Taleb - the new sage of Wall Street

Re:Taleb - the new sage of Wall Street | by mynameishere on Monday October 06, 2008 @01:43PM (#325127)

The banking system, betting against black swans...

I'm so sick of this guy and his gimmicks. Here--I'll sell you some zebra stampede insurance. Now you're covered against that black swan. It could happen, yes? But by definition, a random event can't be predicted, so why bother planning against it?

But this wasn't a "black swan". There was nothing strange about what happened, and many, many people predicted it and explained their predictions. Yet, the media is giving credit to some charlatan who provides nothing but magical thinking:

where he believes no one can predict black swan events, he's eager to cite instances where he alone has done so.

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Re:Taleb - the new sage of Wall Street | by timr on Monday October 06, 2008 @02:08PM (#325152)

I generally agree with you (I find Taleb's writing to be incoherent and his arguments overwrought), but I think his point is still relevant: if you make your wealth through financial tricks that work moderately well 99.99% of the time, but fail catastrophically .01% of the time, you've got to plan on failing in a catastrophic way. For whatever reason, most Wall St. guys don't seem to think that way.

Point being, you don't need to predict the improbable event; you just need to be aware that it's eventually going to happen, and plan appropriately.

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Re:Taleb - the new sage of Wall Street | by mynameishere on Monday October 06, 2008 @02:34PM (#325176)

plan appropriately

Sure. Did you know that on the big stock market drop a couple weeks back, only one company in the s&p 500 went up?

http://www.usnews.com/blogs/new-money/2008/9/30/campbells-so...

if you have no confidence in your banking system and no confidence in the financial markets, the only thing you can have confidence in is the ability to build a bunker

That is the only way to provide against the vast bulk of "black swans". A bunker with plenty of canned goods. And that fact got priced into the market instantly. Even if it amounted to a sort of joke...

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Re:Taleb - the new sage of Wall Street | by timr on Tuesday October 07, 2008 @04:53AM (#325558)

You're being extremely cynical.

The point is not that you (probably) lost money in last week's market; the point is that you didn't go bust. The guys that Taleb is talking about put it all on the line, discounted the possibility that this sort of thing could happen, and now they're dead.

Like I said: I don't like Taleb's writing, but I don't think the message is particularly bad.

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Re:Taleb - the new sage of Wall Street | by nandemo on Tuesday October 07, 2008 @12:35PM (#325812)

Ah, hindsight. I doubt that many people actually predicted exactly what and when it would happen. Just saying "mortgage-based securities will fall" or "the market will go down in 2007/2008" doesn't count. Of course, I don't doubt that some people predicted it in the sense that they took trading positions against the market. But there are always people shorting the market.

Have you actually read any of his books? His style might be a little unusual, but I've never seen any "magical thinking" there.

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Re:Taleb - the new sage of Wall Street | by paraschopra on Tuesday October 07, 2008 @05:14AM (#325579)

>But by definition, a random event can't be predicted, so why bother planning against it?

Bang on! This is the typical talk of people who either don't understand what Taleb is talking about or are so adamant that they simply don't care flexing some of their brain muscles. It is analogous to saying that jumping off the cliff, there is a finite probability (however small) that one won't be killed, so why bother not jumping?

I hope you get the point now.

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Re:Taleb - the new sage of Wall Street | by blackswan001 on Saturday December 13, 2008 @07:49AM (#396674)

I am sure you did not understand Taleb at all. Actually I think it is possibly his mistake that he believes common people without n iota of statistics or mathematics can understand it. Let me explain, almost all of the equations that the Bankers used are based on a bell curve for a distributed event funtion. Now its called a bell curve because the be represents the average and assumes that an event of infini value would have zero chance to happen. That is ok general continuous function because that is a theorical contruct; but in a distributed function and which by definition cannot have zero occurance (because it is distributed) and event with infinite value can occur atleast once. The whole base of mathematics, therefore which is being used by the Banks is flawed and should be removed.If you udnerstand this thing, I would say Taleb is to Banking what Einstein was to Physics. He is asking you to change the foundation. Do you understand it? I doubt you do.

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Re:Taleb - the new sage of Wall Street | by calambrac on Tuesday October 07, 2008 @06:44AM (#325609)

Taleb doesn't claim that black swans are strange; kind of the opposite, in fact. His claims is that its stupid to pretend that black swans don't exist simply because they haven't been seen before.

I don't see what the gimmick is in this line of thought, can you explain a bit more?

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Re:Taleb - the new sage of Wall Street | by quasimojo on Monday October 06, 2008 @01:51PM (#325132)

agreed, there was no black swan here. this was a simple debt implosion

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Re:Taleb - the new sage of Wall Street | by jon_dahl on Monday October 06, 2008 @06:28PM (#325401)

Taleb isn't saying that this event can't be explained ("simple debt implosion"), or that no one predicted it. He's saying that the markets as a whole didn't take into account what ended up happening.

This crisis is built upon the fact that people thought they could predict mortgage repayment rates, and they didn't expect a major decline in housing prices. Huge parts of the world economy took these bets. The unexpected happened. Hence the black swan.

In some respect, what Taleb is saying is obvious - markets aren't predictable, and it is unwise to place bets that will kill you if your predictions are wrong. Too bad more people didn't do this.

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