Harvesting Black Swans

Taleb has dedicated his professional career to exploring risks that lie outside of "normal" expectations. It has obviously taken some personal toll, "Every morning the world appears to me more random than it did the day before, and humans seem to be even more fooled by it than they were the previous day. It is becoming unbearable." he writes.

The cause for his discomfort is the occurrence of far more extreme events, Black Swans, than we might expect if the distribution of events fits within the Gaussian bell curve. This curve was first used to describe probability distributions in the natural world and is now a fundamental pillar of modern investment theory.

The standard approach to investing assumes that return distributions can be accurately described by the bell curve. Black Swans are assumed to be extremely rare events that are not worth worrying about. The problem with this approach in investing is that these events happen more often than they should, and when they do, they can be catastrophic. Taleb recommends that you turn the approach to risk on its head and consider Black Swan risk first. His answer is to barbell risk, keeping most of your investments as safe as possible and putting a small proportion into very risky investments, investments that are highly leveraged to positive Black Swans.