
Is Taleb a crank? - kingkongrevenge
http://falkenblog.blogspot.com/2009/03/review-of-talebs-black-swan.html
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jacquesm
Is Taleb a crank ? You know what, I don't know.

Is Sam Sethi a nut job ? Also no clue.

Is Dvorak a troll ? Again, it doesn't register, he might be.

What I do know is that "Is X a Y ?" where 'X' is the name of some guy that's
in the public eye and Y some hyperbolic term (preferably derogatory) will get
immediate traction.

~~~
bonsaitree
It's a really sad commentary on our society, and specifically the HN
community, when a headline framed as a question (a no-no in Journalism 101)
gets traction. Great response.

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sharpn
I agree the headline does read like that of a fluff piece, but the article is
considered, and it _does_ quantify & address the question in the headline. I
guess what I'm saying is that if your attention _is_ grabbed by the headline,
then you won't be disappointed by the article - in this case.

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david927
It's Falkenstein who is the crank. You can tell he's read Taleb's work with a
chip on his shoulder (as many have). Taleb's not saying "shit happens," he's
saying, "you can't measure risk -- ever." You can approximate portions, like
VaR and bond rating agencies, but we've been _way_ too cocky that our
measurements cover it all.

I think allegations of "crank"-ness were discussed until about a year ago.
September vetted him. End of story.

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kingkongrevenge
He's saying that Taleb's points are not very useful or original.

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david927
I know. I read it. My point was that he thinks that because he thinks that
Taleb is simply saying 'shit happens'. He's not. We believed in the Gaussian
curves and risk measured in standard derivations. We believed VaR and it ate
us for lunch. If it's not very useful or original, September would not have
proved him out so well.

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Rantenki
The author claims almost immediately that: "Taleb’s style is to severely
criticize experts and authorities--lots of 'morons', 'idiots', and 'fools' out
there--while implying that both he and his reader or listener are exempt from
their many biases."

Actually, Taleb continuously laments how amazingly difficult it is to stay
objective and analytical, especially when it comes to assessing risk.

Taleb's key point however, was that existing economic models depend on using
Gaussians for modeling probability distributions, but that Gaussians are only
useful in SOME cases. Real world behaviorally driven events rarely fit into a
neat statistical framework, so don't try and force them to, you'll just get
bad results out of your model.

I would recommend reading his fooled by randomness book as well (and I may be
remembering details from that one as well in this comment).

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joe_the_user
The author covers the topic in considerable depth but fails to understand the
key points.

Mandlebrot makes serious criticisms of the standard models of stock and other
valuations - these boil down to saying that the "tails" of market changes are
going to be larger than the current models.

The simplest example is CDO's. If you believe in short-tailed, uncorrelated
stock market changes, you can argue that the stocks of five different
tripple-A rated major corporations have a zero percent chance of
simultaneously declining. And you similarly combine together even poor quality
bonds to create a "synthetic" bond which also supposedly has a nearly 0%
chance of failure.

If you believe in long-tailed, correlated stockmarket changes, you believe
that the chances of such bonds failing is much higher.

Guess what actually happened?

I would criticize Taleb, however, for not bringing the issue of complex random
processes to the fore. I think he wants to make his ideas very accessible but
the problem is that he looses the key difference between short-tailed and
long-tailed distributions, since short-tailed distributions DO exist in
reality, especially physics and so we're not talking generic randomness when
looking the problems of understanding markets and uncertainty.

~~~
kingkongrevenge
> saying that the "tails" of market changes are going to be larger than the
> current models

The claim is that people using the models are well aware that the gaussian
distribution is only an approximation, and that substituting fatter tailed
distributions into the models don't actually affect the outputs very much.

~~~
joe_the_user
Yes, I know that's been claimed.

Do you think that, perhaps, the massive collapse of the financial system in
the past year might at least cast a bit of doubt on whether that "awareness"
translates effectively to behavior?

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bwd2
I kind of ran out of steam on the paragraph where he claims that
Niederhoffer's strategy is better than Taleb's while failing to mention that
Niederhoffer has blown up two separate funds during periods of market
instability (1997 and 2007). I find that Niederhoffer's experience reinforces
rather than debunks Taleb's arguments.

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lutorm
Arguing that Taleb is contradicting himself in relying on small number
statistics or "anecdotes" doesn't make sense. You only need a sample of one to
falsify a theory.

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akronim
Taleb's strategy gets paraphrased as "buy out of the money puts" but I'm sure
there's quite a bit more going on than that at his funds, even if that's
broadly the strategy. For starters you have to figure out which puts to buy.
It almost certainly isn't about buying puts on the main index, since that's
almost a default no-thinking risk management approach which drives the price
of the puts up.

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bowman
I have to say, at least Taleb can write. Reading this scrawl gave me a
headache.

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jsankey
Upvoted because I think it's important in this case to read an opposing view.
After all, predicting a crash is not in itself confirmation of insight - at
any point in time there will be some people making the prediction, so when a
crash inevitably happens some people come out looking like geniuses.

As for who is right, frankly that's going to take a lot more digestion...

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Devilboy
Taleb really did predict 7 out of the last 2 recessions.

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nir
I think he'd probably agree - by definition, his theory means that he's no
better at predictions than anyone else, and as I understand his investment
strategy, he positions himself so that being right once in a while covers the
losses of being wrong the rest of the time.

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lutorm
What does whether he is a "crank" have to do with whether he is wrong? I
stopped taking the author seriously when the ad hominem attacks started. Taleb
may be a crank, he may be unsympathetic or inflammatory, but that has _no
bearing whatsoever_ on the state of his theories.

