Book Review; The Black Swan by Nicholas Nassim Taleb

I think it is a good book. The only thing is, it is really elementary and imo one is better served by picking up an undergraduate text in statistics.

Otherwise, if you don't mind the prose or prefer it to dry stats books, this is a good read.

I just wished the book had some corresponding equations in it. Alternatively, a website where more serious students can go and expand on the subject matter would help.

nitro

 

I think it is a good book. The only thing is, it is really elementary and imo one is better served by picking up an undergraduate text in statistics.

Otherwise, if you don't mind the prose or prefer it to dry stats books, this is a good read.

I just wished the book had some corresponding equations in it. Alternatively, a website where more serious students can go and expand on the subject matter would help.

nitro

 

so good you had to say it 3x

 

Can you give a 2-3 sentences summary of it?

I assume it is something like this:

" Shit eventually happens, but it happens so randomly and infrequently, that there is no way you can take advantage of it (at least me, Taleb couldn't) in the markets. If shit happened more often, it would be more predictable and the reward playing it right less profitable."

There you go, I just saved you guys a few bucks...

 

I think it is a good book. The only thing is, it is really elementary and imo one is better served by picking up an undergraduate text in statistics. Otherwise, if you don't mind the prose or prefer it to dry stats books, this is a good [supplementary] read.

I just wished the book had some corresponding equations in it. Alternatively, a website where more serious students can go and expand on the subject matter discussed in the book would help. Carefully worked out real trading examples to educate on the chapter subject would be unprecedented

I found this book in the science/math section of the bookstore. Not sure it belongs there, but not sure it belongs in other sections either. I would have stuck it in the [theoretical] economics section.

Taleb's book on Dynamic Hedging is an outstanding book. He has shifted his interest it seems [at least his interest in what he spends his time writing about] and his recent books are "pop" books.

nitro

 

<i>here's a piece we did on the taleb book event couple months ago---may shed some light on the content and author for those of you who have not read it yet. Taleb has fashioned himself as an intellectual rebel challenging convention and is quite the raconteur.... </i>



We attended Nassim Taleb’s new book launch party for The Black Swan –The Impact of the Highly Improbable on Park Ave, NYC. The event was well attended with approximately 120 people. The audience included several heavy weight quantitative professionals such as Dr. Emanuel Derman. It was well orchestrated compared to the mad house of the George Soro’s signing event attended earlier in the year. Little touches like serving Black Swan wines, as a marketing tie in, and chocolate cookies added to the friendly, collegiate ambiance. The jovial crowd appeared to consist of academics, young suits, and various book types.

An animated and vocal Taleb took the stage first stressing that his new book was not about finance, then admitting that he does not like the subject and finds it exceedingly boring. In true Taleb fashion he began by ripping on history books by saying that most historians are bullsh!t artists and not to take any history book seriously. He added that historians and stock analysts share a similar trait – Bsing. During his speech, he raised the following question, “How many traders are in the room?” Sitting near the back of the room, we counted perhaps 8 hands—I was expecting a much larger representation of the trading community.

Nassim then jumped into the issue of retrospective distortion—using the recent VT shootings as fodder for his idea. By retrospective distortion he meant the way humans tend to evaluate and make sense of matters after the fact, constructing an orderly event in hindsight. . The more significant things he talked about included his belief that experts do not exist in complex domains, that using cumulative advantage loops and preferential advantage concepts is not a proper way to conceptualize black swans and perhaps his most interesting statement is that ALL design has its genesis in randomness—the implications of this idea are profound. He elaborated a little on several topics, then opened the floor up for questions.

Not surprisingly, the first question focused on Malcolm Gladwell’s New Yorker article regarding Niederhoffer and Taleb. He was visibly annoyed and without delay he stated that the article was an example of a “false narrative”—another concept he talks about in the book. He said that the article worked wonders for selling his book, but for the wrong reasons. However, he made it clear that the right reason for buying his book was boring. Taleb further affirmed that he absolutely does not wish to talk about Niederhoffer, quickly moving onto the next question.

He fielded questions about the central aspect of his new book claiming that the Normal and Gaussian distributions are frauds primarily because probabilities drop when moving away from the mean while with Mandelbrot’s variations this does not occur. He then was asked several specific financial questions, which he politely dodged and commented that he does not know what the Black Swan is or how to predict it. Time was up and the book signing began—several of the audience members carried a dozen or more books for his autograph. Not sure if they will be on eBay, but I’ll monitor for a bit to see if they end up there.

Taleb was over all very energetic and his aggravation, when Victor Niederhoffer was mentioned, was short-lived. He dropped the F bomb on several occasions quickly changing to proper words with a chuckle—not sure if this was done purely for effect or if its his natural vocabulary. Taleb’s lively delivery and overall friendly demeanor (except when Niederhoffer was mentioned) made it an entertaining and unique evening. My initial impressions of the book, after a cursory read, are that it appears interesting, well documented and entertaining although lacking in an academic discussion. I’m looking forward to further reading this week.

enjoy,

surf


http://www.marketsurfer.blogspot.com/

http://www.dailyspeculations.com/wordpress/?p=1386

 

Let me cite one simple example of his massive ego blindness. He rather proudly cites his student hooliganism that closely preceded the downward spiral into armed conflict in Beirut, without it ever occurring to him that the acts of himself and his student peers contributed visibly to that increasing unrest. He clearly reveals himself in "The Black Swamp" to be a shallow intellectual dilettante. A butterfly. Daintily tasting a wild profusion of superficially plausible ideas. If there is trading acumen there, he's concealing it successfully. And it is absolutely intolerable to me that he loathes the French. One suspects that it is because those he has met loathed him. His superficiality comes to mind. Or perhaps they resent anyone more arrogant than themselves.

 

interesting observation. no one said the guy doesn't have a huge ego.....

surf

 

...and non-existent. Let's face it guys, when Taleb put the theory to test, his fund lost money. At least he couldn't come up with a strategy that would make money in the long run while anticipating random shit happening ....

Let's quote a reviewer from Amazon:

"Let me give a simple illustration: In the book, Mr Taleb gives the example of a Turkey that is fed everyday and thinks to him/herself "Hey! These humans feed me everyday- They're great!" only to be surprised, one day, out of the blue, when it lands on the chopping block.

This example is given to show that using traditional reasoning to predict the future is fundamentally flawed, because it ignores "black swans".

Mr. Taleb argues "See, That turkey is dumb by predicting that humans will always be nice to him, given prior evidence- Don't be like the turkey"

This is a poorly formed argument: There is a perfectly valid argument for the turkey's beliefs- Occam's Razor: The simplest explanation is that humans are always nice to you. It may be true that the Turkey is stupid, but you're making a poorly formed argument if you do not delve into the use of Occam's Razor as a defense of the turkey's beliefs.

Occam's Razor, which is a central refutation of many of the arguments in this book, is never mentioned in it. This is the general problem with this treatise- Mr. Taleb sets up straw man arguments and then shoots them down- In the process, the reader often thinks "Hey! that's unfair- There are better arguments for the opposite position" but they are left avoided/unexplored.

This is definitely an interesting subject area, and many of the author's arguments may be true, and the book may be worth reading for some... but be aware that you may be disappointed by a lack of crispness in the argument the author puts forth."

 

Let me ask anyone who had read it: didn't you feel like a sucker for having bought it? Especially since that was one of his favorite words in the text. The book is little more than an excuse for him to preen in print. And I intensely disliked the experience of reading along quite seriously struggling with my inferior intellect to understand his seemingly lofty reasoning, only to be duped by his reference to an imaginary authoress. Oh so cute.