75 Entrepreneurship Lessons from Nassim Taleb’s ‘The Black Swan’

One of my favourite thinkers of the modern era would have to be Nassim Nicholas Taleb.

Not only has he written several best-selling books on decision-making, randomness and luck, but he, like so many great thinkers from across the ages (from Marcus Aurelius and Seneca during Roman times to Ray Dalio or Ben Horowitz today), is also a practitioner. He spent over twenty years as an options trader and risk analyst, and today has interests in venture capital.

I would take the words of a practitioner over a career academic any day, preferring instead to read Jeff Bezos’ shareholder letters of the Netflix culture deck, over some business book that a tenured professor, but not-once entrepreneur, turned over.

Not only is Taleb a practitioner, but his writing style is humorous, and at times militant. He doesn’t shy away from naming names, and name-calling (or doing both at the same time), which is refreshing in a world of virtue-signallers and preference-falsifiers.

Having been a fan of Taleb’s other books, Skin In The Game, and Anti-Fragile, I couldn’t wait to get into a book that I appreciated the underlying premise of, but had not yet read, that being The Black Swan: The Impact of the Highly Improbable.

At the risk of sounding sensationalist, it is in my humble opinion, a must-read for entrepreneurs, students of decision-making and practitioners facing uncertainty.


A Black Swan, Taleb says, is an event, positive or negative, that is deemed improbable yet causes massive consequences. Black Swans are said to explain almost everything about our world, but we, and that includes so-called experts, are blind to them.

For Centuries, the Old World agreed that all swans were white. That was of course, until black swans were discovered off the coast of Western Australia in 1697 by Dutch explorers, demonstrating the fact that an absence of evidence does not equate to an evidence of absence.

Reading the book through the eyes of an entrepreneur, author and podcaster — someone playing in the sandpit that Taleb calls Extremistan, I have attempted to extract and capture some of the key lessons from this book. Where relevant, or inspired to do so, I’ve provided some additional commentary or linked to other ideas you might be familiar with (I have highlighted my commentary in bold and italicised quotes).

While I write book summaries like this one more so for my own consolidation of knowledge — worth considering if your find yourself forgetting most of what you read, the following lessons should help you to make better decisions in your own entrepreneurial ventures.

Please note: The following does not do the book anything remotely resembling justice, so please ‘do yourself a favour’ and buy, read, re-read, annotate and apply lessons from The Black Swan to your personal and professional life more broadly. Finally, apologies to Mr Taleb if I have misinterpreted or put anything he has argued out of context.

With that, I bring you 75 entrepreneurial lessons from The Black Swan.

A Primer on Extremistan

Taleb introduces the concepts of ‘Mediocristan’ and ‘Extremistan’ which I will refer to these throughout this post.

  • Mediocristan is characterised by certainty, predictability and non-scalability.
  • Extremistan is characterised by uncertainty, non-predictability and scalability.

Today’s world is beginning to resemble Extremistan a lot more than Mediocristan. It is more uncertain and complex than ever, owing to the increasing pace of change ushered in by technology, and as such, entrepreneurs looking to best navigate it, need to understand the underlying dynamics of how gaining an advantage in this brave new world works.

75 Lessons for Entrepreneurs from The Black Swan

  1. We have severe limitations when learning from observation or experience is concerned, demonstrated by the above-mentioned discovery of black swans.
  2. A Black Swan has three attributes:
  • it is an outlier
  • it is extremely impactful
  • it is retrospectively predictable, but not prospectively predictable

3. Randomness is just unknowledge.

For example, a Thanksgiving turkey might ‘randomly’ find itself under the blade on its 1000th day after being fed daily and allowed to roam free for the previous 999 days. But what in this case seems random to the turkey would not seem so random to the butcher who possessed this knowledge and had it penned in their calendar. Taleb puts it simply; don’t be a turkey.

4. What you don’t know is more important than what you do know — it’s what we don’t know that can hurt us.

5. Free markets are successful because they allow people to be lucky → so you should tinker lots to collect lots of black swan opportunities. Luck is perhaps the one big differentiator between winners and losers in Extremistan.

6. We humans tend not to laud silent heroes and/or the act of not taking visible action.

As an entrepreneur or leader, you might feel compelled to do something — to take action. But oftentimes, the most prudent and rewarding path of action is to do nothing.

7. The Gaussian Bell Curve ignores large deviations, and according to Taleb, represent one of the great intellectual frauds.

Bear this in mind when using bell curve or statistics-driven models to make high-risk financial decisions. They might work in Mediocristan, but are not sensitive to large deviations and ‘fat tails’ in Extremistan.

8. Metaphors and stories are more potent than abstract ideas alone.

This should not be news to too many entrepreneurs, but ultimately, whether it be selling to customers, or trying to raise capital, tell stories that make what you do and why it’s important relatable, memorable and shareable. People buy stories, not abstract ideas. Taleb himself used the metaphor of a black swan and used stories throughout his book to illustrate what would otherwise be a somewhat abstract and more difficult to communicate idea. Ideas can’t spread unless they are shareable.

9. The triplet of opacity (our tendency to think that we know what’s going on in an incredibly complex, and random, world) is caused by:

  • illusions of understanding
  • retrospective distortion and the narrative fallacy
  • overvaluation of factual information

10. Humans reduce, categorise and simplify the world, in order to meaningfully try to navigate it, but we do this at the expense of ruling out and becoming blind to Black Swans

11. Scalable, leveraged professions (such as entrepreneur, professional footballer, author, podcaster or musician — those that appear to have no earning ceiling) are good only if you are successful — but they are characterised by monstrous inequalities, which means that you are likely to be in the unsuccessful and under-rewarded.

Consider that 97% of book sales are made by just 20% of the authors.

Taleb also reminds us that Wilfredo Pareto’s 80/20 Principle can be broken down further into 64/4, and 50/1, which means that 1% of the players can reap something to the order of 50% of the rewards in most domains.

When it comes to entrepreneurship, ‘who are your 1% customers?’ is a worthwhile question to answer.

12. When your sample size is large, deviations end up hiding in the average.

This is one of the reasons any health practitioner worth their weight will snicker at dietary recommendations and physicals that make ‘average’ the target, because ‘average’ is heavily influenced by the 69% of Americans (not too dissimilar in Australia or the UK) that are overweight or obese. Still happy with average?

13. Beware the problem of induction, or ‘the turkey problem’.

As indicated in #3, the turkey suffers from the problem of induction. It supposes that day 1,000 will be another day of roaming free on the paddock, eating copious amounts of leaves, berries and grass. But the past, as the turkey soon learns, is not always the best predictor of the future — especially in Extremistan.

14. Don’t be a sucker in the things that matter.

Don’t sweat the small stuff. As an entrepreneur, your time, energy, cognition and capital are all you have, so invest your time on the big decisions and on the big ticket items. I once witnessed a Director at a large Australian investment bank spend 45 minutes on the phone, debating a $1.50 surcharge on his most recent bank statement. Don’t be this guy.

15. Never confuse the absence of evidence with evidence of absence.

Your competitive landscape might seem barren now, but that doesn’t mean that there aren’t 75 companies working in stealth mode, and about to commoditise your ‘unique’ competitive advantage.

16. Get closer to the truth through falsification

As legendary physicist Richard Feynman put it, we can never be sure we’re right, we can only ever be sure we’re wrong. And even then, as Taleb warns us, be wary of errors in your testing, leading to false negatives.

17. Do your best to be a skeptical empiricist.

Test, learn and adapt, continuously!

18. We need to withhold judgment in order to override biological failings.

As Danny Kahneman pointed out in Thinking Fast and Slow, we humans can fall victim to gut-driven ‘Systems 1 thinking’ which is rooted in our biology. While it might have made sense when we were evading predators and pursuing prey on the African savanna tens of thousands of years ago, nowadays these risk-averting impulses can prove to be our undoing.

In order to counter this, do as Taleb and others like 48 Laws of Power author, Robert Greene, have suggested, and increase your reaction time.

19. “One death is a tragedy, one million a statistic” — Stalin

20. Avoid the narrative fallacy (our tendency to, wrongly, draw a linear straight line when looking at outcomes and why they occurred) through:

  • experimentation
  • experience
  • clinical knowledge

Most business books I’ve read fall into the trap of the narrative fallacy, and amount to little more than ‘bubblegum pop’ for entrepreneurs.

21. All ‘non-dull’ activities and professions belong to what Taleb calls Mediocristan — they are non-scalable professions that don’t benefit from Black Swan events.

22. To have a happy life, opt for lots of mildly good news, instead of few significant pieces of good news — this is because we fall victim to hedonic adaptation.

23. In Mediocristan, people gamble dollars to win pennies. In Extremistan, people gamble pennies to win dollars.

This aligns with what Clayton Christensen put forward in The Innovator’s Dilemma, around what he called sustaining (Horizon 1) and disruptive (Horizon 2) innovation.

Most large companies invest in expensive and incremental ‘digital transformations’ that, at best, deliver minimal returns, and more commonly, fail completely.

Innovative companies however, invest relatively smaller amounts, into lots of disruptive, exponentially higher reward opportunities (not dissimilar to what venture capitalists do), and reap the rewards from the few winners.

These rewards tend to eclipse the incremental ones many times over.

Ensure your company is doing a bit of both (more on this in #50).

24. The problem of silent evidence / history is written by the victors.

While praying worshippers, saved from a deadly storm, might be immortalised in medieval paintings as a nod to God, the unanswered prayers of the drowned worshippers are quickly forgotten.

We see this all the time in books and in particular on Instagram. Numerous ‘sages’ advertising tips and tricks that worked for them on their way to entrepreneurial success. But for every winner using a ‘proven method’, thee are usually hundreds, if not thousands of people, who used said proven method, but ultimately failed.

Never discount the role of luck and extenuating circumstances.

25. 99.5% of the Earth’s species are now extinct.

This is just a random fact from the book that I thought I’d share to illustrate the unpredictability and volatility of our world, and the absence of sacredness when it comes to our own species.

26. Consider the silent consequences and opportunity cost of your decisions.

27. Avoid the ludic fallacy: the misuse of games to model real-life situations.

If a coin is flipped 99 times and lands on heads, an academic, using models, might say that the 100th flip has a 50/50 chance of landing heads, whereas a realist or practitioner would suggest that the game is rigged.

28. Negotiate the purchase of bankrupt estate assets from banks because bankers don’t care as much as owners, and are likely to off-load at a much lower price than the latter because they don’t have skin in the game.

This is just a simple piece of investment advice I took from the book.

29. Don’t confuse the map with the territory.

30. Off-model risks are 1,000X more impactful than on-model risks.

A casino stands to suffer far greater losses from the risks it didn’t account for in its ‘risk and control matrices’ than the ones it did, argues Taleb.

To further demonstrate this, almost nobody saw the global financial crisis of 2008 coming and just look at the enormity of damage that it caused.

31. Don’t ‘focus’ when dealing with uncertainty — you need to avoid ‘tunnelling’ and leave yourself open to taking the next exit.

32. We are 22x more comfortable with what we know than we should be, according to the research — we grossly underestimate the probability of error in our projections.

33. Contrary to the notion that information is power, it can be toxic in Extremistan if we allow ourselves to fall victim to confirmation bias and anchoring.

I’ve long been an advocate of not watching the news, mostly because it gives you an overly negative world-view, and fills your head with junk.

Taleb points out that watching the news comes at the risk of developing and incrementalist, Mediocristan view of the world, impairing our ability to see and think how we should in Extremistan.

34. Be wary of experts → they don’t know what they don’t know.

This brings to mind Henry Ford’s famous quote:

“None of our men are ‘experts.’ We have most unfortunately found it necessary to get rid of a man as soon as he thinks himself an expert because no one ever considers himself expert if he really knows his job.”

35. Before you rely on the research reports and outlooks of large institutions like JP Morgan or Deloitte, refer to their previous outlooks to see how much they got right and how much they got wrong.”

36. We attribute our success to skill and failure to circumstance.

This is otherwise known as the fundamental attribution error and sometimes, the inverse applies when we’re evaluating our employees. Be wary of this.

37. Foxes are generalists whilst hedgehogs are specialists — in an an environment of uncertainty, it pays to be a fox (contrary to what Jim Collins put forward in Good To Great).

38. Complex predicting models fair no better than simple ones — so don’t be fooled by snake oil salesman bearing complex statistical models.

39. Don’t cross a river that is, on average, four feet deep — beware of variability.

Taleb likes to use the suitcase packing analogy to demonstrate this point.

If you’re going to France and the temperature has a variability of 10 degrees Fahrenheit, then you more or less know what to pack.

But if you’re going to Mars and the temperature variability is 1,000 degrees Fahrenheit, then you’re going to need a damn big suitcase to account for the entire spectrum of possible outcomes.

No items found.

40. “The most important advances are the least predictable” — Sir Francis Bacon

41. Positive accidents: You find something that you’re not looking for and it changes the world (for example, the antibiotic properties of penicillin)

42. We either grossly over-estimate or under-estimate the impact of technology.

We appear to have been over-estimating the impact of virtual reality for decades, while former IBM CEO, Thomas Watson, once quipped that there would never be a need for more than a handful of computers.

43. To predict the future, you first need to incorporate elements from it.

For example, if I represent a commercial real estate company, elements from the future might be autonomous vehicles and sustainable urban agriculture. This might mean less demand for car parking spaces, and more demand for vertical farms. As such, it might make sense to gain some exposure to opportunities in this space.

Don’t project the future based on the present alone.

44. Economists ignore the fact that most people aren’t always looking to maximise their economic interests.

As such, you should be cautious of what most economists say.

45. Epistemocracy: don’t be dogmatic, hold strong opinions loosely, and always be open to updating your world view based on new evidence and experience.

46. Humans fool themselves to orient towards the future.

47. One should learn under severe caution.

Entrepreneurs, at least the good ones, tend to be voracious readers and eternally curious. At the same time, there is a risk of dogmatism, falling victim to anchoring and ‘so and so said that…’ thinking.

Do as Ben Horowitz does and hold strong opinions loosely, or better yet, do as Socrates urged, and concede that you know nothing, so that you navigate the world with caution and don’t leave yourself vulnerable to black swan events.

48. Well sounding maxims might make sense but they don’t always stand up to empirical tests.

Here’s three:

“It’s either a hell yeah, or a no” — actually, a lot of our big decisions live in the grey and contain numerous trade-offs

“Say yes to everything” — actually, by virtue of doing this you’re saying no to everything else, and potentially saying no to those things that will bring you closer to your goals

“Many hands make light work” — actually, Brooks’ Law demonstrates how, after a certain number of hands are added to a project, more hands actually increases project complexity, and as a result, increases cost and delays delivery. Too many hands makes for expensive failures, not light work.

49. We forget to philosophise under strain.

50. The barbell strategy: Put 85–90% of your money into safe assets (eg. Government-backed bonds or safe index funds) and 10% into extremely speculative ones (such as early-stage startups) — cap the acceptable downside, but leave yourself open to exponential upside.

This also aligns somewhat with what Clayton Christensen put forward years ago insofar as a firm’s investment in innovation is concerned. He suggested putting 70–80% of R&D into safe sustaining innovations, but about 5–10% into high-risk disruptive innovations.

Nowadays, one way you can gain access to many early-stage opportunities without needing to be a high net-wealth individual is through equity crowd-funding platforms. Caution: the quality of deal-flow on some platforms might be questionable, with the big VCs still gaining access to many of the big opportunities first.

51. Don’t chase black swans; let them enter your life.

Because we can’t predict black swans, it makes no sense to chase them. In fact, it might paradoxically hide them from us because we end up tunnelling and missing the lateral opportunities.

Instead, create the space for black swans to enter your life by cultivating serendipity, experimenting, investing in lots of small outlay but high risk opportunities and of course, not taking bell curves too seriously.

52. Mitigate the risk of negative black swans (using insurance and/or capping the downside are ways of doing this).

53. Nobody knows anything.

54. Cumulative advantage means that the big get bigger, while the small stay small, and get relatively smaller.

Malcolm Gladwell demonstrates this phenomena in his book Outliers, where he argued that kids born in the first quarter of the year have a higher likelihood of making it to the NHL than kids born in the forth quarter of the year. This is because when they were first picked for the Under-6 teams, the Quarter 1 kids were more likely to be physically bigger -a valuable trait when it comes to hockey, and as such, picked for the A-team, tapping into better coaching and a virtuous cycle.

This is also why the rich get richer — because they have access to capital that the poor don’t, and that capital buys access to wealth creating opportunities.

55. Nobody is safe in Extremistan.

Consider that most companies on the S&P500 fifty years ago have disappeared, dropped off the list or merged.

Also see: Nokia, Blockbuster, Kodak, Borders, DEC, Toys R Us

56. Luck is the great equaliser.

In order to tap into luck, tinker lots! You increase your chance of lack by doing.

57. The long tail of influential small guys.

58. The anti-Pinker: we will have fewer but more severe crises argues Taleb.

While people like Steven Pinker and the late Hans Rosling argue that the world is better than it has ever been — it might be hard to argue this given the numbers — what they miss, according to Taleb, is the risk of large deviations.

Taleb argues that we will have fewer crises, but the impact of them will be far greater than ever before.

Tyler Cowen argued something similar on a recent episode of Eric Weinstein’s podcast, suggesting that access to weapons of mass destruction has been somewhat commoditised relative to what it was during World War 2.

Again, the absence of evidence is no evidence of absence.

59. Don’t ignore outliers. Their impact can make or break you.

60. Keep things in perspective.

A mountain range viewed from the moon might appear as smooth and flat as a marble’s edge, but viewed up close by a climber, can be a life or death proposition.

Consider whether you are viewing things through the lens of your own eyes, a microscope or an aeroplane. Might this be impacting how you see things?

The world might look perilous to some today, particularly those with ties to Extinction Rebellion, but zoom out and compare it to how things were 200 years ago, prior to widespread healthcare, education, running water, the advent of electricity, refrigeration, transportation, and other things we now take for granted, and today doesn’t look so bad.

61. Mediocristan methods don’t work in Extremistan.

I see this all the time when corporate executives attempt to apply the same decision-making models they use for low-risk incremental improvements to existing products to new and novel, but highly uncertain and potentially disruptive innovations.

It’s a bit hard to predict ROI of potentially disruptive products and use this as your investment criteria without a clear picture of the future.

62. 10 days in the last 50 years were responsible for half the returns in the financial markets.

63. Genuine philosophical problems come from outside philosophy.

64. Be multi-disciplinary in your thinking.

65. Don’t commoditise your thinking.

66. Worry less about small failures, and more about large ones .

This aligns with what Amazon CEO, Jeff Bezos, calls Type 1 (large consequential decisions) and Type 2 (small, inconsequential decisions)

Make Type 1 decisions slowly, and Type 2 decisions quickly.

This will give you a serious competitive edge of most mid-size and large organisations that tend to make all decisions slowly.

67. Don’t run for trains — missing trains isn’t painful if you don’t run.

68. Attend parties and write books → this generates Extremistan serendipity.

69. Model mother nature — she is our best teacher.

70. “Happy is he who owes nothing”.

71. The organism with the most secondary uses wins.

72. No stress + short bouts of extreme stress > moderate stress consistently

This aligns with Naval Ravikant’s philosophy on work:
“Train hard, sprint, rest and reassess — then go at it again.”

73. The more remote events are the more impactful they tend to be”

74. Pascal’s Wager suggests that it’s best to believe in God because we don’t have evidence that He doesn’t exist. Taleb argues that it would be naive to half-heartedly ‘believe’ based on this questionable premise and assume that God would be okay with that.

I decided to include this because any compelling argument can be taken further, or busted. Never take anything you read on face value, and always challenge the things that matter.

75. The skepticism v gullibility question is a central philosophical question, and one that, to a very large degree, remains unresolved.

January 5, 2020




Steve Glaveski


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