Affirming Taleb-Style Skepticism in Scientific American

(Michael Shermer's , author of "Skeptic" column in Scientific American)

Although Nassim Taleb would be the first to point out that he did not invent the principles of skeptical empiricism described in his Black Swan book, it is interesting to see some (but not all) of those ideas affirmed in the Scientific American (July 2009 issue). It makes me think that those "ah hah!" moments I had when reading the book were legitimate.

One affirmation occurs in Michael Shermer's "Skeptic" column. Arguing that science is the best avenue to the truth, he describes the "null hypothesis, which assumes that the claim under investigation is not true until proven otherwise." Basically this means that in science (unlike law) a statement is presumed to be wrong (guilty) until it proven right - and even then you can never really be sure.

This is akin to Taleb's notion of negative empiricism (as taught by Karl Popper). Quoting my Black Swan Book Report... although you can never be absolutely sure that your theory or proposition is true, just one negative result can prove it wrong. That's where truth comes from. Evidence is asymmetrical. One piece of negative evidence can offset a lot of positive evidence. We should regard all theories as provisional. Don't look for what will prove you right but what will prove you wrong; it's a faster more certain process and you'll learn more.

The other affirmation is in "The Science of Bubbles and Busts" article by Gary Stix. He describes built-in biases which lead humans to make financial mistakes that in aggregate result in economic bubbles and busts. He says that we have...
  • A confirmation bias which prompts us look for evidence that confirms ideas we already have.
  • A herding bias which leads us to agree with everybody else.
  • An availability bias which leads us evaluate information based on context rather than merit.
  • A bias toward overrating our own abilities.
  • A bias to engage in heuristic-based intuition when we should be trying to think rationally.
These are the same biases and tendencies cited by Taleb as reasons for our inability to properly understand black swans. Taleb also notes our tendency to prefer a good narrative to the facts.

I think Taleb would disagree with the premise of the article that once these biases are understood that tools can be devised to predict economic bubbles. He would probably say that insofar as these events are true black swans (not gray swans) they are inherently unpredictable.

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