#11 The Nassim Taleb & Incerto Podcast | Mediocristan V Extremistan.

Nassim speaks about two fictional countries and their differences concerning each owns predictive abilities.

In Mediocristan, land of the average, observing the first 100 outcomes will provide analysts a good indication for the next 10,000. In Extremistan, quite the opposite. Observing the first 100 outcomes provides no insight into predicting the next 10, let alone the next 10,000.

Think of how domain specific outliers influence different distributions.

If you average the weight of 100 random people, there is no person (alive) who can be added to the sample and weigh enough to significantly alter the average. If the average weight of 100 people is 75KG, an outlier weighing 200KG is barely going to move the needle. The same is true for calorie consumption. There is no day where you can eat enough calories to make you fat, nor is there one day where you can eat so insufficient an amount of calories to make you skinny. These are domains of Mediocristan.

Now imagine we take a sample of 100 people and calculate their average net worth. There are outliers alive (Jeff Bezos or Cristiano Ronaldo) who can totally distort your average making everyone else’s combined net worth look like a rounding error for our outlier.

There are domains subject to an outlier so extreme that it can completely distort the game for the rest. These domains are wealth, income, subscribers, deaths, size of planets, viruses, etc.

‘You Can’t Lose A Ton Of Weight In One Day, But You Can Lose A Ton Of Money’

The problem of the Black Swan is that we think we live in Mediocristan and are able to predict the future based on the past. We can safely predict that the next person added to our average weight cannot weigh more than 500KG. However we live in Extremistan and are exposed to its domains. All of the world’s USD can be wiped clean tomorrow should a Black Swan event so significant occur.

We live in Extremistan.

The problem is, we think we live in Mediocristan.

Listen To Mediocristan V Extremistan As A Podcast Instead!

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