Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
GBPUSD Top in Place, GOLD Price Ready to Rocket? - 27th May 17
Silver Mining Stocks Fundamentals - 27th May 17
BBC Newsnight Falls for FAKE POLLS, Opinion Pollsters Illusion for Mainstream Media to Sell - 27th May 17
UK Local Election Results Forecast for General Election 2017 - 26th May 17
Stock Market & Crude Oil Forecast! - 26th May 17
Opinion Pollsters UK General Election Seats Forecasts 2017 - 26th May 17
Bitcoin and AltCoins Crypto Price Correction - 26th May 17
Bearish Head and Shoulders in EURUSD? - 26th May 17
SELL US Stocks - Massive Market CRASH WARNING! - 26th May 17
EURGBP: A Picture of Elliott Wave Precision - 26th May 17
Credit Downgrades May Prompt Stock Market Capital Shift - 26th May 17
Rosenstein and Mueller: the Regime Change Tag-Team - 25th May 17
Stock Market Top - Are We There Yet? - 25th May 17
Should I Invest My Fortune in Gold? Inaugural Lecture by Dr Brian Lucey - 25th May 17
USD/CAD Continues Decline - 25th May 17
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

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