Black Swan: On the Principles of Sudden Wealth and Prosperity

Note: If you want to make a lot of money or achieve great success, you should read this article. This article involves some theoretical knowledge, but I believe that even those who are tired of science and engineering knowledge can understand it by skipping these fragments.

A Black Swan refers to a low-probability, disruptive event, but here it carries a deeper philosophical meaning. Before the discovery of black swans in Australia, Europeans believed that all swans were white. "Black Swan" was once a common idiom in European speech and writing, used to refer to things that could not possibly exist. However, this unshakable belief collapsed with the appearance of the first black swan.

The existence of the Black Swan implies an unpredictable, major, rare event. It is unexpected, yet it changes everything. Humans tend to over-rely on experience, not realizing that the appearance of a single black swan is enough to overturn everything. However, whether in expectations for the stock market or government decision-making, Black Swans are unpredictable. The "9/11" incident, the US subprime mortgage crisis, and China's snow disaster are all examples.

Randomness is everywhere in life, and the same applies to capital markets. People always use their limited life experience and fragile beliefs to explain unpredictable events; even professionals who are good at calculation are not immune to being fooled by randomness. In fact, what we should do is adapt to this unknown future. This book will teach you to change your way of thinking, seize the opportunities brought by Black Swans, adopt coping strategies, and benefit from them. This book will change our views on the world, human nature, and money.

The "Black Swan" itself is a highly disruptive book; for example, it mocks several Nobel Prize-winning economists and most economists. The author's unique experiences and knowledge background have created such a peculiar book. Its rigorous thinking, broad scope, and rich evidence make it feel like a must-read.

It points out that when thinking, we often rely too much on certain people, things, theories, and data, rather than doubting, especially doubting ourselves. Doubt is恰恰 (precisely) the greatest guarantee for us to make fewer mistakes or serious errors. This aligns well with the ancient saying, "The gentleman examines himself three times a day."

In the world, the normal distribution is not necessarily the only statistical law. Many things cannot be explained by the normal distribution. For example, theories in cosmology about black holes or white dwarfs show such extreme imbalances in mass and volume, but this is the fact. Similarly, many things in our real life are like this.

A famous representative of Black Swan events is the Western Industrial Revolution. The Western Industrial Revolution satisfies the three elements of a Black Swan event: first, it is unexpected; second, it has a significant impact; third, although it is unexpected, human nature compels us to fabricate reasons for its occurrence afterward, and to a greater or lesser extent, we consider it explainable and predictable.

The recent financial crisis is also a typical Black Swan event. The author of this book is very indignant about the "statistical methods" currently used in academia and the models played by economists, believing that these things only have academic significance and cannot guide actual life at all. Mainstream economics today is basically equivalent to classical thermodynamic statistical physics, suitable only for studying equilibrium states.

In one sentence: traditional sociologists and economists like to use the Gaussian normal distribution to describe random events, but many events in our lives are not normally distributed. For example, the sales of best-selling books and the wealth of the rich; their extreme examples are much higher than what the normal distribution predicts. The normal distribution describes a roughly uniform world. However, inequality is an essential attribute of our world. Many distributions in our world follow a power law. The probability of extreme scenarios predicted by this distribution is much higher than that of the normal distribution. This is why ordinary people often underestimate the probability of Black Swans appearing. The so-called "80-20 rule" is actually a characteristic of this uneven distribution.

The power law distribution is closely linked to fractal mathematics. Actually, if you examine the achievements of best-selling authors or the distribution of the wealthy, you will find that its structure is fractal: among every 4 wealthy individuals with a net worth over $100 million, one will have a net worth over $1 billion; and among every 4 individuals with a net worth over $1 billion, one will have a net worth over $10 billion. Those at the $10 billion level looking at those at the $1 billion level is like those at the $1 billion level looking at those at the $100 million level. In other words, fractal structure brings about the power law. Mandelbrot, the well-known founder of fractal science, is a friend of the author of this book. The author of this book dislikes Mandelbrot's use of "self-similar" to describe fractals, because this power law coefficient can be quite imprecise. The author proposes using "self-affine" to describe this phenomenon.

Any Black Swan that can be estimated using fractals and power laws is called a "Gray Swan." There are some other Black Swans for which there is no mathematical model to predict. However, he does not analyze those Black Swans in depth.

After saying so much nonsense, let's get to the main point. Everything mentioned before can be ignored as it has no significance. Fundamentally, the Black Swan theory argues that everything around us is unpredictable, which is undoubtedly wrong. From the perspective of divination and calculation, the grasp of changes in human affairs far exceeds the understanding and grasp of the real world by most mathematicians. Most skilled fortune tellers may not understand those mathematics, but they usually understand this world far better than any economist or mathematician.

This does not mean that mathematics is useless, but rather that mathematicians or economists constantly complicate real-world problems, indefinitely adding various dimensions, resulting in chaos and making things more complicated, ultimately leading to loss of control. This is why many theories look beautiful but cause big problems when applied—they not only fail to simplify things but make them more complicated.

The Black Swan can only be said to have discovered a phenomenon: that there are things in the world that the vast majority of people cannot predict, or that there are things that the vast majority of people have no cognition of, just like the Black Swan. Before the first one was discovered, it is not certain that no one had seen it before, but if those who saw it spoke of it, others might not believe it unless there happened to be some way for most people to see and acknowledge it simultaneously, which could then be taken as a fact.

Therefore, when a Black Swan truly appears, there will be some lag, just like investment. The best entry point is never the lowest point, and the best profit point is never the highest point, because when the lowest and highest points are reached, the public reaction will cause further lag in your subsequent reaction behavior.

For many people in poor living conditions, if they want to change their current destiny, they must first strive to become a Black Swan. First, they must believe in the existence of luck. If they do not believe in luck, they should learn to speculate on luck.

To put it bluntly, the way out is: since work cannot get any worse, why not think about what better paths are available? Within the scope of your abilities, choose jobs that require only a bit of luck to have a high probability of high returns or commissions. From the perspective of destiny, people's careers or financial luck can be divided into "regular" and "irregular." When "regular" doesn't work, it's better to consider "irregular." "Regular" paths include working honestly, getting promoted continuously, becoming a civil servant, getting promoted to official positions, buying and selling, doing business, and earning normal profits. If regular wealth is not good but irregular wealth is good, then it is suitable for doing highly profitable things. If both are not good, it doesn't necessarily mean there is no hope; there are still other methods.

If you want to achieve success quickly, you must at least meet the following two conditions:

-1- Scalable. For example, if you work for a salary, you are not scalable because your wealth depends on the length of your working hours, and your working hours are absolutely limited. Conversely, if you write a book, you are scalable because the sales of your book can be infinite. The Black Swan variable, because it can be extremely extreme, must be scalable. Scalable means you can arbitrarily perform large-number multiplication.

-2- Having self-reinforcing characteristics. That is to say, the richer people are, the easier it is for them to earn more money; the more famous the author, the easier it is to sell books, leading to positive feedback, making the author even more famous. The probability of wealth increase increases as wealth itself grows. It is this nature that determines the power law distribution.

If you haven't understood the above content, it is recommended that you just go back to working honestly and keep buying lottery tickets every day; maybe one day you will win.