Shared by JohnH

Goes on to report a debate between Hugh Hendry and Michael Novogratz.

The program offered, as usual, stimulating and entertaining presentations and debates. The return of Nassim Taleb was not a black swan event.  He seems to have become bitterer in his crusade against Sharpe-ratio and model-wielding financial “pundits”: while last year he was campaigning for a world that is more robust to black swans, this year he’s fighting for a society that is “robust to bullshitters” (my Word spell checker suggests “bulls hitters”). When I suggested to him that models would be quite harmless and even useful  if the people who use them 1) understood them and 2) applied common sense, he replied that asking people to use common sense is like asking them to stop their heart beat. That seems to be a quite radical and not constructive stance. If people are so stupid, what’s the point in writing smart books?

Fearful of being included in the “no common sense” category, I’ve decided to become an admirer and a follower of Fat Tony, the “horizontally challenged” fictional character introduced by Taleb in Chapter 9 of the Black Swan. Fat Tony is a highly practical and commonsensical “successful nonnerd with a happy disposition” and the title to Taleb’s next book. Two chapters of Fat Tony can be previewed from Taleb’s website: see  Fat Tony 1 and Fat Tony 2.

Repetita juvant (repetition helps), the wise ancient Romans used to say, and there was a fair amount of repetition of old slogans in Taleb’s speech. However, for the benefit of the bearly awake and of the bulls hitters, here is another rehash. You’ve just boarded a plane headed to Rome, when the captain announces: “Hi folks, welcome to this flight to Rome. Just to let you know that we couldn’t get a map of the airways to Rome; we have a map of the airways to Berlin, but, hey, that’s all we have, so that’s what we’re going to use, and anyway, Rome and Berlin are pretty close to each other.” Naturally no passenger would accept to fly under those conditions … well, at least those with some common sense left in them, err … Anyway, says Taleb, why would anybody insist in using models that are known not to explain the reality at hand, just because those are the only models available?

Obvious observation, you might think, but ask yourself that question again next time you are confronted with standard deviations, Sharpe ratios, Value at Risk, or even cointegration, in a practical context. The repetition might indeed be helpful.