Nassim Nicholas Taleb is one of the eminent contributors to Thinking: The New Science of Decision-Making, Problem-Solving, and Prediction, the latest in a series of Edge books edited by John Brockman and published by Harper Perennial (October 2013). In his essay, Taleb suggests and discusses several “phronetic rules” that suggest what is wise to do (or not to do) in the fourth quadrant. With regard to key terms, the rules he suggests are in the Aristotelian sense of phronesis, decision-making wisdom.

As for the fourth quadrant, it is the “black swan domain,” one that he describes in depth in his book, The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility,” published by Random House (2010).

According to Taleb:

“The first type of decisions is simple, “binary,” in that you just care if something is true or false. Very true or very false does not matter. Someone is either pregnant or not pregnant. A statement is “true” or “false” with some confidence interval. (I call these M0 as, more technically, they depend on the zeroth moment, namely just on probability of events, and not their magnitude —you just care about “raw” probability). A biological experiment in the laboratory or a bet with a friend about the outcome of a soccer game belong to this category.

“The second type of decisions is more complex. You do not just care of the frequency—but of the impact as well, or, even more complex, some function of the impact. So there is another layer of uncertainty of impact. (I call these M1+, as they depend on higher moments of the distribution). When you invest you do not care how many times you make or lose, you care about the expectation: how many times you make or lose times the amount made or lost.

“Probability structures: There are two classes of probability domains—very distinct qualitatively and quantitatively. The first, thin-tailed: Mediocristan“, the second, thick tailed Extremistan. Before I get into the details, take the literary distinction as follows:

“In Mediocristan, exceptions occur but don’t carry large consequences. Add the heaviest person on the planet to a sample of 1000. The total weight would barely change. In Extremistan, exceptions can be everything (they will eventually, in time, represent everything). Add Bill Gates to your sample: the wealth will jump by a factor of >100,000. So, in Mediocristan, large deviations occur but they are not consequential—unlike Extremistan.

“Mediocristan corresponds to “random walk” style randomness that you tend to find in regular textbooks (and in popular books on randomness). Extremistan corresponds to a “random jump” one. The first kind I can call “Gaussian-Poisson”, the second “fractal” or Mandelbrotian (after the works of the great Benoit Mandelbrot linking it to the geometry of nature). But note here an epistemological question: there is a category of “I don’t know” that I also bundle in Extremistan for the sake of decision making—simply because I don’t know much about the probabilistic structure or the role of large events.”

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Nassim Nicholas Taleb has devoted his life to problems of uncertainty, probability, and knowledge. He spent two decades as a trader before becoming a philosophical essayist and academic researcher. Although he now spends most of his time either working in intense seclusion in his study, or as a flâneur meditating in cafés across the planet, he is currently Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute. His main subject matter is “decision making under opacity”, that is, a map and a protocol on how we should live in a world we don’t understand.

His works are grouped under the general title Incerto (Latin for uncertainty), composed of a trilogy accessible in any order (Antifragile, The Black Swan, and Fooled by Randomness) plus two addenda: a book of philosophical aphorisms (The Bed of Procrustes) and a freely available Technical Companion. Taleb’s books have been published in thirty-three languages.

Taleb believes that prizes, honorary degrees, awards, and ceremonialism debase knowledge leadership by turning it into a spectator sport.