the story is actually the end (and I typically love books like this). Holly is a bit flighty and lost, but seems to catch the attention and adoration of those who encounter her. She is constantly wondering, roaming, searching for a place to belong. However, Truman Capote leaves us not knowing quite what has happened to Holly - did she ever find a sense of home or peace?
When I was searching for a picture of the book cover online I stumbled across a review of the book that seems to sum it up quite well (better than I ever could):
"Holly is the epitome of wild things, for what place does a wild thing belong but in the wild? It puts forth the question but not the answer of where a wild thing belongs when there is no wilderness left. But the cat, a wonderer who found a home, gives us some hope, that a wild thing can find a place to belong, and not be caged. It is a motif that Capote exposes with a charming tale and a truly unforgettable character. "
And that about does it! You can easily read this short story in a few hours and it's defintely worth the read! Enjoy!

The Shape Shifter by Tony Hillerman

I thought I'd just give a short plug for Tony Hillerman, since he pasted away a little more than a week ago. This was his last book and I'd recommend the series. In brief, these books feature an older Navajo police lieutenant and a younger police sergeant who solve cases in reservation areas of the southwest tribes in Arizona, New Mexico, Colorado, and Utah. The FBI is responsible for handling felonies like murder and armed robbery, but often do not understand the underlying dynamics of those indian cultures. The two Navajo policemen do and often solve the cases by coming at them from another point of view and a different entry point, like a stolen pot or container of pine sap.

Some of the most satisfying reading for me is to be immersed in a culture very different from my own and following an interesting human dilemma using points of view that blend the familiar human condition with the unique issues associated with a different culture. In his best books, Hillerman pulled it off well. If you want to get a feel for his writing, try some early books, although this one stands alone as a decent mystery.