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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

#51

Post by jpendry »

neilk wrote: post #23
BrentRitterbeck wrote: post #16

Earlier quoted context omitted.

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…

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…

they pulled those tricks because widows and orphans money was regulated so it had to be in 'AAA' products, and the widows and orphans demanded higher returns because 'everybody' else was getting higher returns or they were going to invest they're money elsewhere.

look, by no means am i blaming 'widows and orphans' for this mess, it's just the reasons for it are very complex. even regulation that seems like a great idea, grading investment products, ended up playing some small part in the chaos.

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

#52

Post by fauigerzigerk »

jerf wrote: post #10
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…

"The only objective evaluation of economic matters is in scientific, risk-and-return terms." That's not the problem; I suggest you read up on his theories. His point is, to put it more mathematically, that using inappropriate statistical models to try to model future events can lead to catastrophe. In particular, assuming something is a normal Gaussian process when in fact it's something that's almost a normal Gaussi…

I agree about the statistical issues he highlights, but his anti expert stance is kind of odd. I mean we listen to this guy because he used to be a wall street trader. His books were published because he was accepted as some kind of an expert himself. So is he wrong because he's an expert?

He says: "We replaced the heuristics of the elders with arrogant (and incompetent) beliefs, breaking, in the name of science, the chain of knowledge."

In europe we had fascisim and stalinism within the past 100 years. That's three or four generations. Before the dawn of liberalism, capitalism, enlightenment and the industrial revolution we had 1000 years of depression caused by religious fanatics. We had to break that chain of "knowledge".

The heuristics of the elders are little more than mature, cultivated cliches of what past experts and ideologues told them. Taleb is correct, it's incredibly difficult to make predictions in a complex system. However, I don't see how a blanket condemnation of science and a blanket approval of crude traditions helps us to become better at that.

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

#53

Post by pbhjpbhj »

dtf wrote: post #38
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.

I honestly don't know what memes you're referring too (nor the books) but outlier and tipping point have basic meanings without interpretation: tipping point is a cusp or specifically the point at which the force vector originating at the centre-of-gravity passes outside the foot of a body causing it to tip over. Outliers are statistical anomalies or unexpected results that are usually ignored as if they are insignificant.

Black swans on the other hand are birds with a particular pigment.

Now what are the additional layers of meaning, we see black swans referring to apparently unlikely events that nevertheless will occur (that's possibly not the definition given by this guy), but what about the super-definitions for the others?

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

#54

Post by tc »

katamole wrote: post #41
cia_plant wrote: post #40

Earlier quoted context omitted.

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

Not when it keeps being rehashed ad nauseum .

Maybe he intends to keep rehashing it until people understand. Good ideas, it seems, need to be repeated.

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

#55

Post by khafra »

TriinT wrote: post #15
jerf wrote: post #11

Earlier quoted context omitted.

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?!

The idea I've gotten from reading Taleb (articles, not books) is not that all models are useless, it's that assuming a normal distribution is often unjustified, and that once-in-a-century events come along quite a bit more often than that. Sure; he invented a catchphrase, not the exponential distribution--but "Black Swan" is more than just a cheap Australian Cabernet if it'll generate more positive awareness of systemic risks.

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

#56

Post by giardini »

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…

Have you read either of his books?

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

#57

Post by biohacker42 »

tc wrote: post #54
katamole wrote: post #41

Earlier quoted context omitted.

Not when it keeps being rehashed ad nauseum .

Maybe he intends to keep rehashing it until people understand . Good ideas, it seems, need to be repeated.

It wasn't that great of an idea: http://www.stat.berkeley.edu/~aldous/157/Books/taleb.html

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

#58

Post by zupatol »

cwan wrote: post #37
neilk wrote: post #12

Earlier quoted context omitted.

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 regulati…

One way to make banks boring and predictable would be to define precisely what kind of products they are allowed to sell. This sounds like what Taleb would want, but it don't think it would be good to entirely eliminate innovation.

But if regulators would forbid any product valued by models they don't understand, it would probably be a good start.

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

#59

Post by katamole »

tc wrote: post #54
katamole wrote: post #41

Earlier quoted context omitted.

Not when it keeps being rehashed ad nauseum .

Maybe he intends to keep rehashing it until people understand . Good ideas, it seems, need to be repeated.

Good ideas, it seems, need to be repeated.

Absolutely not. Ideas that are diffuse and unoriginal, on the other hand, are often repeated because they are uncompelling.

I've read The Black Swan, and although it was entertaining, I didn't feel like I learned anything of value.

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