three lessons on risks: a movie

Daniel Davies is notorious for making more than full use of a joke once he gets hold of it. I think this is the original source (perhaps even the Urquell) of his line that Black Swan author Nassim Nicholas Taleb must be furious at what Hollywood did to his book in development.

Well, I watched the movie on a plane the other day. It was that or The Social Network – I was planning on a week in Silicon Valley surrounded by tightly wound super-ambitious geeks, so I get enough of that at work. As it happens, there are a couple of good lessons about risk in Black Swan. Perhaps Taleb shouldn’t be so touchy about it after all.

1. Tail-risk is real

Just as Nassim Taleb said in the book, no matter how good your planning, you can’t hedge everything and you will tend to underestimate the weirder and wilder ends of the distribution. One day, something not just bad but incalculably weird, something you never expected you didn’t expect, will come rapid-roping into your back garden and piss in the pool. Of course, it’s likely to happen on stage on the first night at the worst possible moment. You’ll have to be ready, but you can only be ready in a general sense. Get your trigger movements right – far better to be calling an ambulance and plunging into the fray than locked in the bunker with a PR agent and a large amount of toilet paper. Act right in the crisis and much will be forgiven.

Inevitably, if you want a clue, look at the things you try to repress and deny and don’t believe could ever happen. That’s why you deny them.

2. That said, you’ve got to put up with it

All precautions must be seen in the light of the scale of the threat. Too much security is as dangerous as too little (this may be more Schneier than Taleb). Without a certain amount of optimism bias and risk tolerance, you’ll never get anything done. In fact, you’ll end being terrified of your shadow. (And why did you choose the word shadow, with its, ah, many meanings, Mr. Garrovell?) Your colleagues may well wish they had your job, but that’s no reason to kill yourself. In fact, after a certain level of neurosis is passed, self-protection shades over into self-sabotage – delivering just what you imagine your enemies want, whether they be real or imagined.

3. Don’t draw conclusions based on regional accents

Black Swan is the only movie I can think of in which New Yorkers see an outsider – a Californian – as being unimaginably evil, sophisticated, cool, and cunning. In fact, this was the plot detail that kept coming back to me. Wall Street and City investors in dozens of regional mortgage lenders that turned into financial neutron bombs imagined they were smarter than the offcomed’uns.




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