Nassim Nicholas Taleb

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Nassim Nicholas Taleb
While in theory randomness is an intrinsic property, in practice, randomness is incomplete information.

Nassim Nicholas Taleb (born 1960) is a essayist, epistemologist, researcher, and former practitioner of mathematical finance.

Sourced[edit]

  • My major hobby is teasing people who take themselves and the quality of their knowledge too seriously and those who don’t have the guts to sometimes say: I don’t know....
  • You may not be able to change the world but can at least get some entertainment and make a living out of the epistemic arrogance of the human race.
    • Nassim Nicholas Taleb's Home Page
  • It is now the scientific consensus that our risk-avoidance mechanism is not mediated by the cognitive modules of our brain, but rather by the emotional ones. This may have made us fit for the Pleistocene era. Our risk machinery is designed to run away from tigers; it is not designed for the information-laden modern world.
    • Quoted in the introduction to "A Talk with Nassim Nicholas Taleb," Edge (April 2004) [1]
  • Much of the research into humans' risk-avoidance machinery shows that it is antiquated and unfit for the modern world; it is made to counter repeatable attacks and learn from specifics. If someone narrowly escapes being eaten by a tiger in a certain cave, then he learns to avoid that cave.
  • We should reward people, not ridicule them, for thinking the impossible.
    • "Learning to Expect the Unexpected," The New York Times (2004-04-08}

Fooled by Randomness (2001)[edit]

  • Delivering advice assumes that our cognitive apparatus rather than our emotional machinery exerts some meaningful control over our actions.
  • It does not matter how frequently something succeeds if failure is too costly to bear.
To be completely cured of newspapers, spend a year reading the previous week’s newspapers.
  • Trading forces someone to think hard; those who merely work hard generally lose their focus and intellectual energy. In addition, they end up drowning in randomness; work ethics draw people to focus on noise rather than the signal.
  • Mild success can be explainable by skills and labor. Wild success is attributable to variance.
  • Lucky fools do not bear the slightest suspicion that they may be lucky fools - by definition, they do not know that they belong to such a category.
  • Unlike a well-defined, precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality.
  • There is a saying that bad traders divorce their spouse sooner than abandon their positions. Loyalty to ideas is not a good thing for traders, scientists - or anyone.
  • A mistake is not something to be determined after the fact, but in the light of the information until that point.
  • I always remind myself that what one observes is at best a combination of variance and returns, not just returns.
  • I try to make money infrequently, as infrequently as possible simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price.
  • The more data we have, the more likely we are to drown in it.
  • At no point during his ordeal did Nero think of himself as 72% alive and 28% dead.
  • Probability is not about the odds, but about the belief in the existence of an alternative outcome, cause, or motive.
  • We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract.
  • Wittgenstein's ruler: "Unless you have confidence in the ruler's reliability, if you use a ruler to measure a table you may also be using the table to measure the ruler." (page 224)
  • [E]conomists are evaluated on how intelligent they sound, not on a scientific measure of their knowledge of reality. (page 85)
  • [E]conomics is a narrative discipline, and explanations are easy to fit retrospectively. (page 257)
  • [In] economics... you can disguise charlatanism under the weight of equations and nobody can catch you since there is no such thing as a controlled experiment. Now the spirit of such methods, called scientism by its detractors, continued into the discipline of finance as a few technicians thought their mathematical knowledge could lead them to understand markets. The practice of financial engineering came along with massive doses of pseudoscience. (page 115)

The Black Swan: The Impact of the Highly Improbable (2007)[edit]

Random House, 2008, ISBN 0-81297-918-4

  • I disagree with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or "incentives" for skill.
    • p. xxi
  • If you want to get an idea of a friend's temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life. Can you assess the danger a criminal poses by examining only what he does on an ordinary day? Can we understand health without considering wild diseases and epidemics? Indeed the normal is often irrelevant.
    • p. xxix
  • It is remarkable how fast and how effectively you can construct a nationality with a flag, a few speeches, and a national anthem; to this day I avoid the label "Lebanese," preferring the less restrictive "Levantine" designation.
    • p. 5
  • History is opaque. You see what comes out, not the script that produces events, [...] The generator of historical events is different from the events themselves, much as the minds of the gods cannot be read just by witnessing their deeds.
    • p. 8
  • Categorizing is necessary for humans, but it becomes pathological when the category is seen as definitive, preventing people from considering the fuzziness of boundaries, let alone revising their categories.
    • p.15
  • But it remains the case that you know what is wrong with a lot more confidence than you know what is right.
    • p.58
  • We tend to use knowledge as therapy.
    • p. 69
  • Consider that the turkey's experience may have, rather than no value, a negative value. It learned from observation, as we are all advised to do (hey, after all, this is what is believed to be the scientific method). Its confidence increased as the number of friendly feedings grew, and it felt increasingly safe even though the slaughter was more and more imminent. Consider that the feeling of safety reached its maximum when the risk was at the highest!
    • pp. 40–41 (Taleb attributes the parable of the turkey to Bertrand Russell, who originally wrote of a chicken.)
  • The casino is the only human venture I know where the probabilities are known, Gaussian (i.e., bell-curve), and almost computable.
    • p. 127
  • Probability is a liberal art; it is a child of skepticism, not a tool for people with calculators on their belts to satisfy their desire to produce fancy calculations and certainties.
    • p. 128
  • There is no effective difference between guessing a variable that is not random, but for which information is partial or deficient (...), and a random one (...). In this sense, guessing (what I don't know, but what someone else may know) and predicting (what has not taken place yet) are the same thing.
    • p. 142
  • Cumulative errors depend largely on the big surprises, the big opportunities. Not only do economic, financial, and political predictors miss them, but they are quite ashamed to say anything outlandish to their clients — and yet events, it turns out, are almost always outlandish.
    • p. 149
  • Don't cross a river if it is four feet deep on average.
    • p. 161
  • Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making.
    • p. 162
  • The same past data can confirm a theory and its exact opposite! If you survive until tomorrow, it could mean that either a) you are more likely to be immortal or b) that you are closer to death.
    • p. 185
  • One cannot assert authority by accepting one's own fallibility. Simply, people need to be blinded by knowledge - we are made to follow leaders who can gather people together because the advantages of being in groups trump the disadvantages of being alone. It has been more profitable for us to bind together in the wrong direction than to be alone in the right one. Those who have followed the assertive idiot rather than the introspective wise person have passed us some of their genes. This is apparent from a social pathology: psychopaths rally followers.
    • p. 192
  • While in theory randomness is an intrinsic property, in practice, randomness is incomplete information.
    • p. 198
  • Rank beliefs not according to their plausibility but by the harm they may cause.
    • p. 203
  • This makes living in big cities invaluable because you increase the odds of serendipitous encounters — you gain exposure to the envelope of serendipity.
    • p. 209
  • Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks — when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur... I shiver at the thought.
    • pp. 225-226

Ten principles for a Black Swan-proof world (2009)[edit]

Article published in Financial Times (2009-04-07). Article here.

  • The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
  • It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.
  • Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence.” Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.
  • Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
  • Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

The Bed of Procrustes: Philosophical and Practical Aphorisms (2010)[edit]

  • An idea starts to be interesting when you get scared of taking it to its logical conclusion.
    • p. 3
  • Academia is to knowledge what prostitution is to love.
    • p. 4
  • In science you need to understand the world; in business you need others to misunderstand it.
    • p. 4
  • Using, as an excuse, others’ failure of common sense is in itself a failure of common sense.
    • p. 7
  • Procrastination is the soul rebelling against entrapment.
    • p. 8
  • When we want to do something while unconsciously certain to fail, we seek advice so we can blame someone else for the failure.
    • p. 9
  • It’s harder to say no when you really mean it.
    • p. 9
  • Asking science to explain life and vital matters is equivalent to asking a grammarian to explain poetry.
    • p. 17
  • You exist if and only if you are free to do things without a visible objective, with no justification and, above all, outside the dictatorship of someone else’s narrative.
    • p. 17
  • People used to wear ordinary clothes weekdays, and formal attire on Sunday. Today it is the exact reverse.
    • p. 19
  • The book is the only medium left that hasn’t been corrupted by the profane.
    • p. 20
  • Restaurants get you in with food to sell you liquor; religions get you in with belief to sell you rules.
    • p. 21
  • To be completely cured of newspapers, spend a year reading the previous week’s newspapers.
    • p. 21
  • Success is becoming in middle adulthood what you dreamed to be in late childhood.
    • p. 22
  • Modernity needs to understand that being rich and becoming rich are not mathematically, personally, socially, and ethically the same thing.
    • p. 22
  • Older people are most beautiful when they have what is lacking in the young: poise, erudition, wisdom, phronesis, and this post-heroic absence of agitation.
    • p. 24
  • What fools call “wasting time” is most often the best investment.
    • p. 24
  • A man without a heroic bent starts dying at the age of thirty.
    • p. 25
  • Someone who says “I am busy” is either declaring incompetence (and lack of control of his life) or trying to get rid of you.
    • p. 26
  • The difference between slaves in Roman and Ottoman days and today’s employees is that slaves did not need to flatter their boss.
    • p. 26
  • You are rich if and only if money you refuse tastes better than money you accept.
    • p. 27
  • Modernity: we created youth without heroism, age without wisdom, and life without grandeur.
    • p. 27
  • You can tell how uninteresting a person is by asking him whom he finds interesting.
    • p. 28
  • Preoccupation with efficacy is the main obstacle to a poetic, elegant, robust and heroic life.
    • p. 29
  • Charm is the ability to insult people without offending them.
    • p. 30
  • Those who do not think that employment is systemic slavery are either blind or employed.
    • p. 30
  • They are born, put in a box; they go home to live in a box; they study by ticking boxes; they go to what is called “work” in a box, where they sit in their cubicle box; they drive to the grocery store in a box to buy food in a box; they talk about thinking “outside the box”; and when they die they are put in a box.
    • p. 31
  • The twentieth century was the bankruptcy of the social utopia; the twenty-first will be that of the technological one.
    • p. 31
  • You have a real life if and only if you do not compete with anyone in any of your pursuits.
    • p. 39
  • Only in recent history has “working hard” signaled pride rather than shame for lack of talent, finesse and, mostly, sprezzatura.
    • p. 39
  • What they call “play” (gym, travel, sports) looks like work.
    • p. 40
  • Decomposition, for most, starts when they leave the free, social, and uncorrupted college life for the solitary confinement of professions and nuclear families.
    • p. 41
  • A competitive athlete is painful to look at; trying hard to become an animal rather than a man, he will never be as fast as a cheetah or as strong as an ox.
    • p. 41
  • Hard science gives sensational results with a horribly boring process; philosophy gives boring results with a sensational process; literature gives sensational results with a sensational process; and economics gives boring results with a boring process.
    • p. 45
  • A good maxim allows you to have the last word without even starting a conversation.
    • p. 45
  • The fool generalizes the particular; the nerd particularizes the general; ... the wise does neither.
    • p. 53
  • You want to be yourself, idiosyncratic; the collective (school, rules, jobs, technology) wants you generic to the point of castration.
    • p. 54
  • The sucker’s trap is when you focus on what you know and what others don’t know, rather than the reverse.
    • p. 56
  • Mental clarity is the child of courage, not the other way around.
    • p. 57
  • Wit seduces by signaling intelligence without nerdiness.
    • p. 60
  • Greatness starts with the replacement of hatred with polite disdain.
    • p. 64
  • The tragedy of virtue is that the more obvious, boring, unoriginal, and sermonizing the proverb, the harder it is to implement.
    • p. 65
  • Ethical man accords his profession to his beliefs, instead of according his beliefs to his profession.
    • p. 66
  • Just as dyed hair makes older men less attractive, it is what you do to hide your weaknesses that makes them repugnant.
    • p. 68
  • When conflicted between two choices, take neither.
    • p. 71
  • For the robust, an error is information.
    • p. 72
  • It takes extraordinary wisdom and self-control to accept that many things have a logic we do not understand that is smarter than our own.
    • p. 78
  • Intelligence consists in ignoring things that are irrelevant.
    • p. 78
  • For the classics philosophical insight was the product of a life of leisure; for me a life of leisure is the product of philosophical insight.
    • p. 84
  • We learn the most from fools ... yet we pay them back with the worst ingratitude.
    • p. 85
  • The best test of whether someone is extremely stupid (or extremely wise) is whether financial and political news makes sense to him.
    • p. 87
  • The weak shows his strength and hides his weaknesses; the magnificent exhibits his weaknesses like ornaments.
    • p. 94
  • Social science means inventing a certain brand of human we can understand.
    • p. 95
  • Because our minds need to reduce information, we are more likely to try to squeeze a phenomenon into the Procrustean bed of a crisp and known category (amputating the unknown), rather than suspend categorization, and make it tangible. Thanks to our detections of false patterns, along with real ones, what is random will appear less random and more certain—our overactive brains are more likely to impose the wrong, simplistic, narrative than no narrative at all.
    • p. 105
  • There is a certain category of fool—the overeducated, the academic, the journalist, the newspaper reader, the mechanistic "scientist", the pseudo-empiricist, those endowed with what I call "epistemic arrogance", this wonderful ability to discount what they did not see, the unobserved.
    • p. 106
  • We are robust when errors in the representation of the unknown and understanding of random effects do not lead to adverse outcomes —fragile otherwise.
    • p. 107
  • I have respect for mother nature's methods of robustness (billions of years allow most of what is fragile to break); classical thought is more robust (in its respect for the unknown, the epistemic humility) than the modern post-Enlightenment naïve pseudoscientific autism. Thus my classical values make me advocate the triplet of erudition, elegance, and courage; against modernity’s phoniness, nerdiness and philistinism
    • pp. 107-108

Antifragile: Things That Gain from Disorder (2012)[edit]

Random House, 2012, ISBN 978-1-4000-6782-4

  • I want to live happily in a world I don't understand.
    • p. 4
  • We didn't get where we are thanks to the sissy notion of resilience.
    • pp. 10–11
  • Simplicity is not so simple to attain.
    • p. 11
  • Modernity has replaced ethics with legalese.
    • p. 15
  • If you see fraud and do not say fraud, you are a fraud.
    • p. 15
  • Just as being nice to the arrogant is no better than being arrogant toward the nice, being accommodating toward anyone committing a nefarious action condones it.
    • p. 15
  • A man is morally free when... he judges the world, and judges other men, with uncompromising sincerity. This is not just an aim but an obligation.
    • p. 16
  • The fragile wants tranquility, the antifragile grows from disorder, and the robust doesn't care too much.
    • p. 20
  • Half of life—the interesting half of life—we don't even have a name for.
    • p. 33
  • It is all about redundancy. Nature likes to overinsure itself.
    • p. 44
  • If humans fight the last war, nature fights the next one.
    • p. 46
  • Information is antifragile; it feeds more on attempts to harm it than it does on efforts to promote it.
    • p. 49
  • Much of aging comes from a misunderstanding of the effect of comfort.
    • p. 55
  • The best way to learn a language may be an episode of jail in a foreign country.
    • p. 62
  • If I could predict what my day would exactly look like, I would feel a little bit dead.
    • p. 63
  • Much of modern life is preventable chronic stress injury.
    • p. 64
  • It is often the mistakes of others that benefit the rest of us—and, sadly, not them ... For the antifragile, harm from errors should be less than the benefits.
    • p. 72
  • He who has never sinned is less reliable than he who has only sinned once.
  • The antifragility of the higher level may require the fragility—and sacrifice—of the lower one.
    • p. 74
  • It is painful to think about ruthlessness as an engine of improvement.
    • p. 75
  • There is no such thing as a failed soldier, dead or alive (unless he acted in a cowardly manner)—likewise there is no such thing as a failed entrepreneur or failed scientific researcher ...
    • p. 79
  • This is the central illusion in life: that randomness is a risk, that it is a bad thing ...
    • p. 84
  • Injecting some confusion stabilizes the system.
    • p. 101
  • When some systems are stuck in a dangerous impasse, randomness and only randomness can unlock them and set them free.
    • p. 102
  • Randomness works well in search—sometimes better than humans.
    • p. 103
  • Modernity widened the distance between the sensational and the relevant.
    • p. 109
  • [A] theory is a very dangerous thing to have.
    • p. 116
  • Few understand that procrastination is our natural defense, letting things take care of themselves and exercise their antifragility.
    • p. 122
  • Daily news and sugar confuse our system in the same manner.
    • p. 127
  • What is nonmeasurable and nonpredictable will remain nonmeasurable and nonpredictable ... no matter how much hate mail I get.
    • p. 138
  • A man is honorable in proportion to the personal risks he takes for his opinion.
    • p. 147
  • Our greatest asset is the one we distrust the most: the built-in antifragility of certain risk-taking systems.
    • p. 171
  • The worst side effect of wealth is the social associations it forces on its victims, as people with big houses end up socializing with other people with big houses.
    • p. 174
  • I suppose that the main benefit of being rich (over just being independent) is to be able to despise rich people (a good concentration of whom you find in glitzy ski resorts) without any sour grapes. It is even sweeter when these farts don't know that you are richer than they are.
    • p. 176 (footnote)
  • An option hides where we don't want it to hide.
    • p. 184

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