Is Nassim Taleb right about AI not being able to accurately predict certain types of distributions? So Taleb has two heuristics to generally describe data distributions. One is Mediocristan, which basically means things that are on a Gaussian distribution such as height and/or weight of people.

The other is called Extremistan, which describes a more Pareto like or fat-tailed distribution. An example is wealth distribution, 1% of people own 50% of the wealth or something close to that and so predictability from limited data sets is much harder or even impossible. This is because you can add a single sample to your data set and the consequences are so large that it breaks the model, or has an effect so large that it cancels out any of the benefits from prior accurate predictions. In fact this is how he claims to have made money in the stock market, because everyone else was using bad, Gaussian distribution models to predict the market, which actually would work for a short period of time but when things went wrong, they went really wrong which would cause you to have net losses in the market.

I found this video of Taleb being asked about AI. His claim is that A.I. doesn't work (as well) for things that fall into extremistan.

Is he right? Will some things just be inherently unpredictable even with A.I.?

Here is the video I am referring to https://youtu.be/B2-QCv-hChY?t=43m08s
Yes and no!

There's no inherent reason that machine learning systems can't deal with extreme events. As a simple version, you can learn the parameters of a Weibull distribution, or another extreme value model, from data.

The bigger issue is with known-unknowns vs. unknown-unknowns. If you know that rare events are possible (as with, say, earthquake prediction), you can incorporate that knowledge into the models you develop, and you'll get something that works as well or better than humans in that domain. If you don't know that rare events are possible (as with, say, a stock market crash produced by correlated housing defaults), then your model will reflect that as well.

I tend to think Taleb is being a bit unfair here: AI can't handle these kinds of events precisely because its creators (us) can't handle them! If we knew they were possible, then we could handle them pretty well, and AI could too.