Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Nassim Taleb (Black Swan) open letter to David Cameron

guardian.co.uk

Post reply on HN
Print view View original

11–20 of 66 posts

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#11

Post by jerf »

TriinT wrote: post #9
oakmac wrote: post #7

Earlier quoted context omitted.

Black Swan theory isn't about denying science; it's about recognizing the limits of science. Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do.

"Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do." Have you ever worked at an investment bank? I suspect you have not. Wall Street does not run on the scientific method. It runs on greed, fear and politics. The ones who check the assumptions and know the limits of their models don't have the…

Malfeasance enabled the models, the models enabled malfeasance. Declaring one thing "the culprit" and not the other is to fail to recognize the dynamic nature of the system. Even in a world of perfect angels, Taleb shows that broken models would still bring the system down. Even in a world of perfect models, unscrupulous jerks can bring the system down. It's all too related to pull apart.

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#12

Post by neilk »

cwan wrote: post #3
keven wrote: post #2

"Work on building a "robust" society, capable of withstanding errors, in which the role of finance (hence debt) would be minimal. We want a society in which people can make mistakes without risk of total collapse. Silicon Valley offers a good example, where people have the chance to fail fast (and repeatedly)."

Impressively scathing of both the Obama and former Bush administrations. I'm not sure how he would go about implementing some of his ideas since on one hand he argues against additional regulations and on the other he argues for a ban certain types of complex financial products (ie who would be the arbiter of what he calls a return to products that dependend on trial and error?). He is however a great writer and more…

Taleb wants financial services to come in two flavors: boring, predictable, public banking utiliies; and no-safety-net no-bailout risk-taking investment.

He sees current regulation as helping to create the monsters we have now, where the risk-takers are allowed to play with the money that's supposed to be stable.

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#13

Post by mynameishere »

oakmac wrote: post #7
drewcrawford wrote: post #4

> It is a low-probability, high-impact event that, because of its rarity and the instability of the environment, cannot be scientifically evaluated in terms of risk and return. I stopped reading here. The only objective evaluation of economic matters is in scientific, risk-and-return terms. Anything else is quackery, fear-mongering, or worse. A great deal of evil has been done in the last decade or so in the name of…

Black Swan theory isn't about denying science; it's about recognizing the limits of science. Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do.

You can't discount the apocalypse. You just can't. And this pan-phobic concept "black swan" is just various degrees of unknowable apocalypses that we are supposed to account for based upon their very unaccountableness. I don't buy it. Read the tea leaves first, then tell me about swan feathers.

The housing bubble was BLATANT. No black swans involved. I remember talking about it with friends in 2005. No big deal, really.

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#14

Post by neilk »

compay wrote: post #5

Unless you're an entrenched partisan, I think it's still a tad too early to call Obama's economic policies "disastrous" or "calamitous."

I think Taleb's main complaint is that Obama has not changed the incentives for Wall Streeters to put the economy at risk. Instead, we've had a big and apparently permanent transfer of risk from private to public, exacerbating the situation.

A Goldman Sachs executive just boasted that their business methods hadn't changed at all from before the crash. Think about that for a second.

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#15

Post by TriinT »

jerf wrote: post #11
TriinT wrote: post #9

Earlier quoted context omitted.

"Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do." Have you ever worked at an investment bank? I suspect you have not. Wall Street does not run on the scientific method. It runs on greed, fear and politics. The ones who check the assumptions and know the limits of their models don't have the…

Malfeasance enabled the models, the models enabled malfeasance. Declaring one thing "the culprit" and not the other is to fail to recognize the dynamic nature of the system. Even in a world of perfect angels, Taleb shows that broken models would still bring the system down. Even in a world of perfect models, unscrupulous jerks can bring the system down. It's all too related to pull apart.

So, what is the solution? Destroy the financial industry? Good luck.

Taleb is an anti-intellectual. He believes that all models are wrong and useless. To make it worse, he advocates that no further knowledge can be attained. The only knowledge and truth that is right is the "black swan theory". Come on, gimme a break!!! Aren't we HN'ers smarter than that? Why is Taleb's drivel being upvoted?!

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#16

Post by BrentRitterbeck »

neilk wrote: post #14
compay wrote: post #5

Unless you're an entrenched partisan, I think it's still a tad too early to call Obama's economic policies "disastrous" or "calamitous."

I think Taleb's main complaint is that Obama has not changed the incentives for Wall Streeters to put the economy at risk. Instead, we've had a big and apparently permanent transfer of risk from private to public, exacerbating the situation. A Goldman Sachs executive just boasted that their business methods hadn't changed at all from before the crash. Think about that for a second.

I hear this from people all the time. From a financial viewpoint, the markets exist to transfer capital from those that have it to those that need it. In addition to that, the markets exist to transfer risk from one party to another. People outside of finance need to realize that companies like Goldman, when they are speculating, serve a legitimate purpose. They provide a mass of liquidity that otherwise wouldn't be there. So, before you start thinking about changing the way things work, imagine what things would be like if you attempt to remove speculators from the market. If you tie Wall Street's hands too much, last year's freezing of the credit market would look like a nice summer day.

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#17

Post by neilk »

mynameishere wrote: post #13
oakmac wrote: post #7

Earlier quoted context omitted.

Black Swan theory isn't about denying science; it's about recognizing the limits of science. Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do.

You can't discount the apocalypse. You just can't. And this pan-phobic concept "black swan" is just various degrees of unknowable apocalypses that we are supposed to account for based upon their very unaccountableness. I don't buy it. Read the tea leaves first, then tell me about swan feathers. The housing bubble was BLATANT . No black swans involved. I remember talking about it with friends in 2005. No big deal, rea…

Many people knew there was a housing bubble, but few predicted it would have such wide-reaching effects. Did you?

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#18

Post by jamesbritt »

TriinT wrote: post #9
oakmac wrote: post #7

Earlier quoted context omitted.

Black Swan theory isn't about denying science; it's about recognizing the limits of science. Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do.

"Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do." Have you ever worked at an investment bank? I suspect you have not. Wall Street does not run on the scientific method. It runs on greed, fear and politics. The ones who check the assumptions and know the limits of their models don't have the…

"You can't steal ideas from probability theory and statistics that have been known for centuries, rename it, wrap it nicely and call it a new, original idea."

Do you have any references to work centuries old that describes what Taleb calls 'Black Swans'?

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#19

Post by [deleted] »

BrentRitterbeck wrote: post #16
neilk wrote: post #14

Earlier quoted context omitted.

I think Taleb's main complaint is that Obama has not changed the incentives for Wall Streeters to put the economy at risk. Instead, we've had a big and apparently permanent transfer of risk from private to public, exacerbating the situation. A Goldman Sachs executive just boasted that their business methods hadn't changed at all from before the crash. Think about that for a second.

I hear this from people all the time. From a financial viewpoint, the markets exist to transfer capital from those that have it to those that need it. In addition to that, the markets exist to transfer risk from one party to another. People outside of finance need to realize that companies like Goldman, when they are speculating, serve a legitimate purpose. They provide a mass of liquidity that otherwise wouldn't be…

[deleted]

Re: Nassim Taleb (Black Swan) open letter to David Cameron

#20

Post by frossie »

mynameishere wrote: post #13
oakmac wrote: post #7

Earlier quoted context omitted.

Black Swan theory isn't about denying science; it's about recognizing the limits of science. Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do.

You can't discount the apocalypse. You just can't. And this pan-phobic concept "black swan" is just various degrees of unknowable apocalypses that we are supposed to account for based upon their very unaccountableness. I don't buy it. Read the tea leaves first, then tell me about swan feathers. The housing bubble was BLATANT . No black swans involved. I remember talking about it with friends in 2005. No big deal, rea…

"The housing bubble was BLATANT. No black swans involved."

Yes, but what was not blatant was that the housing bubble popping would kill Lehman Brothers, cause runs on banks and almost bring down the whole world economy.

Taleb's point is that you can't go around behaving like any system is, to borrow a phrase "too big to fail" - or rather too cleverly thought out/regulated to fail. To some extent this is simple engineering. I can test the resilience of my cluster to network failure by pulling out an ethernet cable and see what happens - maybe there's a small hiccup while systems fall back onto local resources, maybe nothing fails over properly and I am hosed for 12 hours. As I understand Taleb, his argument is that the economic powers (bankers, traders, politicans) spend too much time trying to figure out how to prevent network failure, rather than making sure that when the network does go out, it doesn't take your whole mission down with it. Because, no matter how well you think you have engineered the system, the chance of your network going out somehow, sometime is non-zero.

I do agree with the posters that Taleb overstates the cleverness of his own insight; but unfortunately, in his field, it seems that people really were too dumb/greedy to grasp this. Irrespective of what you think of his interpretation of events or the validity of his suggestions (and I too question them), I think as systems engineers we can appreciate the risk of designing political and economic systems under the assumption that they can't fail.

Post reply on HN