Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Critical Fibonacci Extensions May Mark End Of Trump Stock Market Rally - 29th Mar 17
Ending Syria’s Nightmare will Take Pressure From Below - 29th Mar 17
Charts That Reveal US Real Employment Status and It’s Not Good - 29th Mar 17
SNP Controlled Scottish Parliament Demands Right for Scotland to Commit Suicide - Indyref2 - 29th Mar 17
USD Gold Myriad of Signs - 28th Mar 17
Ominous Social Trends That Will Shape Our Future - 28th Mar 17
Foundation And Empire: Is Donald Trump The Mule? - 28th Mar 17
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

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.


© 2005-2016 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

Catching a Falling Financial Knife