Accordingly, it is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration.

Normative economics is like religion without the aesthetics.

But he has most of the attributes of the bad trader. And, at any point in time, the richest traders are often the worst traders.

As to the second, more serious flaw, I have already discussed the problem of induction. The story focuses on an unusual episode in history; buying its thesis implies accepting that the current returns in asset values are permanent (the sort of belief that prevailed before the great crash that started in 1929).

Following the incident, John regarded himself “ruined”; yet his net worth is still close to $1 million, which could be the envy of more than 99.9% of the inhabitants of our planet. Yet there is a difference between a wealth level reached from above and a wealth reached from below. The road from $16 million to $1 million is not as pleasant as the

Imagine yourself practicing the piano every day for a long time, barely being able to perform “Chopsticks,” then suddenly finding yourself capable of playing Rachmaninov. Owing to this nonlinearity, people cannot comprehend the nature of the rare event.

Say you get a windfall profit of $1 million. The next month you lose $300,000. You adjust to a given wealth (unless of course you are very poor) so the following loss would hurt you emotionally, something that would not have taken place if you received the net amount of $700,000 in one block, or, better, two sums of $350,000 each.

No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.

Beyond that, it is all randomness: either by taking enormous (and unconscious) risks, or by being extraordinarily lucky. Mild success can be explainable by skills and labor. Wild success is attributable to variance.