Tag Archives: Optionality

Lindy Effect, GMOs, Shills, Solar Energy, Pope Francis |Twitter @nntaleb

NNT has been VERY busy on Twitter lately. This is just a sampling from the last few days. Usually but not always, I select Tweets that include links to additional information.











ANSWER: Every loss of crop raises total ruin 100 fold. Halving crops raises total ruin by 100 quintillion 10^20 (assuming independence).

— NassimNicholasTaleb (@nntaleb) August 13, 2015
@nntaleb you will like this onion article on GMOs http://t.co/1m2TtHFTqG

— Ben Hayes (@benhayesnyc) August 12, 2015
Relgious heuristics have played in role in intergenerational risk management http://t.co/FFY7OTbe8c @Streitapfel

— NassimNicholasTaleb (@nntaleb) August 12, 2015
The pope is reciting a version of our Precautionary Pple: Pope Francis Joins Battle Against Transgenic Crops http://t.co/Z9LsDsZdog

— NassimNicholasTaleb (@nntaleb) August 12, 2015
Additional aphorisms added to INCERTO https://t.co/NNpAtYK9N5

— NassimNicholasTaleb (@nntaleb) August 11, 2015
Deep down,thrilled to see political established annihilated by Trump whom I can’t stand. Prefer stupiddemocracy to fakedemocracy @ianbremmer

— NassimNicholasTaleb (@nntaleb) August 10, 2015
The value of solar energy is in the optionality: raw material is free AND doesn’t change in price, with no of negative optionality (waste).

— NassimNicholasTaleb (@nntaleb) August 10, 2015
A new scholarly article on the fake “consensus” on GMOs and the travesty of science by corporate interests. (Gated) http://t.co/PqEDT5U3dr

— NassimNicholasTaleb (@nntaleb) August 10, 2015
We are witnessing the prostitution of science: Like Monsanto, Coca-Cola Funds Shills to Distort Science. http://t.co/U5bMx7mwRF

— NassimNicholasTaleb (@nntaleb) August 10, 2015
Wrong to evaluate a statistical concept (unconditional life expectancy) from (conditional) exceptions. #LindyEffect https://t.co/cUQvM72ANx

— NassimNicholasTaleb (@nntaleb) August 9, 2015

Academics find it “irrational” that one can prefer apples to oranges…

Academics find it “irrational” that one can prefer apples to oranges, oranges to pears, but pears to apples (something called intransitivity of preferences). I leave aside the problem that in real life choices have synchronies: I am not (dynamically) inconsistent if I prefer soup to grapes at the beginning of dinner, but grapes to soup at the end. Things never presents themselves to us in a textbook way, but over time and in different contexts. But there there is a deeper logic for such inconsistency –even in the *static* case.

Recall that the antifragile is what likes a bit of randomness.

It may be very efficient, in the long run, to inject some randomness in one’s choices in order to span a broader set of objects, and intransitivity is one way to do so. Break the routine of choices. This is similar to gift giving: a gift is something that you would not buy otherwise; it too breaks your routine of choices — like a book you would have never thought of buying.

Mother nature may have a way to force you to make “mistakes” of small consequence may reveal deeper preferences or more interesting attributes of the world. This is optionality.

via Academics find it “irrational” that one can… – Nassim Nicholas Taleb.

A Dozen Things I’ve Learned from Nassim Taleb about Optionality/Investing | 25iq

Excellent! See the entire list, link below.

A Dozen Things I’ve Learned from Nassim Taleb about Optionality/Investing

1. ”Optionality is the property of asymmetric upside (preferably unlimited) with correspondingly limited downside (preferably tiny).”  Venture capital, when practiced properly by a top tier firm, is a classic example of a business that benefits from optionality. All you can lose financially in venture capital is what you invest and your upside can be more than 1000X of what you invested.  Another example of optionality is cash held by a disciplined patient value investor with the temperament to not buy until Mr. Market is fearful.  As just one example, Warren Buffett did exactly this during the recent financial panic and earned $10 Billion by putting his cash to work.  Seth Klarman, Howard Marks and other value investors use dry powder in the form of cash to harvest optionality since Mr. Market is bi-polar.

2. ”‘Long volatility’ in trader parlance, has positive optionality.” As an example, the optionality of cash allows the holder to buy assets from people who were “short volatility” when a crisis hits. The wise value investor sits and waits patiently for Mr. Market to deliver a fearful market and when the intrinsic value of a company’s shares presents a “margin of safety” buys in quantity.

3. “If you ‘have optionality,’ you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur. (The key is that your assessment doesn’t need to be made beforehand, only after the outcome.)”  Being able to make decisions which do not require correctly forecasting the future is a wonderful thing.  Not one of the great value investors identified in the series of posts in this blog relies on macro forecasts of the future.  Instead, value investors use the optionality of cash to buy after the outcome exists (i.e., a significant drop in intrinsic value). Regarding venture capital, Warren Buffett believes:  “If significant risk exists in a single transaction, overall risk should be reduced by making that purchase one of many mutually- independent commitments.  Thus, you may consciously purchase a risky investment – one that indeed has a significant possibility of causing loss or injury – if you believe that your gain, weighted  for probabilities, considerably exceeds your loss, comparably weighted, and if you can commit to a number of similar, but  unrelated opportunities.  Most venture capitalists employ this strategy.”

A Dozen Things I’ve Learned from Nassim Taleb about Optionality/Investing | 25iq.