Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

Post by kragen » Tue, Sep 28, 2010, 5:23 AM UTC

sbaqai wrote: post #22

kragen wrote: post #16

Earlier quoted context omitted.

If you have a hundred would-be Warren Buffetts who each make one investment per year, and a hundred would-be George Soroses who each make dozens of investments per year, the variance on the Buffetts' investments will be a lot bigger than the variance on the Soroses'. Consequently the richest investors out of the whole group will almost certainly be Buffetts, even if the two groups do equally well on average. In fact,…

I understand what you're saying. But don't you have to consider the number of times Buffett exercised his investment decision, and not only when he's put money up? You'd have to consider all those deals he passed up, as using his investment strategy, no? He may make 1-2 investments a year, out of maybe 200 investments available to him that he's analyzed. Thats still 200 investment decisions, not 1 or 2, which I'm ass…

> But don't you have to consider the number of times Buffett exercised his investment decision, and not only when he's put money up?

You might think so, but as it turns out, no. Try simulating it.

Post by drallison » Sun, Oct 03, 2010, 2:02 AM UTC

lzw wrote: post #24

drallison wrote: post #18

I think Nassim is standing on shaky ground here, although we do not have the full text of his remarks. I do not think our understanding of real world economics and the way that our economy actually works is adequate to state anything about the impact of one strategy versus another. Academic Economics certainly is not adequate to predict anything in the real world with any degree of reliability. Time series analysis o…

I would like to point out that the understanding of real world economics is developed enough to make very accurate predictions. For instance, I knew in late 2000 or early 2001 that there would be a housing boom, a housing bubble, and a banking crisis when it burst. I was a slacker so it wasn't until 2003-2004 that I started putting money behind this scenario and I profited on the way up and on the way down. (I was wa…

You write: "I would like to point out that the understanding of real world economics is developed enough to make very accurate predictions. "For instance, I knew in late 2000 or early 2001 that there would be a housing boom, a housing bubble, and a banking crisis when it burst. ..."

I don't think "knowing" constitutes prediction. If a housing bubble were predictable, the factors creating it, the timing, the drivers, and all manner of detail would have been generally known, as would the impact of the bubble in the short, medium, and long term. Moreover, we would have been able to explore various options that would mitigate the impact of the bubble or eliminate it all together.

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse