The Black Swan: The Impact of the Highly Improbable · chapter 5 · id the-black-swan-c5-03-the-ludic-fallacy-is-the-mista
“The ludic fallacy is the mistake of applying models from controlled, 'ludic' (game-like) environments to the messy real world. Taleb illustrates this with casinos, where the four largest losses came not from gambling (which they modeled perfectly) but from a tiger mauling Roy Horn ($100M+), an employee failing to file tax forms, a contractor trying to dynamite the building, and the kidnapping of an owner's daughter.”
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Receipts
Aure's Notes: The Black Swan Summarysource alive
The four largest losses at a Las Vegas casino fell completely outside the casino's risk models: Roy Horn's tiger attack (over $100 million loss to Mirage), a disgruntled contractor attempting to dynamite the casino, kidnapping of an owner's daughter, and an employee failing to fi
Doug Cornelius: Book Review of The Black Swansource alive
The dollar value of these Black Swans, the off-model hits and potential hits, swamp the on-model risks by a factor of close to 1,000 to 1. The casino spent hundreds of millions on gambling theory and surveillance while its bulk risk came from outside the models.
Wikipedia: Black Swan Theorysource alive
Taleb uses the casino example to illustrate how sophisticated risk management focused on modeled risks (card counting, cheating) can miss the dominant risk factors that fall outside the model entirely.
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