in his book the black swanNassim Taleb develops two ideas, Mediocristan and Extremistan, to help explain his Black Swan Theory.

Mediocristan is where normal things happen, things that are expected, whose chances of happening are easy to calculate and whose impact is not terribly great. The curved bell and the normal distribution are emblems of Mediocristán. For those unfamiliar with statistics, the bell curve represents the normal distribution, where small, low-impact changes have the highest probability of occurring, and large, broad-impact changes have a very small probability of occurring. .

Nature is full of things that follow a normal distribution. People’s heights follow a normal distribution. Imagine walking down the street. If you see ten people, chances are most of them are very close to average height, and only a small number are very short or very tall. This is a normal distribution.

Mediocristán thus constitutes the normal, the easy to predict, the expected, the small impact, the mundane.

Extremistan is a different beast. In Extremistan, nothing can be accurately predicted and events that seemed unlikely or impossible occur frequently and have great impact. Black Swan events occur in Extremistan.

Think about income distributions. Most people make close to an average salary, some people make less, but some people make a lot. If you were trying to calculate an average salary, the highest earnings (the million dollar salaries) would have a disproportionate effect on the average. To further illustrate, imagine a room filled with 30 random people. If you ask everyone what their salary is and calculate the average, chances are the average seems pretty reasonable. However, if you were to add Bill Gates to the room and then calculate the average salary, your average would go up by a huge margin. One observation had a disproportionate effect on the mean. This is Extremistan.

Things like book sales, whether a movie becomes a hit or a viral video on the internet, they all have similar characteristics and therefore reside in Extremistan.

You may be thinking, so what? Well, the problem is that people tend to think that most things fall into the category of Mediocristan, that they are normal, that they can be predicted and that they have a regular and known probability of happening, and that they will not have a drastic impact. . We have a tendency to think that change occurs gradually and smoothly. This is Mediocristan.

Taleb believes that the most important events, the ones that were unexpected and have a great impact (the Black Swan events, basically), fall into the category of Extremistan, and these events occur much more frequently than people realize. If you think about it, there are a lot of things that fit this idea. The financial crisis, the housing crash, and major world historical events like 9/11 all fit the mold. People tend to think that these kinds of changes happen slowly and smoothly, but in reality, they can happen very suddenly, without warning, and can have a drastic impact that is felt everywhere.

Taleb uses this idea of ​​Mediocristan vs Estremistan to illustrate the importance of the Black Swan events. Black Swans are not predictable, but they pack a punch and occur much more frequently than most people realize. The faster you understand the importance of the Extremistan and Black Swan events, the more protected you will be from their negative consequences.