Black Swan

is coming, even though it cant be predicted


Sometimes I actually feel bad for Taleb.

On a side note, please avoid taking my name in vain.

Isn’t the whole point of a Black Swan the fact that you can’t imagine it happening beforehand and that it seems like a completely obvious issue in hindsight? This makes the idea of “risk of Black Swan event” somewhat oxymoronic.

Instead, one can talk about the fact that the system is becoming less robust, meaning that small changes are more likely to have catastrophic knock-on effects. That actually is something that it would make some sense to try to measure.

The most hilarious thing about his book is he bashes the media constantly for being idiotic talking heads; yet so many show hosts wanted to interview him.

^ He spoke at a local society event we had a few years back and pretty much spent his hour slagging the profession and calling everyone in the room charlatans and yet they all just sat there nodding and gave him a big applause at the end. Then they went back to measuring their VaR and building their MPT portfolios after lunch. I don’t think 95% of people in the room understood what he was really implying.

He is an interesting guy and he is smart, but he does have this attitude of “if you don’t agree with me on every point, you’re an idiot” which never goes over well.

He’s a smart guy who makes the mistake of thinking he’s the only smart guy in existence. There is no discussing things with him; there is merely listening to him lecture.

I am torn on him. I agree with his logical premise, and a lot of the finance world likes to laugh it off as if the industry is infallible and too smart to let these things happen.

He does come off as a bit of a tool though, and he seems to always be worried. Although maybe if everyone in the industry were a bit more worried we would be better off

his work is widely misunderstood and misappropriated by those he opposes, I bet that gets old quick.

are we talking about taleb or black swan?

I would have paid money to see that. Bet the guy had a field day.

I always felt that Taleb was right about how Black Swan events can completely destroy the best laid plans of mice and men, but he didn’t have a very good answer for what one was supposed to do while one was waiting for the black swan.

He iterated his bit about how life for a Thanksgiving Turkey seems sweet and awesome until the week before Thanksgiving when it all falls apart, but it’s not clear that the Thanksgiving Turkey gains all that much by knowing his fate and worrying it about it for his entire life, particularly since there seems to be no real way for the Turkey to escape the farm he’s caged in.

Cowards die many times before their deaths. The valiant never taste of death but once.

But the same may be said of the informed and the ignorant, except it’s the ignorant Turkey never tastes of death but once.

Taleb’s response is that we need to build robust systems, and - as someone who started his career in environmental analysis - robust systems are certainly a sensible approach. But robust systems are always competing with systems designed for either 1) maximum sustainable yield, or worse, 2) maximum yield, even if unsustainable. If we are all dead in the end, those maxium yield guys at least have it nice before they go. How do we compete with that??? Perhaps with socialism??


“Assets under management at Universa have neared $2 billion since the fund launched early last year with $300 million under management.”


“Universa managed roughly $300 million in assets at the end of last year, according to a regulatory filing.”

^ After the next blow out the AUM will be right back up.

is that supposed to say they’ve earned 2b from $300m AUM?

AFAIK it’s because of their fee structure - they earn fees on the notional “AUM” and keep a partially funded account of $300MM. They probably consider their AUM to be some multiple of the $300MM they keep on hand, probably ~10x that.


How about you stop taking the name of our Australia fauna?

I still have no idea why everyone on here has been worshiping this guy for like a decade. What’s his book about? Low-probability high-damage events happen? Well duh, so what. People underestimate/ignore the probability? Well duh, so what. How is that a book? Welcome to working in finance.

Skeptical, I guess it depends how you define a black swan event. The official definition by this writer is “an event that is a surprise to the observer”. This is not to say it can’t be foreseen as a possible outcome and modeled, it’s to say the observer is an idiot, or cares not to see because of biases or special interests.

In every model I’ve ever built for industry I’ve wanted to put in buttons to model rare events, and every time I’ve been told “oh we can’t really model that, it’s too complicated, let’s not”. Well, actually I can model it. I turned in a report in early 2007 saying the CMO/MBSs were the biggest risk to the portfolio, what happened? Nothing.

It’s more that people just choose to ignore these risks, because you can always say to investors “well, who could have known”. There is also the “but everyone else was doing it too, and they didn’t see it coming either” excuse. I don’t believe they can not be imagined and modeled.

^ Hubris.

^ It’s not hubris if you end up being right, the problem is industry keeps getting it wrong.

It could be “excessive pride or self-confidence” that leads them to get it wrong, but I think it is also that they are compensated for taking excessive risk. The black swans are there to see, they just don’t give a shit, cause it ain’t their money.