Living with Complexity

October 12, 2009 Leave a comment

In last week’s New Yorker, John Cassidy wrote a must-read article entitled “Rational Irrationality – The real reason that capitalism is crash-prone”. It is about the complexity of the financial market and brings to mind another classic book written by Nassim Nicholas Taleb, “The Black Swan – The impact of the highly improbable“.

Both the article and the book deal with what Nassim Taleb describes as the characteristics of a black swan (i.e. a highly improbable event), which are: it is unpredictable; it carries a massive impact and after the fact we concoct an explanation that makes it more predictable than it was. The near financial collapse (saved from complete collapse by government intervention), the astonishing success of Google and 9/11 are all black swans. Both authors speak directly to our human limitations in explaining our inability to see what’s coming whether opportunity or disaster. A major reason according to Taleb is that humans are hard-wired to focus on specifics when we should be focused on generalities. We concentrate on what we know and simplify, narrate and categorize. And, we simply do not reward those who can imagine the impossible.

John Cassidy writes about the phenomena as a more root cause explanation of the recent financial meltdown and calls it rational irrationality – when the specifics of the situation and individual behaviors can be described as perfectly reasonable but when aggregated in the marketplace, produces calamity.

Taleb offers great advice at the end of his book about living in this complex and unpredictable world which is advice that he received from a friend “never run for a train” because missing a train is only painful if you run after it. In other words, you are only exposed to the improbable if you let it control you. If you are clear on your purpose and you live your life with attention and intention you can be undaunted by the complexity and the improbable.

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