The Reality Club: THE FOURTH QUADRANT by Nassim Taleb

Home About Edge Features Edge Editions Press Edge Search

Re: THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS

By Nassim Nicholas Taleb

Jaron Lanier, George Dyson

JARON LANIER
Computer Scientist and Musician; Columnist, Discover Magazine

This is a superb piece and I hope it is widely read and taken to heart in Wall
Street, Silicon Valley, and Washington. All these centers of power and
creativity are drowning in illusions brought about by thunderous misuses of
statistics that have become implacably seductive only with the recent
availability of vast, connected computer resources.

Edge.org has become the most dramatic point of contact between the critics
and supporters of the fallacies Taleb elucidates.

An astute reader of edge.org will notice a connection with "Digital Maoism,"

the Edge original essay I wrote a couple of years ago. In that essay I
proposed that the "Wisdom of the Crowds" could only work when an answer
the crowd was asked to give was no more complicated than a single number
or value, when the crowd was not able to formulate its own questions, and
so on. My criteria were not nearly as well developed or presented as Taleb's,
but I think it is reasonable to claim a kinship between my characterization of
bad uses of the crowd and Taleb's Fourth Quadrant.

In Digital Maoism, I reported that some of the organizations I consulted to

were in the grips of "Crowd Wisdom" and as result had come to expect less
work and accountability from me and the other consultants. Taleb similarly
points out that he had observed warning signs in recent years from financial
Goliaths that have since collapsed. Without betraying any confidences, I will
say that the lists of companies we are each talking about share a huge
overlap.

Taleb addresses finance, but similar madness has appeared in connection

with:

http://edge.org/discourse/fourth_quadrant.html (1 of 3) [27/09/2008 14:52:30]

The Reality Club: THE FOURTH QUADRANT by Nassim Taleb

• Science, where it has been proposed that statistics in the

computing cloud can and should replace the process of
understanding within a scientist's brain

• Arts, where it has been proposed that "big n" business models
should replace taste, artistic voice, or the idea of "artist" as
profession

• Education, where it has been proposed that wikis can do better

than textbooks and teachers

• Journalism, where many believe blogs, Twitter streams, wikis,

and so on can do better than reporters in the mold of Woodward
and Bernstein

• Technology, where it has been proposed that an uncannily

smooth historical determinism is in charge, propelling us to the
Singularity.

There are many other examples. What is discouraging is that the complete
failures of all these claims have only bolstered the faith of the seduced
believers.

GEORGE DYSON
Science Historian; Author, Project Orion

Nassim Taleb's explanation of the current financial predicament, and how to

better avoid the next one, is a refreshing antidote to claims that we are
suffering a statistical anomaly that, because it was unpredictable, could not
have been foreseen.

In 1777, during the American Revolution, Georges-Louis Leclerc comte de

Buffon published his Essai d'arithmétique morale, in which he laid the
foundations for behavioral economics, evolutionary game theory, and Monte
Carlo statistical sampling, among other things.

Buffon opened his treatise by considering a simple question: why will a

human being purchase a lottery ticket when the chances of them dying in the
next 24 hours are greater than the chances that they will win?

Disasters and miracles follow similar rules. Charles Babbage, in his Ninth
Bridgewater Treatise of 1837, considered the nature of miracles (which, as a
computer scientist, he viewed as pre-determined but rarely-called

http://edge.org/discourse/fourth_quadrant.html (2 of 3) [27/09/2008 14:52:30]

The Reality Club: THE FOURTH QUADRANT by Nassim Taleb

subroutines) and urged us "to look upon miracles not as deviations from the
laws assigned by the Almighty for the government of matter and of mind;
but as the exact fulfilment of much more extensive laws than those we
suppose to exist." It's that question of characteristic scale.

What to do now? I'd prefer less Paulson, and more Newton. In the 17th
century, English coinage had become widely debased, much as our system of
financial instruments has become debased today. In 1696, Sir Isaac Newton
was appointed Warden of the Mint, with authority to prosecute
counterfeiters, who were not only hung, but drawn and quartered. This,
accompanied by a systematic recoinage, worked.

Return to THE FOURTH QUADRANT: A MAP OF THE LIMITS OF

STATISTICS By Nassim Nicholas Taleb

John Brockman, Editor and Publisher

Russell Weinberger, Associate Publisher
contact: editor@edge.org
Copyright © 2008 By Edge Foundation, Inc
All Rights Reserved.

|Top|

http://edge.org/discourse/fourth_quadrant.html (3 of 3) [27/09/2008 14:52:30]