Monthly Archives: March 2010


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Mark Blyth a

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a Department of Political Science, Brown University, Providence, RI
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4 issues per year
Published in:
Critical Review,



, pages 447
– 465
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Nassim Taleb rightly points out that although people may acknowledge in the abstract that the world is uncertain, they still behave as if a large enough sample size is all that is needed to predict, and model, the future. He also rightly notes that ever-increasing quantities of information are relevant only in simple situations, such as in predicting the range of human height, but are misleading in more random arenas, such as financial markets. However, while Taleb decries the use of narratives for falsely forcing the facts to fit a given story, we need narratives in order to make sense of a complex world. Further, Taleb fails to take sufficient heed of the fact that human narratives themselves become objects that act on subjects in an ever-increasing web of complexity.

BurbsPoker Homepage: How following the advice of a successful options trader will improve your poker game

Poker has always been compared to the stock market with its risk-to-reward and long-term approach mentality, but these comparisons are usually cited in a generalized way, and always struck me as more philosophical than absolute –where the analogies could be used to discuss just about any topic, poker and the stock market being just two among many.

As I read the story on Taleb, I was amazed at the parallels between Taleb’s version of options trading and the game of poker that went well beyond generalizations and philosophy. For those of you that don’t know what options’ trading is I’ll use a poker analogy: If buying and selling stocks is similar to a poker game, options’ trading is akin to a prop bet. Basically options’ traders bet on what the market might do in the future, and instead of buying or selling stocks they look for people willing to bet the other way.

nntaleb: The tragedy of the information age is that the toxicity of data increases much faster than its benefits. Worse (cont)

nntaleb: The tragedy of the information age is that the toxicity of data increases much faster than its benefits. Worse (cont)

[Complete Tweet: The tragedy of the information age is that the toxicity of data increases much faster than its benefits. Worse than I thought THE DEGRADATION OF PREDICTABILITY — AND KNOWLEDGE at]

Reader Pascal pointed out the link is broken. The page was available at Here’s NNT’s post from that page…

Distinguished Professor of Risk Engineering, NYU-Poly; Principal, Universa Investments; Author, The Black Swan


I used to think that the problem of information is that it turns homo sapiens into fools — we gain disproportionately in confidence, particularly in domains where information is wrapped in a high degree of noise (say, epidemiology, genetics, economics, etc.). So we end up thinking that we know more than we do, which, in economic life, causes foolish risk taking. When I started trading, I went on a news diet and I saw things with more clarity. I also saw how people built too many theories based on sterile news, the fooled by randomness effect. But things are a lot worse. Now I think that, in addition, the supply and spread of information turns the world into Extremistan (a world I describe as one in which random variables are dominated by extremes, with Black Swans playing a large role in them). The Internet, by spreading information, causes an increase in interdependence, the exacerbation of fads (bestsellers like Harry Potter and runs on the banks become planetary). Such world is more “complex”, more moody, much less predictable.

So consider the explosive situation: more information (particularly thanks to the Internet) causes more confidence and illusions of knowledge while degrading predictability.

Look at this current economic crisis that started in 2008: there are about a million persons on the planet who identify themselves in the field of economics. Yet just a handful realized the possibility and depth of what could have taken place and protected themselves from the consequences. At no time in the history of mankind have we lived under so much ignorance (easily measured in terms of forecast errors) coupled with so much intellectual hubris. At no point have we had central bankers missing elementary risk metrics, like debt levels, that even the Babylonians understood well.

I recently talked to a scholar of rare wisdom and erudition, Jon Elster, who upon exploring themes from social science, integrates insights from all authors in the corpus of the past 2500 years, from Cicero and Seneca, to Montaigne and Proust. He showed me how Seneca had a very sophisticated understanding of loss aversion. I felt guilty for the time I spent on the Internet. Upon getting home I found in my mail a volume of posthumous essays by bishop Pierre-Daniel Huet called Huetiana, put together by his admirers c. 1722. It is so saddening to realize that, being born close to four centuries after Huet, and having done most of my reading with material written after his death, I am not much more advanced in wisdom than he was — moderns at the upper end are no wiser than their equivalent among the ancients; if anything, much less refined.

So I am now on an Internet diet, in order to understand the world a bit better — and make another bet on horrendous mistakes by economic policy makers. I am not entirely deprived of the Internet; this is just a severe diet, with strict rationing. True, technologies are the greatest things in the world, but they have way too monstrous side effects — and ones rarely seen ahead of time. And since spending time in the silence of my library, with little informational pollution, I can feel harmony with my genes; I feel I am growing again.