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Nassim Taleb (Black Swan) open letter to David Cameron

guardian.co.uk

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

#31

Post by neilk »

BrentRitterbeck wrote: post #27
neilk wrote: post #23

Earlier quoted context omitted.

Your slippery slope looks pretty flat to me. Some regulation does not mean locking down the entire market. And anyway, Taleb is proposing complete liberation for speculators; the only thing is they can't do it and expect bailouts, and they can't get some quasi-official stamp that says "AAA", please invest widows' and orphans' money here. From a financial viewpoint, the markets exist to transfer capital from those tha…

Your twist on the poor being the group that "needs" the money is a clever little play on words, but you, and everyone else here, knows exactly what I meant. Companies need money. Investors have money. As for some god-given right to bank accounts, I never said any such thing. It's not my fault, nor Wall Street's fault, that people aren't better prepared to understand finance. It's a dog eat dog world. If you want to k…

You're right in some of your criticisms -- I had already edited it to remove some of that language.

But do we have no middle ground here?

We agree, for instance, that most people really AREN'T equipped to understand finance as it is practiced. The difference is that you believe there is a class of people whose advice can be relied upon. Taleb thinks not for epistemological reasons. The perverse incentives I mentioned are (for him) barely worth discussing, since they are just corruption rather than self-delusion.

(And when I say corruption, I don't mean they are necessarily evil people; I mean their agenda is now misaligned with the customers').

Anyway, I keep saying "Taleb says" because I am not well versed in these matters. I study it about as much as a layperson can, and all I know is that most of it still seems too complex to predict.

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

#32

Post by BrentRitterbeck »

neilk wrote: post #31
BrentRitterbeck wrote: post #27

Earlier quoted context omitted.

Your twist on the poor being the group that "needs" the money is a clever little play on words, but you, and everyone else here, knows exactly what I meant. Companies need money. Investors have money. As for some god-given right to bank accounts, I never said any such thing. It's not my fault, nor Wall Street's fault, that people aren't better prepared to understand finance. It's a dog eat dog world. If you want to k…

You're right in some of your criticisms -- I had already edited it to remove some of that language. But do we have no middle ground here? We agree, for instance, that most people really AREN'T equipped to understand finance as it is practiced. The difference is that you believe there is a class of people whose advice can be relied upon. Taleb thinks not for epistemological reasons. The perverse incentives I mentioned…

There is a class of people whose advice can be relied upon. It's up to you to find out who those people are. If your broker is not performing up to snuff, you have the right to fire him. It's just like I have the right to fire my auto mechanic, who knows more about cars than I do, if he's not doing a good job.

As for finance being complex, it's really not.

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

#33

Post by nostrademons »

cwan wrote: post #8
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'm pretty sure that Taleb isn't a partisan - having also been pretty critical of Bush/Republicans (though he did point out the Obama administration's spending is magnitudes larger than his predecessor(s)). In the lead up to the crisis, Taleb was one of maybe only a couple people who not only forecasted the crisis but bet right on how it might occur. He used similarly dire language and was laughed at by many of his d…

"For this reason alone he shouldn't be so quickly dismissed."

I'm not sure he'd agree with you. Taleb's books repeatedly stress the importance of survivorship bias. In any population, they'll be someone forecasting just about any conceivable event. No matter how unlikely events turn out to be, somebody is eventually going to be right, and then that person is lauded as a genius for having forecasted correctly. When really they've done no such thing; rather, people have just retrospectively picked out the person who happened to guess right.

I think Taleb would say you shouldn't dismiss him because there's ample evidence throughout history that he's right, not because he happened to guess right this time. Whenever debt levels have risen to what they are now, it's resulted in economic instability and chaotic behavior. It's not just this century: you can find examples back to Roman times.

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

#34

Post by jkuria »

Taleb needs to find something new to talk about. In his book Fooled By Randomness, he takes a paragraph and makes it a chapter. Takes a chapter and makes it a book, talking endlessly about black swans, how people who are successful are successful because they got lucky and repeating analogy after analogy to make the same basic point. In this post he makes sweeping statements about debt being bad, based on wisdom from Babylonian times and Roman proverbs:

"David, you must counter this complexity by lowering indebtedness. We have known since Babylonian times that debt is treacherous and allows no room for mistakes: felix qui nihil debet goes the Roman proverb ("happy is he who owes nothing")."

He sounds like Ahmedinejan in his letter to former president Bush advising him to embrace the ways of the prophets of old :)

There are many situations where debt is your friend but like all good things it can be abused. Common Taleb, find something new to talk about! Black Swan is so 2002!

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

#35

Post by nostrademons »

lutorm wrote: post #30
mynameishere wrote: post #13

Earlier quoted context omitted.

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…

If it really was that blatant, why did it happen? Doesn't the fact that it burst by definition mean that most people did not recognize it? But Taleb makes a different point: Discounting the apocalypse is exactly what he's arguing against, because this is essentially what LTCM et al were doing with their models. They calculated probabilities to make sure that the estimated payoff was greater than the estimated loss, b…

"If it really was that blatant, why did it happen? Doesn't the fact that it burst by definition mean that most people did not recognize it?"

Some data, some math, and an interpretation you won't hear every day:

http://quickfacts.census.gov/qfd/states/00000.html

http://photos1.blogger.com/photoInclude/x/blogger/2825/754/1...

There are 127 million housing units in the U.S. At the peak of the bubble, 7 million houses/year were sold. A total of roughly 30 million houses were sold in the boom years of 2002-2007, assuming there's no double-counting (people who sold a house multiple times), which is probably a pessimistic assumption. That means that over half of U.S. households took absolutely no part in the bubble - they just sat tight.

Now look at the inventory numbers from the last two years. They go up rather dramatically. This means there were more sellers than buyers, i.e. a large number of people realized that home prices were selling for more than they thought the house was worth, and quickly put their house on the market to take advantage of this. Sure looks like people recognized the bubble to me, it's just that by definition they can't all get out before it bursts.

My interpretation is that most people did recognize the bubble - it's just that they're not the ones that the New York Times writes stories about. They held onto their home and neither bought nor sold, instead just going about their business. Or they sold at the peak, rented for a bit, and are now buying back in at half price and pocketing a few hundred grand. Smart people tend not to brag about how they just made a killing off other people's stupidity. It prevents people from being stupid again, which limits the opportunities for future killings. Besides, it tends to kill the mood at parties.

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

#37

Post by cwan »

neilk wrote: post #12
cwan wrote: post #3

Earlier quoted context omitted.

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.

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

But how do you get there? How do you make sure they don't spin out of control or even how do you decide which firms to break up and how? (I don't disagree, I am genuinely interested in learning how he sees it can be implemented and without new significant regulations no less).

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

#38

Post by dtf »

sh1mmer wrote: post #25

Having not read his book, was I the only person annoyed that he used the phrase "black swan" a dozen times in the first paragraph without qualifying it? He could have been saying "You and your party may be the only hope we have for a resilient society insulated from negative oranges and in which everyone has the opportunity to benefit from positive oranges." for all the difference it makes to me.

I cringed too - especially at the capitalization. I shall cringe again when Cameron starts using it. Forced memes like "black swan", "outlier" and "tipping point" are like little mini-advertisements for their books and their authors. Getting them into the vocabulary of politicians and business leaders is the ultimate marketing ploy.

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

#39

Post by ErrantX »

sh1mmer wrote: post #25

Having not read his book, was I the only person annoyed that he used the phrase "black swan" a dozen times in the first paragraph without qualifying it? He could have been saying "You and your party may be the only hope we have for a resilient society insulated from negative oranges and in which everyone has the opportunity to benefit from positive oranges." for all the difference it makes to me.

That was my hang up too. Then when he did get round to the definition it's clear he needs a bit more than a sentence to qualify what he means: because call me a gambler but Black Swan's sound pretty much like something we should avoid planning for or risk getting paranoid.

(and even though I did start reading his book and do sort of know what he's on about I still cant get away from that feeling. Why cant he say "lets not be arrogant and high risk" without having to qualify it with IMO a poor reason (surely the sentence alone should be enough):(

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

#40

Post by cia_plant »

jkuria wrote: post #34

Taleb needs to find something new to talk about. In his book Fooled By Randomness, he takes a paragraph and makes it a chapter. Takes a chapter and makes it a book, talking endlessly about black swans, how people who are successful are successful because they got lucky and repeating analogy after analogy to make the same basic point. In this post he makes sweeping statements about debt being bad, based on wisdom from…

Isn't it better to have one idea that is insightful and correct, than to have many ideas which are wrong, like most commentators?
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