Friday, December 05, 2008

Randomness and Narrative

I am busy reading `The Black Swan' by Nassim Taleb. My introduction to reading on the London tubes, and the sequel to 'Fooled by Randomness'.

One issue that has been raised is the natural human attempt to give everything an explanation. Sometimes the same event is used as the reason for two completely different outcomes. For example, when Saddam Hussein was captured, two headlines on Bloomberg at different times of the day read:

1) Bond Markets Fall: Fear that Hussein's capture will not curb terrorism
2) Bond Markets Rally: Hussein's capture causes demand for risky assets

Trying to explain noise with a narrative makes us feel easier, but isn't really that helpful. In that case it is more obvious.

But what about the bigger events, should we still avoid (false) explanations? Maybe things just happen?

So when someone cheats on someone, is it because of something? Or maybe they just did it. When someone loses their job, is it because they did something wrong, or the company need to cut jobs and they were unlucky? When someone doesn't want to be with someone else, is it as simple as... they chose someone else, no deeper reason. When someone dies, it isn't because you are being punished for something, people just die.

Narrative does help us understand. It does make us feel better. It helps us remember. It helps us forget. And maybe a lot of the time it just covers things up, so you don't have to think about it anymore.

The danger is making up false narratives, and giving them more weight than they deserve.
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