I have been finishing up The Black Swan by Nassim Nicholas Taleb this weekend. (I happen to be listening to this book on my iPod. I love listening to books, but that is a different story.)
The book is about role of the improbable and chance play in the world — both in small personal matters and in global, historical events. It is a philosophical work of “empirical skepticism” by a former Wall Street trader. (Given what has happened to the economy since he wrote the book, it certainly warrants a close read.)
One of the points that Taleb brings up in the book is the general state of “epistemic arrogance” of human beings. Meaning that, in general, we are more confident in what we think we know then we ought to be. He makes no bones about the fact that economists and many social scientists are particularly hard hit with the vice of epistemic arrogance!
This morning I was searching for an article I had heard about regarding Jonathan Coulton on the Freakonomics Blog of the New York Times. I came across this post by Steven Levitt, author of Freakonomics, with his predictions for the Kentucky Derby.
Let me quote Levitt:
If I had to pick a last-place finisher (a bet they would never actually offer at the track because people involved with horse racing understand better than most that people respond to incentives), it would be Mine That Bird.
And we all know now that Mine That Bird won!
As Bill Finney wrote for Espn.com:
This was a lot more than an upset; it was the most inconceivable result in the 135-year history of the race. An impossibility, that’s what this was.
Black swans, indeed!