Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Robustness and Fragility, A Lecture by Dr. Nassim Taleb

Politics / Resources & Reviews Jul 19, 2010 - 04:32 AM GMT

By: Daniel_Bruno

Politics

He starts the sold-out presentation with a tale of two readers on a business trip. Settled in for a long flight, Dr. Taleb pulls a book out of his bag while the fellow next to him pulls out the fashionable,expensive, razor thin, 500 book capacity Kindle to pass the time. A conversation ensues and comparisons are made. Common sense and marketing tell us that the Kindle is far more efficient, But Dr. Taleb is not so sure. He has reams of work on 1990s era floppy discs that he can no longer access. But books, the product of technology essentially unchanged in 500 years, present no such problem and will outlast the Kindle when it too becomes obsolete.


The controversial point of the anecdote is this: efficiency is fragile; simple and redundant systems are robust and Mother Nature, and by extension natural selection, favors simplicity, including in financial markets. The Kindle, like debt, especially complex financial instruments that no one understands, embody the opposite of simplicity and will not stand the test of time. In fact, they will be short lived.

I was reminded of the story of the zero gravity ball point pen. NASA reportedly spent a lot of time and money in the 60s developing a pen the astronauts could use in space. What did their arch rivals do? They gave their cosmonauts pencils.

Building on the airplane allegory, Taleb goes on to ask the audience how many times a flight has been cancelled or delayed, and by how many hour?. He then asks, how many times has a flight arrived early, and by how many minutes? Some statistical model errors are skewed towards certain outcomes and one does not wade through a river that is, on average, four feet deep. The probability of rare events canot be accurately measured. This is how Taleb breaks down convexity bias and the flaw in much of current business school thinking about risk management. When you think about it, it rings true: how many times have we seen pundits and experts declare that the probability of a four airplanes hijacked simultaneously, a killer hurricane, a repeat of 1929 or a catastrophic offshore oil spill is one in some gigantic number every zillion years? Then it happens in our lifetime.

The wild success of his paperback The Back Swan happens about as often as an actual Black Swan sighting, but randomness is an unlikely factor: the reasons for the book's great appeal are a combination of good timing and good storytelling, the keys to successful entertainment in any venue. His iconoclastic ways stir debate, stoke sales and earn detractors. "The fact that you never died before does not prove your immortality." Pithy sayings like this make the audience laugh and relax.

By the time Taleb delves into standard deviations, Gauss, kurtosis and heuristics to make his point and argue his case, his listeners are already receptive to his views even if they don't get the technical mumbo-jumbo. Therein lies Taleb's success as an author and speaker. It also doesn't hurt that he lampoons the banks and academic/financial elites as incompetent and responsible for the economic crises that have buffeted the world lately. He's not afraid to step on toes and tell it like it is.

By Daniel Bruno
Chartered Market Technician

www.FXboss.info

FXBOSS receives 24-hour streaming news and expert commentary. Over 70 FXBOSS forex specialists talk to trading rooms in the world’s currency capitals and track major political, economic and market events globally. They give you the instant, live, tradable information you need to judge the direction of the market, and make informed decisions about your trades.

© 2010 Copyright  Daniel Bruno - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in