Gladwell for Dummies
Gladwell has said that of all the people he has interviewed, he most identifies with Nassim Nicholas Taleb, the polymath former derivatives trader turned "risk management" guru whom he profiled in April 2002, after Taleb published his breakthrough bestseller Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. Taleb, now "distinguished professor of risk engineering" at NYU, writes chatty, nonlinear nonfiction books that are invariably described as intellectually "provocative...in the tradition of" Malcolm Gladwell. Taleb's follow-up, The Black Swan: The Impact of the Highly Improbable (2007), examined a phenomenon of the same genus as Gladwell's outlier: a "black swan," according to Taleb, is an unlikely but "consequential event" with profound transformative implications.
But if Taleb shares something in content and style with Gladwell, his books have a markedly different tone. Taleb considers himself a connoisseur of the "epistemic arrogance of the human race," and, unlike Gladwell, he rather conspicuously relishes the chance to hurl "the insult"--in all its freshness--at those aspiring bigwigs misguidedly combing his books for investment strategies. In Fooled by Randomness, he mocks his own youthful distrust of philosophy, which he considered "an activity reserved for those who were not well versed in quantitative methods and other productive things," and then describes turning to it later in life, after realizing he was "generally repelled by the wealthy, generally because of the attitude of epic heroism that usually accompanies rapid enrichment." He recounts his gradual recognition that
$10 million earned through Russian roulette does not have the same value as $10 million earned through the diligent and artful practice of dentistry. They are the same, can buy the same goods, except that one's dependence on randomness is greater than the other's.... Deep down, I cannot help but consider them as qualitatively different.
In The Black Swan, Taleb elaborated on what Gladwell has called Taleb's "heretical" idea. Cataloging industries on a spectrum between two poles, Extremistan and Mediocristan, where finance in the era of securitization and the art world in the age of digital reproduction hovered near Extremistan and dentists, mechanics and community organizers were still largely anchored in Mediocristan, Taleb closed in on a flaw in the logic of modern capitalism that he felt to be gravely dangerous. The world's financial and consumer superpower had shifted its economy radically toward the "scalable" activities of Extremistan--where the same number of labor hours could result in one sale or 1 million--while maintaining Mediocristan's solidly "average" talent base as well as the base's conventional sense that "success" is largely a function of craftsmanship, experience and innate talent. He did not blame books like The Tipping Point for encouraging readers to believe they could game their fates in the face of Extremistan's governing randomness, but he could have.
Gladwell's profile explained none of Taleb's ideas in detail, but its timing was impeccable: in 2002 Wall Street was reeling from the "blow-up" of Enron, the Twin Towers and the accounting industry, and Taleb, who claimed his methods had insulated his fund from such a fate, cut a compelling figure. "We cannot blow up, we can only bleed to death," Taleb told Gladwell. Gladwell likened Fooled by Randomness to Martin Luther's ninety-five theses, solemnly concluding:
This kind of caution does not seem heroic, of course. It seems like the joyless prudence of the accountant and the Sunday-school teacher.... We associate the willingness to risk great failure--and the ability to climb back from catastrophe--with courage. But in this we are wrong. That is the lesson of Nassim Taleb...and also the lesson of our volatile times.
Mirthless as he may appear to Gladwell, Taleb is a millionaire who gets to say he told you so. Why has no one said the same for Gladwell? After all, it's true. Perhaps the reason is partly the unyielding chicken-egg binariness of his patented "To intuit, or to counter-intuit?" method, which proved insufficient to explain the increasingly complex topics he approached after Taleb, most notably the implosion of Enron. In "The Talent Myth," published in July 2002, he declared the firm a casualty of the article's titular fallacy, which was then in vogue among many elite companies. He used as evidence the career of Lou Pai, who found himself kicked upstairs so many times that when he left Enron in 2001, he was CEO of one of its largest subsidiaries: "Because Pai had 'talent,' he was given new opportunities, and when he failed at those new opportunities he was given still more opportunities...because he had 'talent.'"
This certainly was likely to interest anyone who bought Taleb's contention, in Fooled by Randomness, that the most vexing problem of modern finance was its practitioners' tendency to conflate success and talent. According to their logic, failure equals talent, too! But if both were true, surely an industry rife with Lou Pais was not a little corrupt?
Alas, when presented with the chance to implicate any self-aggrandizing Extremistanis in the crime of succumbing to their context, Gladwell never missed an opportunity to miss an opportunity. The lesson of Enron, he wrote in "The Talent Myth," was that smart people might be overrated. Five years later, in "Open Secrets," he offered another view, challenging readers to compare Enron with Watergate. Whereas Watergate had been a puzzle, a scandal with an obvious narrator and cast of perpetrators, Enron was a mystery--a scandal too complex to comprehend. "Enron's downfall has been documented so extensively that it is easy to overlook how peculiar it was," he wrote. This assertion might ring less false were it followed by an elaboration of how it differed from other "mysteries": the Enron crooks were caught and prosecuted. One noteworthy event Gladwell fails to mention is the panicked plea of Enron CEO Ken Lay for a federal bailout on grounds of the "systemic risk" the firm's collapse would pose, a plea rejected by Treasury Secretary Paul O'Neill. All of this appears to muddy Gladwell's earlier assertion that Enron and its management consultants at McKinsey
believe in stars, because they don't believe in systems. In a way, that's understandable, because our lives are so obviously enriched by individual brilliance. Groups don't write great novels, and a committee didn't come up with the theory of relativity.
But stars do believe in systems--at least when the system is down several trillion dollars.