Book · How to decide
The Black Swan
Nassim Nicholas Taleb · 2007
On rare, high-impact events that models do not anticipate, and the consequences of building portfolios as though they do not happen.
Why it is here
The argument is that consequential events cluster in the tails of distributions, that these are systematically underestimated because they are absent from the historical record until they occur, and that this makes most risk modelling worse than useless.
For an angel there is an unusual twist: you are on the favourable side of this asymmetry. Your downside on any position is capped at your cheque and your upside is not, which means rare extreme events work for you rather than against you. That is the entire argument for the asset class.
The practical consequence is exposure rather than prediction. You do not need to identify which company becomes extraordinary; you need enough positions that one can, and enough patience to still be holding when it does.
Read it if
You want to understand why an asset class with a high failure rate can nonetheless be rational.
Skip it if
You have read Fooled by Randomness recently — there is meaningful overlap and that one is tighter.
What it explains