Feisal Naqvi

Black swans and dead turkeys

In Uncategorized on March 4, 2008 at 4:08 am

What do you do with this black swan now that it has shown up? Do you go back to living in Mediocristan? Do you assume that politics as usual is about to return? Or, do you try living in Extremistan in the belief that this is one of those moments when hope and history rhyme?

I first started playing cards in high school. Ever since then — through college, law school and more than a decade of legal practice — I have continued to play; occasionally for profit, sometimes for a loss, and always for fun.

The problem with playing cards seriously though is that you start analysing all social phenomena like a card player. What that means is that you always play the odds. In any given situation, you figure out the percentage play and then stick to it. If you go for broke, you will most likely wind up broke. If you get beat by a bad draw, that’s life.

The bigger problem with thinking like a card player is that the card player’s view of probability does not necessarily apply to life beyond the card table. In his brilliant book titled The Black Swan, Nicholas Nassim Taleb explains how very little human beings actually know and how much of life is in fact determined by the highly improbable.

Taleb illustrates his first point about the limitations of human knowledge by referring to the fact that, prior to the European discovery of Australia, there were literally hundreds and thousands — if not millions — of instances where people had observed white swans but no black ones. And yet, once the first black swan was discovered, all of that experience counted for naught.

He makes the same point in a far more graphic manner by referring to the experience of an imaginary turkey. For the first thousand days of its life, that turkey is under the impression that human beings are wonderful and are concerned solely with its welfare. But on the one thousandth and first day, surprise!

Moreover, not only are we humans lousy at predicting disasters but we are equally lousy at predicting good things. As an example, Taleb notes that the three most influential technological developments of the 20th century are normally reckoned to be the internet, the laser and the personal computer. None of them was predicted and even the people who invented them had no idea as to what the impact of these devices would be: Tom Watson, the former chairman of IBM, originally thought that the worldwide market for computers would be no more than a handful.

To return to the issue of cards, Taleb’s final point is that the types of chances and probabilities we face in card games are not the types of chances and probabilities we face in real life. In cards, the types of probabilities we face are relatively well known because all of them come from a universe of known possibilities. Taleb calls this world Mediocristan.

But in real life, the biggest problems — and opportunities — we face come from what Donald Rumsfeld once referred to as the “unknown unknowns”. This is the world that Taleb calls Extremistan, a world defined and driven by highly improbable events.

The point of discussing all of this is to note that the events which followed the sacking of the Chief Justice of Pakistan on March 9, 2007 were a “black swan” event. Leaving aside the morality or legality of trying to railroad a chief justice in patently unfair proceedings, it can safely be assumed that all those who advised General Musharraf to teach the Chief Justice a lesson did not foresee in all of their predictions the possibility that the deposed chief justice would become a popular hero; that he would be welcomed by the people of Pakistan in numbers not seen since the heyday of Zulfiqar Ali Bhutto; that emboldened by public support, a 13-member bench of the Supreme Court would restore the Chief Justice; that his restoration would set off such a wave of defiance that the once-closed chapter of General Musharraf’s candidature would be opened to debate; that General Musharraf would be forced to impose martial law against himself to avoid the danger of a contrary verdict, that General Kayani would direct the army to step out of politics; that relatively fair and free elections would be held; that the masses would vote overwhelmingly against General Musharraf; and, that throughout all of this, the lawyers of Pakistan would never give up on their struggle to establish an independent judiciary.

But now comes the million-dollar question: assuming you are the new political leadership of Pakistan, what do you do with this black swan now that it has shown up? Do you go back to living in Mediocristan? Do you assume that politics as usual is about to return? Or, do you try living in Extremistan in the belief that this is one of those moments when hope and history rhyme? After all, if Taleb is to be believed, the prime mover throughout history has been the improbable event.

I don’t have the answer. In fact, one of the main points made by Taleb is that nobody really has the answers. He cites a study which found that not only were most “experts” wrong far more often than they thought but that there was no difference in results whether one had a PhD or an undergraduate degree. Interestingly, the only regularity found was that those who had a big reputation were worse predictors than those who had none.

The immortal Yogi Berra once said, “it is tough to make predictions, especially about the future.” And so, I end not with a prediction but a sentiment: the hell with probability.

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