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Egypt, Black Swans and the Bed of Procrustes

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Nassim Nicholas Taleb's The Bed of Procrustes provides an elegiac, enlightening and yet amusing philosophical look at the human obsession with both predicting the unpredictable and with fame and riches.

Shortly after the beginning of the Egyptian uprising, the New York Times ran an interesting article entitled "Obama Said to Fault Intelligence Agencies' Mideast Forecasting." Of course we don't know what Obama actually said, but we do know that the CIA is in good company. Israel's famed Mossad failed to predict the end of Mubarak's regime just as much as the CIA, and so, to the best of my knowledge, did most other intelligence agencies, think tanks, academics, companies that do risk analyses and the many, many other institutions and people paid to predict our future.

And a lot of money it is. The NYT estimates that U.S. taxpayers are billed $80 billion a year for their intelligence agencies -- about the budget of a small country. The Tunisian uprising caught everybody unprepared. Accepted wisdom in the week after the ousting of Tunisian dictator Ben-Ali was that this would cause a stir in the Arab world, but would not easily be replicated in Egypt, because Mubarak's hold on the armed forces was much stronger than Ben-Ali's had been. Well: so far for the predictions...

But before pummeling the CIA, the Mossad and all others who failed to predict Mubarak's imminent demise, we should remember that about 8% of the U.S. GDP is generated by the finance industry. We pay huge amounts of money to a sector that not only failed to predict the financial meltdown of 2008, but was largely responsible for creating it through reckless speculation and the creation of financial instruments that severely exacerbated this crisis. So the intelligence community is certainly not alone its failures to predict the most vital aspects of our future.

What then, is the function of those paid by society to predict and interpret events? This question is asked poignantly in The Bed of Procrustes by Nassim Nicholas Taleb, the Lebanese-born polymath (philosopher/economist/mathematician/investor) whose previous book The Black Swan is an international bestseller.

One of the reasons for Taleb's high credibility in a culture that doesn't particularly value philosophical sophistication is his financial success, which is truly remarkable because it was based on the most unusual of tools: he generated it by consistently applying his own philosophical skepticism about the financial community's competence. Long before the great financial meltdown of 2008 Taleb had claimed that economic models only function within a certain range of probabilities. But the defining events of a period are exactly those that are unlikely, and that everybody is unprepared for; those Taleb calls 'Black Swans'.

By betting against the market, he made money -- the one ability unanimously in high regard in the global village. This is what made people otherwise averse to philosophical writing read his sparkling prose, guided by a great sense of style and multilingual erudition in a number of disciplines.

Taleb has made this failure of experts to predict crucial events the topic of a highly enjoyable collection of Aphorisms entitled The Bed of Procrustes. Its basic theme is that we humans need cognitive simplicity to find our way through the hypercomplex reality we live in. But it is precisely the simplicity of our cognitive tools that inevitably fails to predict the statistically improbable that will change our lives. We confuse the map with the territory, and are, time and again, surprised, that they don't coincide.

In other words: society pays a certain form of analysts phenomenal sums of money for systematically failing to predict the events that impact our lives most deeply: just think about the attack on Peal Harbor; the Yom Kippur War in 1973; 9/11; about the prediction that Iraq would democratize easily after the US invasion; or the financial meltdown in 2008.

Taleb writes in the tradition of the great Stoic and Epicurean philosophers since classical antiquity, from Seneca to Montaigne. Instead of celebrating his success in making money, he takes an ironical look at the pretensions of experts to predict and to understand a reality that is always more complex than the models they use to interpret it.

Along the way Taleb takes elegant jibes at many other characteristics of our global culture of hype, riches and celebrity -- all the more convincing since he has succeeded in it, and is therefore not suspect of being motivated by envy. He succinctly shows how we have lost our sense of the sacred; how our notions of beauty and goodness get systematically confused in the ongoing noise of the global infotainment system, and how electronic media are gradually killing our ability to enjoy deep art.

He returns to the timeless theses of classic stoic and epicurean philosophy: we humans keep confusing the essential and the inessential; we believe that success will bring us peace of mind, whereas it only creates the pressure to exceed our previous achievements.

But most of all he relentlessly attacks the industry of financial analysts, the endless array of pundits that keep writing and talking about what is about to happen in the long and short term -- without ever doing the one thing we expect of them: correctly predicting the most important events of our future. He does so at times with sharp cracks -- but mostly in a tone of distant wisdom. His aphorisms, elegantly written, are written from the elegiac point of view of the man who has seen and done it all, and sees through the worlds foolishness and futility.

I am sure that Taleb doesn't expect The Bed of Procrustes to kill the industry of financial, political and other experts, who, often with the help of incredibly complex mathematical models, promise to predict our future, even though, as Taleb argues, their success is not much more impressive as the soothsayers of previous centuries and millennia.

Taleb's writing is modeled on philosophical aphorisms from Ecclesiastes through Seneca, Montaigne and Schopenhauer to Wittgenstein. Like them The Bed of Procrustes provokes, enlightens and, at many junctures, it is very amusing. While it is certain not to cure us of our follies -- including the addiction to wrong predictions -- it may provide us with the means of looking at them with laughter.

After reading Taleb, we may wonder: If pundits and analysts fail to predict the most important events, what's the point of all this endless commentary we produce and consume? Bernard-Henri Lévy, one of France's most celebrated intellectuals once wrote that philosophy and punditry are basically fighting sports, and that the philosopher's task is to throw good punches. This is a refreshingly candid assessment of the punditry scene: basically it is a combination of spectators' sports, in which the pundits are the fighters, cheered on by their aficionados and booed at by their detractors.

Notoriously, readers primarily consume the pundits they agree with. We all want to be reinforced in our values and worldviews, and our favorite commentators are those who say better what we would ourselves want to say. But maybe we shouldn't be too cruel about this shortcoming of human nature: we can, after all, not live without the meaning systems that provide us with structure and a sense of significance, as I argue in my recent book The Fear of Insignificance: Searching for Meaning in the Twenty-first Century.

Of course Taleb is right: little of this commentary will truly prepare us for the surprises of the coming weeks, months and years. But maybe we need to be lenient towards ourselves: without meaning systems that give structure to our lives, we are all lost. Hence we will continue reading each other, searching for validation of what we already think rather than information that will change our minds. To quote one of Taleb's favorites, Friedrich Nietzsche: we are after all just Human, All too Human.