Hey, any time. It is both a thought-provoking and fun read, isn't it? Now, before we take that stuff at face falue, more or less... I see that, according to surf's excellent first-hand account of the 'Black Swan' launch party, Nassim Taleb himself called that New Yorker article a "false narrative." Ouch. Who are we to disagree? (Unless Dr. Taleb is prone to slight revisionism. )
thanks for everything,annaland. i agree one talented photographer with a great camera..... we would be banned permanently from this site if the last paragraph, regarding the "after-party" wasn't edited out! warmly, surf
"Nassim then jumped into the issue of retrospective distortion â using the recent Virginia Tech 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. " I was curious if he would mention this unfortunate example. "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. " Could you expand on this as you understand it? I don't understand "probabilities drop when moving away from the mean"?
Once again, thanks to all for this thread, and to ThunderDog for the link to the New Yorker article. Here's a new write up/review of Taleb's new book by Bloomberg: Embrace Black Swans to Avoid Financial Disaster, Urges Taleb By Mark Gilbert http://www.bloomberg.com/apps/news?pid=20601088&sid=aum_MAReDqI8&refer=home April 20 (Bloomberg) -- A slump in Chinese stocks on Feb. 27 triggered the worst week for U.S. equities in more than four years and the biggest one-day jump in volatility ever -- the financial equivalent of a butterfly's flapping wing in New Delhi causing a hurricane in North Carolina. In ``The Black Swan: The Impact of the Highly Improbable,'' Nassim Nicholas Taleb argues that we are dangerously blind to the possibility of unlikely events, and reluctant to accept their unpredictability when they do occur. It is a seductive thesis. A Black Swan, in Taleb talk, is an incredibly improbable event with a colossal impact, be it 9/11 or the rise of Google Inc. Our response to such events is to rationalize them, making them appear more predictable than they were, the author argues. In short, we kid ourselves. Our global economy gives ``the appearance of stability'' even as it ``creates devastating Black Swans,'' he says. ``We have never before lived under the threat of a global collapse. The financial ecology is swelling into gigantic, incestuous, bureaucratic banks -- when one falls, they all fall.'' Taleb comes across as a guy who says what he likes and likes what he says. He paints himself as a Renaissance man, a polymath as conversant in music and literature as he is in mathematics and finance. Abundant examples and playful turns of phrase make this a fascinating, challenging read. His concept of ``Umberto Eco's Antilibrary,'' where intellectual wealth lies in unread books rather than well-thumbed volumes, is a lovely abstraction. Splashes of Arrogance His investment fund, Empirica Capital LLC, made him rich enough to spend his time contemplating life from ``dilapidated but elegant cafes in regular neighborhoods as undiluted with persons of commerce as possible.'' Arrogant splashes like this stain more pages than is necessary; I don't imagine Taleb suffers editors gladly. Taleb has a couple of claims to fame. His 2001 book, ``Fooled by Randomness,'' has been published in 18 languages. In April 2002, he was the subject of a Malcolm Gladwell profile in the New Yorker magazine that ran to almost 8,000 words, outlining his theory that luck plays a huge, unacknowledged role in success for traders and investors. In his new book, Taleb says we're all guilty of confirmation bias, tending to look for things that corroborate what we believe to be true. We're also victims of the narrative fallacy, ``our predilection for compact stories over raw truths.'' Tigers and Dynamite A casino might look like a business where calculations of risk and probability determine success or failure. Yet the MGM Mirage casino in Las Vegas ``spent hundreds of millions of dollars on gambling theory and high-tech surveillance, while the bulk of the risks came from outside their models,'' Taleb says. Consider the white tiger that mauled magician Roy Horn of duo Siegfried and Roy at the Mirage in October 2003, costing the casino $100 million, Taleb says. Or the disgruntled contractor who tried to dynamite the place. One employee failed to file tax returns on big-winning gamblers, resulting in ``a monstrous fine,'' while the owner violated gambling laws to pay the ransom on his kidnapped daughter. ``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-one,'' he writes. There's an investment strategy to profit from improbability. ``Be as hyperconservative and hyperaggressive as you can instead of being mildly aggressive or conservative,'' Taleb advises. ``Instead of having medium risk, you have high risk on one side and no risk on the other. The average will be medium risk but constitutes a positive exposure to the Black Swan.'' Killing the Turkey The hand can feed the turkey for 1,000 days until, on day 1,001, it wrings the fowl's neck for Thanksgiving. The trick is to be the butcher, not the turkey. ``A thousand days cannot prove you right, but one day can prove you to be wrong,'' writes Taleb. ``I am not urging you to stop being a fool. Just be a fool in the right places.'' With risk measures at or near record lows, including volatility indexes, corporate bond defaults, credit spreads and emerging-market yields, Taleb might help you dodge the next Black Swan. The book is from Random House (356 pages, $26.95).
Hey guys, I just found out about this thread and about Nasim Taleb..i'm curious about this new book of his: the black swan. However, i was wondering if anyone can tell me if it's worth buying it.... i mean the book pretty much says that it's impossible to predict blackswan events such as the 9/11 or a sudden drop or rise in market.... but isn't that common sense? what else is being discussed in his book? Also, i was wondering if his other book: fooled by randomness is a goody buy as well... maybe someone could shed some lights on this for me. Lastly, i'm also interesting in finding 2 types of books and was wondering if anyone could suggest any good ones. First, i am looking for a good book on trading psychology..., and another book that teaches the market economy and how it relates to trading... for example, how to understand current events, market conditions, what a certain housing number, consumer report, interest rate hike might do to the overall market.... i was wondering if there would be a book that helps you understand the economy/current events and how they correlates to trading and the stock market....... so i can have a better understanding of what might affect the market in a certain way and gain a better understanding of how the market is going to react.
For a guy who doesn't like finance much Taleb certainly knows how to make money with it: He has been running derivatives trading and hedging seminars with Paul Wilmott for awhile that are geared toward traders and managers. The most recent one was last week in London. They cost £1999 per person. He must really hate his job.