Domain Dependence of Critical Thinking
Taleb argues that critical thinking can remain confined to one subject. His philosopher-financier example shows how someone may question uncertainty in philosophy while leaving the assumptions of financial models unexamined.
THE IDEA
Can Philosophers Be Dangerous to Society?
I will go further: people who worry about pennies instead of dollars can be dangerous to society. They mean well, but, invoking my Bastiat argument of Chapter 8, they are a threat to us. They are wasting our studies of uncertainty by focusing on the insignificant. Our resources (both cognitive and scientific) are limited, perhaps too limited. Those who distract us increase the risk of Black Swans.
This commoditization of the notion of uncertainty as symptomatic of Black Swan blindness is worth discussing further here.
Given that people in finance and economics are steeped in the Gaussian to the point of choking on it, I looked for financial economists with philosophical bents to see how their critical thinking allows them to handle this problem. I found a few. One such person got a PhD in philosophy, then, four years later, another in finance; he published papers in both fields, as well as numerous textbooks in finance. But I was disheartened by him: he seemed to have compartmentalized his ideas on uncertainty so that he had two distinct professions: philosophy and quantitative finance. The problem of induction, Mediocristan, epistemic opacity, or the offensive assumption of the Gaussian—these did not hit him as true problems. His numerous textbooks drilled Gaussian methods into students’ heads, as though their author had forgotten that he was a philosopher. Then he promptly remembered that he was when writing philosophy texts on seemingly scholarly matters.
The same context specificity leads people to take the escalator to the StairMasters, but the philosopher’s case is far, far more dangerous since he uses up our storage for critical thinking in a sterile occupation. Philosophers like to practice philosophical thinking on me-too subjects that other philosophers call philosophy, and they leave their minds at the door when they are outside of these subjects.
When to use it
A financial analyst who uses sophisticated models for stock valuation but fails to consider the broader economic risks and black swan events that could invalidate those models.
A scientist who is highly critical in their own research but accepts statistical methods in other fields without question.
A policymaker who focuses on small budget items (like office supplies) while ignoring massive fiscal risks (like unfunded liabilities).
A philosopher who writes critically about epistemology but uncritically uses Gaussian distributions in his finance textbooks.
FROM THEORY TO EVERYDAY LIFE
In practice
The Philosopher-Financier
Taleb describes an academic with doctorates in philosophy and finance who published in both fields. In his view, the academic’s finance textbooks taught Gaussian methods without bringing philosophical concerns about induction and uncertainty to bear on them.
Pennies vs. Dollars
People who focus on minor details (pennies) while ignoring major risks (dollars) are symptomatic of Black Swan blindness. They waste cognitive resources on insignificant matters, increasing the risk of catastrophic events.
A MOMENT TO REFLECT
Put it to work.
In what areas of your life do you compartmentalize your critical thinking, applying rigorous analysis in one domain but not in others?
How might focusing on minor details (pennies) distract you from larger risks (dollars) in your decision-making?
Can you identify a situation where an expert failed to apply their general reasoning skills to their own field of expertise?
CONTINUE THE CONVERSATION
Source texts
- The Black Swan The Impact of the Highly Improbable With a new section On Robustness and Fragility (Nassim Nicholas Taleb)