The Fourth Quadrant: A Map of the Limits of Statistics (Edge, 2008)

Nassim Nicholas Taleb · 14 Sept 2008

The piece opens with

Depending on exposure, one can be extremely wrong and be fine, or slightly wrong and blow up

Their wordsIn some situations, you can be extremely wrong and be fine, in others you can be slightly wrong and explode.

Nassim Nicholas Taleb did not write this page.

Every claim below was made in this piece, quoted word for word and numbered in the order the piece makes them, so you can read it there rather than take our word for it. The sentence above each quote is our reading of the claim, not their wording. Each quote was checked against a stored copy of the page at build time; where the two differ, the quote is the fact.

Our reading
Depending on exposure, one can be extremely wrong and be fine, or slightly wrong and blow up

Their wordsIn some situations, you can be extremely wrong and be fine, in others you can be slightly wrong and explode.
Our reading
In complex decisions exposed to fat tails, decisions should not rest on statistically based claims

Their wordsHere is where your limits are. Do not base your decisions on statistically based claims.
Our reading
Empirical knowledge of rare events’ role is inversely proportional to their impact

Their wordsIf small probability events carry large impacts, and (at the same time) these small probability events are more difficult to compute from past data itself, then: our empirical knowledge about the potential contribution—or role—of rare events (probability × consequence) is inversely proportional to their impact.
Our reading
With no typical event under fat tails, prediction markets are ludicrous because they make events look binary

Their wordsThis absence of "typical" event in Extremistan is what makes prediction markets ludicrous, as they make events look binary.
Our reading
Prosperity comes from avoiding blowups, as longer life comes from avoiding death

Their wordsYou can live longer if you avoid death, get better if you avoid bankruptcy, and become prosperous if you avoid blowups in the fourth quadrant.
Our reading
Only fools optimize, since a simple model error can blow through their capital

Their wordsOnly fools (such as Banks) optimize, not realizing that a simple model error can blow through their capital (as it just did).
Our reading
Things that have worked for a long time are preferable

Their wordsThings that have worked for a long time are preferable—they are more likely to have reached their ergodic states.
Our reading
Absence of volatility should not be confused with absence of risk

Their wordsDo not confuse absence of volatility with absence of risks.

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The other pieces are the ones whose claims are worded most like this one's. That measures language, not agreement: they may argue the opposite.