Taleb’s
Extermistan thesis
The
central point is that we have created a world we don’t understand. There’s a
place he calls Mediocristan. This was where early humans lived. Most events
happened within a narrow range of probabilities – within the bell-curve
distribution still taught to statistics students. But we don’t live there
anymore. We live in Extremistan, where black swans proliferate, winners tend to
take all and the rest get nothing – there’s Bill Gates, Steve Jobs and a lot of
software writers living in a garage, there’s Domingo.
As the economy becomes digital, feedback is stronger, and the inequality and power law is greater
Complex systems are full of interdependencies— hard to detect— and
nonlinear responses. “Nonlinear” means that when you double the dose of, say, a
medication, or when you double the number of employees in a factory, you don’t
get twice the initial effect, but rather a lot more or a lot less. Two weekends
in Philadelphia are not twice as pleasant as a single one— I’ve tried. When the
response is plotted on a graph, it does not show as a straight line (“linear”),
rather as a curve. In such environments, simple causal associations are
misplaced; it is hard to see how things work by looking at single
parts.Man-made complex systems tend to develop cascades and runaway chains of
reactions that decrease, even eliminate, predictability and cause outsized
events. So the modern world may be increasing in technological knowledge, but,
paradoxically, it is making things a lot more unpredictable.
