Monthly Archives: December 2009

don’t worry if you don’t know “absolutely everything” before starting out | Gapingvoid

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Again, just seeing NNT’s ideas filter into the culture. Hugh Macleod is an artist and an entrepreneur and a frequent speaker at internet conferences. He blogs at

To get some very lucid, hard­core pers­pec­tive on this, I recom­mend that you read Nassim’s Taleb’s exce­llent and highly rea­da­ble “Foo­led By Ran­dom­ness” (W. W. Nor­ton & Co., 2001). Nassim’s the­sis is chil­dishly sim­ple: That the big­ger the his­to­ri­cal event, the more ran­dom and unpre­dic­ta­ble the event was to begin with. Nobody saw 9/11, Pearl Har­bor, the assas­si­na­tions of JFK, Lin­coln or Arch­duke Franz Fer­di­nand, the Ato­mic Bombs being drop­ped on Japan, the 1923 collapse of the Ger­man Deutch­mark, the Bar­ba­rians sac­king Rome in 410 A.D., The Bubo­nic Pla­gue of the 1300’s, or Hitler’s 1941 inva­sion of the Soviet Union coming down the pike. Ditto with Detroit not seeing the threat of Japa­nese cars coming after 1945, or IBM not seeing the  threat posed in the 1970s by Mic­ro­soft and Apple. Everything just hap­pe­ned when it did, every­body was shoc­ked com­ple­tely, and every­body just had to deal with the MASSIVE con­se­quen­ces after­ward. Not too much fun at the time, but there was no other choice. Nas­sim makes a damn good case.

Six Mistakes Executives Make in Risk Management | Compliance Building

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Tidy summary of October 2009 HBR article.

Nassim N. Taleb, Daniel G. Goldstein, and Mark W. Spitznagel discuss risk management and short comings in approaches in the October 2009 issue of the Harvard Business Review (subscription required).

They offer up six mistakes in the way we think about risk:

1.  We think we can manage risk by predicting extreme events.
2.  We are convinced that studying the past will help us manage risk.
3.  We don’t listen to advice about what we shouldn’t do.
4.  We assume that risk can be measured by standard deviation.
5.  We don’t appreciate that what’s mathematically equivalent isn’t psychologically so.
6.  We are taught that efficiency and maximizing shareholder value don’t tolerate redundancy.

Boston Conference – Panel 1

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Taleb talks briefly @ 25 minute mark for about 5 minutes. Mostly on “know what vs. know how”. Caplan wrote The Myth of the Rational Voter. Great Caplan introduction audio lecture from SXSW 2008 at

Boston Conference – Panel 1

“Public Ignorance: Rational, Irrational, or Inevitable”
Scott Althaus, Bryan Caplan, Ilya Somin, Nassim Taleb, and Jeffrey Friedman

Nassim Taleb and the Black Swan. Challenging the academics foundations of economics and finance. Repost from /r/PhilosophyofScience. : Economics

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Nice intro to NNT article found at Reddit, by sixbillionthsheep

Nassim Taleb is the best-selling author of The Black Swan. He is a former Wall Street trader and a current University Professor of risk engineering whose grandfather and great-grandfather were former deputy prime ministers of Lebanon.

Taleb describes himself as a skeptical empiricist. Philosophers of science would probably describe him as an extreme scientific anti-realist. He attacks modern intellectuals for what he calls their platonicity – a tendency to create underlying pictures of reality that go well beyond the data. His gripe is primarily with the social sciences, historical studies, the media and every day thinking. He is particularly savage towards finance, attacking Nobel Prize winners such as Robert C Merton (including to his face) for devising and promoting economic models which assume that market price movements behave in a log-normal fashion. It is the widespread belief in these models which he believes are the cause of financial market crashes.

The problem is, he says, we inhabit two worlds of probability which are often confused. He labels these two worlds – mediocristan and extremistan. Mediocristan governs much of the human physical world – it can be described neatly by the Gaussian (bell) curve where no single observation can affect the properties of a large sample much – height, weight, IQ, mortality rates. Extremistan describes the more random nature of human constructions and some natural processes – wealth, book sales, inflation, deaths from terrorist incidents, population of cities, size of planets. Western intellectuals have tried to fit normal curves to Extremistan processes.

His book is frequently punctuated by descriptions of common fallacies, some of which I list below.

Ludic fallacy : Trying to fit probability distributions to data without enough information and reasoning based on these false assumptions. Sometimes we have to reason without even knowing anything about the underlying distribution.

The problem of silent evidence: Deriving causality from an analysis of the winners e.g. assessing the traits (such as risk-tasking appetite) in common of millionaires to explain their success without examining the many more people with those same traits that failed to be millionaires.

Narrative fallacy: Fitting a story or pattern to a series of facts such as what happens in historical explanation and ignoring the many counterfactuals.

Confirmation bias: Seeking confirmatory evidence to validate preconceptions and hypotheses.

For a video lecture detailing his thoughts in The Black Swan, see here (thanks to rjefferson). His (rather unconventional) website can be found here. Long podcast interviews with Taleb about the financial crisis found here. One of his great heroes is Benoit Mandelbrot.

Taleb’s influence has been substantial. He is credited with predicting the present financial crisis (and profitting from it substantially as a result). He recently testified in Congress. He draws crowds that have Bill Gates and Michael Dell waiting in line. At times he is a pompous and haughty read – unquestionably controversial – but as of 2009, he is probably the most influential and widely read philosopher of science alive.


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From NNT’s homepage. Continued at link above. Hat tip to Dave Lull.

118– 2009, Annus Mirabilis

I thought that calendar 2009 was a good year for my thinking activities; taking stock I thought I had satisfied my new year commitment to not be late once, satisfied my ancient Mediterranean avoidance of vulgar work (called “laziness” in modern days by philistines and modern slaves), brought down my “work” activities to under 3 hours a week, while (of course) increasing my income, reduced boring exercise while increasing my fitness, never uttered the word “I am busy” (meaning I was in control of my life), drank good wine, etc. I had spent minimal time with philistines and businessmen, blew away a few heads of state and ministers of finance because I despise bureaucrats & journalists & find them both boring and intellectually inferior to my friends Dupire, Douady, the philosophers & philosophasters, etc. You know you are free when you prefer to turn down invitations by the glorious to accepting them –the first step towards withdrawal and seclusion. I did more raw thinking, pure abstract thinking than ever before, except perhaps in childhood as I had no soccer mum so I could lounge and meditate. I figured out mathematically why nature could not have an animal larger than an elephant, why size is a handicap in complex systems, the “too big WILL fail”, etc. but all these seemed child play. For I never thought that I would see in front of me the result of my life with disastrous consequences for LOGIC, EPISTEMOLOGY, DECISION THEORY, STATISTICAL INFERENCE. Thanks to my friend Raphael Douady who lets me borrow his brain, his intelligence, and his mathematical erudition–he has more mathematical culture than anyone in modern times,except perhaps for his late father Adrien Douady. 16 years of conversations with Raphael … Only he could bring up cylindrical (even spherical) Brownian motion, Sobolev space, etc. into normally bland discourses. All it took is a long conversation in Raphael’s kitchen last November. Now I feel I did something deep.