We know nothing

I've been thinking a lot about uncertainty recently. Both in my personal life and in the wider world around us.
At times, it can make us feel powerless because we feel like we have no control over things. How our plans can go down the drain, and things don't turn out the way we expect, because of what happens outside of our control.
I am currently reading Black Swan by Nassim Taleb. He talks about the phenomena of Black Swans, which are rare, high-impact, unforeseeable events and a quote resonated:

Black Swan logic makes what you don't know far more relevant than what you do know. Consider that many Black Swans can be caused and exacerbated by their being unexpected. - Nassim Taleb

Ray Dalio also makes a similar point but in a more general sense. He says that having ways to deal with what we don't know in life is far more important than what we do know. It makes sense because what we don't know is literally infinitely larger than what we do.

Quantum Physicist and father of quantum computing David Deutsch takes it one step further. He states that humans are fallible, meaning that there are no "reliable means of justifying ideas as being true or probable". It's probably the most mind-blowing idea I've read in the last year: not only are we saying we don't know much, but we don't even know if ANY our knowledge is even likey to be true!!

Positive Black Swans

The key thing here is just because black swans are very rare, it does not mean that they are insignificant. The opposite, actually.

Almost everything in social life is produced by rare but consequential shocks and jumps - Nassim Taleb

This has been my personal experience. COVID, for instance, made us all rethink things, and we are still feeling the effects. It has massively affected the trajectory of my life. I would not have started making property/finance content for fun to deal with being depressed, stuck indoors back in 2020/2021. Especially on an app that was known only for silly dance videos at the time.

So this taught me that:

• The future is unknowable and cannot be predicted

The flip side is that Black Swans do not have to be negative. For example, the rise of the internet, PCs, and smartphones have revolutionised how humans live and generated vast wealth. Yet, it was not something that could have been predicted.

So if we are fallible (don't know anything) and can't predict what's going to happen, how do we actually take advantage of positive Black Swans then?

Asymmetric risks

By taking lots of asymmetric risks. These are where if we lose, it's a small, manageable amount, but when we win, it has the potential to be life-changing.
It sounds straightforward but our brains are trained to operate in symmetric environments. Think about how if you do well in a test, beyond getting the grade we need, the magnitude doesn't matter. If you perform exceptionally, it won't fast-track you through uni. Nor does it mean you can skip all your other tests. You'll still have to perform in every other test. In a corporate environment, you can be a star performer making/saving the company literally millions. It doesn't make you immune to getting let go or made redundant 9 months later if senior management feels like it. We are geared to hyper-fixate on frequency, not magnitude.
Whereas reality is asymmetric. This is why when negative Black Swans hit us, they are so devastating.

Conversely, if we go for an ambitious target, even if the probability is low, the magnitude can far outweigh it. Unlike an academic test, if you start a business, for example, it only needs to work out once. The fact that you failed 9 times before is irrelevant. But it does mean you have to be able to stomach loss after loss.
Even though we can't predict Black Swans, what we do know is that, from the industrial revolution, the world has been getting more complicated at an exponential rate and the occurence of Black Swans is also increasing. I feel like it's going crazy hyperbolic with the rise of the internet and especially AI. We are seeing 10 years of change in 1.
We've established:

1. Black Swans cannot be predicted.
2. We hardly know anything at all.
3. Black Swans are bound to happen at an increasing rate.
4. Black Swans are life-changing.
5. We need to take asymmetric risks

So how do we practically take asymmetric risks? How should we strategise and navigate this crazy world of unpredictability and large magnitude Black Swans?

Get lucky

I'm serious, I'm not intentionally messing around. Hear me out. Since we can't predict the future, top-down planning makes no sense. We have to do what Nassim Taleb calls 'maximum tinkering', or I would say: following our genuine passion and curiosity. And we maximise our surface area for luck or the favourable Black Swan event through trial and error.
There are no guarantees this way, but following on from the quote in last week's newsletter, from Sönke Ahrens, it's why we need to have fun in our work. So we are not getting burnt out in the process. We are enjoying ourseves so we are not fixated with the outcome. So it boils down to:

1. Recognise we know nothing with certainty.
2. Knowing that 'unexpected' things WILL happen.
3. Being comfortable living with and making decisions with uncertainty.
4. Follow where our instincts take us, even if it doesn't make immediate sense.
5. Live more in the present and have fun.
6. Be patient with results but impatient with actions.
7. Be receptive to opportunities as they arise.
8. The ability to stay in the game long enough to keep taking asymmetric bets.
9. Having the flexibility to adapt.
10. Hope to catch a favourable Black Swan.

So, in conclusion. All this to say basically, you just got to get lucky to make it. You're welcome.

Quote

Frightened of change? But what can exist without it? What's closer to nature's heart? Can you take a hot bath and leave the firewood as it was? Eat food without transforming it? Can any vital process take place without something being changed Can't you see? It's just the same with you-and just as vital to nature. - Marcus Aurelius

Resources

This week I signed up to Epidemic Sounds for background music for my new YouTube channel. You get a free trial with my link if interested.

Have a good weekend. Hit reply if you have any thoughts. Catch up in two weeks.

Hans