Things don’t necessarily happen for a reason; but things survive for a reason.
(Ergodicity, Fooled by Randomness, Lindy)
via Things don’t necessarily happen for a… – Nassim Nicholas Taleb | Facebook.
It looks like the logical faculties of humans have been dropping in the age of the internet; mistakes are worse today than they were when I published Fooled by Randomness > 12 years ago.
When I wrote here “Virtue is when the income you wish to show the tax agency equals what you wish to show your neighbor” about 1/2 of people including 1/5 here on this site mistook it for an invitation to pay more taxes instead of showing-off much less with your money.
The error almost always linked to Kahneman’s attribute substitution: always reduce the problem to something easier to communicate, at the expense of transforming the meaning, Procrustean Bed style. “We underestimate randomness” turns into “It’s all random”.Now the 1/5 people on this site making such mistakes… it is painful, but we need them to leave.
via It looks like the logical faculties of… – Nassim Nicholas Taleb | Facebook.
At the national level, the system is more fragile. One tall tower is more likely to fall in a storm than a lawn of grass. This leads to Taleb’s contention that US federal debt is the most fragile of all, and should be decentralised, because default is unthinkable. Hence, “I’m kind of happy with what’s happening in the US now. We’d like the government periodically to come back with a plan, just like a corporation that has a debt addiction.”
Implementing this idea in practice without extreme volatility will be hard. But the Taleb arguments remain strong. Fragility, he insists, trumps growth. If a plane has an elevated chance of crashing, even if that chance is very small, we would give that priority over its speed or its price. So, governments should have a risk manager’s mindset, and not try to prod the economy into growing. Without a risk-averse mindset, risks will grow.
Source: FT.com
Part ll
HatTip to Dave Lull
OPEN DISCUSSION: Back to skin in the game.
It looks like skin in the game does not necessarily work because it makes people more careful, rather but because it allows the risk taker to exit the gene pool and stop transferring the risk to others. A bad driver exposed to harm would eventually die and stop killing people on the road; shielded from harm he would keep killing others ad infinitum, as if he were an economist a la JS or PK.
Let us discuss: is skin-in-the-game largely a selection mechanism, or is it a behavioral modifier, or both, and in what proportion?
Thanks, friends.
[Please feel uninhibited but stay rigorous, and observe rules meant to prevent the discussion from moving away from the core point. This site has been working very, very, very well because trolls have had zero second option.]
via OPEN DISCUSSION: Back to skin in the… – Nassim Nicholas Taleb | Facebook.
REAL ADVENTURERS DON’T LOOK LIKE JAMES BOND: THE FRAUD FRAUDSTER WANTS TO LET YOU KNOW HE IS A FRAUD.
Colette told the budding George Simenon: true literature should not sound literary, forcing him to strip his style of fake gold. It is the same with science: true science doesn’t look like job-market science, and true scientists know that. For instance, the “happiness” economist Bruno Frey has the best publishing record of any of his peer >300 published papers, but even economists don’t think much of him. And, of course, real business doesn’t look like MBA businesses; real risk takers often look like accountants; real professors don’t look like pipe-smoking tweed-clad portraits; really rich people don’t wear tailored suits and often fly premium economy. Real mercenaries like Bob Denard are more likely to look like college administrators.
Most of us traders knew that Madoff was a fraud, even if it took a while for the system to figure it out. There is something about absence of substance that ends up screaming at our inner BS detector, as if the fraud wanted to be the first one to tell you that he was a fraud, by over-imitation and making his gold glitter a bit too much. It may take a while; we may be fooled a bit, but our BS detector ends up eventually working.
via REAL ADVENTURERS DON’T LOOK LIKE JAMES… – Nassim Nicholas Taleb | Facebook.