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From 1997! Links above to full interview.

DS: What’s going to happen if everybody in the financial system starts using VAR?

NT: VAR players are all dynamic hedgers and need to revise their portfolios at different levels. As such they can make very uncorrelated markets become very correlated. Those who refuse to learn from the portfolio insurance debacle do not belong in risk management.

In 1993 hedge funds were long seemingly independent markets. The first margin call in the bonds led them to liquidate their positions in the Italian, French and German bond markets. Markets therefore became correlated.

VAR is a school for sitting ducks. Find me a dynamic hedger who is a reluctant liquidator and I will front-run him to near-bankruptcy.

DS: So one problem with VAR models is that they don’t account for the fact that the market corrects for the models that trades are based on?

NT: Bingo. Even more: Our perception of what’s going on in the real world can hurt us simply because we have to realize that we are the major players ourselves and we act according to our perceptions. In physics it’s called the Heisenberg uncertainty principle. In the social sciences its even more pronounced.

When people ask me what alternative to VAR I have to offer, my answer is smaller leverage, less naïve diversification, less reliance on dynamic hedging.

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From April, 2002 Fun read.

There was just one problem, however, and it is the key to understanding the strange path that Nassim Taleb has chosen, and the position he now holds as Wall Street’s principal dissident. Despite his envy and admiration, he did not want to be Victor Niederhoffer — not then, not now, and not even for a moment in between. For when he looked around him, at the books and the tennis court and the folk art on the walls — when he contemplated the countless millions that Niederhoffer had made over the years — he could not escape the thought that it might all have been the result of sheer, dumb luck.

Taleb: "会議でIMFの加藤氏の講演を聴いた。2010年の予想。11年の予想。14年までには怒りを覚えた。彼らの予想は占星術と変わらない。でも彼らを除去はできないから、予想が役に立たないことを組み込むという私の信念は正しいようだ。" http://bit.ly/3IbiXD

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Links above to full article.

Companies that become too big,complicated and debt-ridden should be allowed to “creativelydestruct,” said Nassim Nicholas Taleb, author of “The BlackSwan.”

Governments shouldn’t rescue firms that become too big tofail because that rewards incompetent actions and adds todeficits, Taleb said yesterday. When regulators become involvedin the financial system, they tend to protect the largestbusinesses, he said.

“Why is it on land you don’t have an animal bigger than anelephant?” Taleb asked at the Aspen Institute’s “Capitalismand the Future” forum at the New York Public Library. “BecauseMother Nature knows it’s too big to fail.”