Black Swan Author Is an Awkward Bird

Nassim Taleb is a mixed blessing, part cheerleader for ignoring the false rationalism of statistics in the realm of human folly we call economics, and part self-indulging jester for being "misunderstood" and protesting too much. I think he suffers a case Roubini syndrome.

Roubini syndrome involves being right once about a big thing and therefore attributing every utterance and opinion subject to that opinion and framework. Having only a single mental hammer seems to have forced both men to see all problems before them as nails.

The risk in Roubini syndrome is that of the one hit wonder pop star who slowly fades away. Both men have more to contribute but seem bent on correcting the media with ever more shrill voices. They have an analog version of SIWOTI syndrome which currently keeps them from more interesting and lasting contributions to thought on economics.

Take a look at Taleb's latest paper Oct 18,2009 entitled Common Errors in Interpreting the Ideas of The Black Swan and Associated Papers.

The paper's first pages are a tiresome tirade, but he has some solid points in the back end of the paper. My own opinion is that his overly emotional rebuttals to prior rebuttals to his work cheapen his voice and muddle the waters. Don't feed the trolls. A good idea stands the test of time, and the best of ideas attract the strongest of criticisms early on before being accepted.

New paradigms are rarely acknowledged as such immediately; that is the role of fads masquarading as innovations. History and ideas of historical note are only acknowledged correctly in the breech.

My recommendation is that the Black Swan should sink or swim in the sea of ideas. The author needs to let it leave the nest to defend itself and fly on its own. Ideas once submitted for consideration are no longer their author's property, but rather become a part of a useful collective consciousness or fade away. Paradigms are a group phenomenon whether true or not.

The gifted Anish Kapoor creator of the Cloud Gate sculpture in Chicago long ago accepted that it would forever forward be known as "the bean", such it is with all creators and their creations in the public domain.

Comments

[RajKish:]

You completely lack an understanding of what Taleb is saying and why he is so important and must be heard. For nth time let me simplify this for you:

Suppose you start with £100 in your investment account and get 20% per year for next 10 years. Now it would worth £620. Along the way you use this money as security and borrow-leverage it 40 times. So now you have are carrying a risk of 40*620 about 24 K +100 original investment. When the black swan do arise say the 11th year...the collective loss to the market is 24K...while the gain was just £620 based on which the reputation of investment banker was made.

So in essence what Taleb is saying is that even if the so called rare event would happen once in 10-40-100 years...it wipes out many times all the profits made in all the previous years. Look differntly nobody was making a profit in all those years, once the risk is properly accounted. Get it? I doubht you do.

Nov 08 11:21 AM

[Nick Gogerty:]

I understand and agree with the black swan concept. I just wish it was being pushed forward in a more functional way. The hysterics and personality etc. seem to cheapen the debate of the concept and its potential for being developed and then applied in a meaningful and considered way.

Nov 08 12:12 PM

[fwi:]

I do not find Taleb's comments or writing hysterical. I believe that he is passionate about what he believes to be an important truth that, if accepted and understood, would benefit not just investors but all mankind in managing risk in daily life.

What some might view as "cheap hysteria" is , to me, just sheer frustration at the media spin and the mistaken conclusions drawn from his work. And the author's (and many others have agreed) point about Taleb and Roubini being "johnny one notes" is unfair.
If you think about it, how many notes does Buffet have? Benjamin Graham? John Paulsen? They all develop their investing constructs and stick to them. All of the above have been really wrong and really right. But by thinking things through, staying disciplined, it has worked out well.

I like it that Taleb has such a breadth of experience and education, that he thinks out of the box, and that he has intellectual courage.

Nov 08 03:01 PM

[wurakeem:]

I devoured Taleb's book "Fooled by Randomness" while on honeymoon and have since read "The Black Swan" and almost every news article written (by him / about him) and saw almost every video with him (Fora.tv, Edge.org w/ Kahneman in Munich, speech before Congress, various Bloomberg and CNBC appearances, special w/ Mandelbrot).

While I am a tremendous follower of Taleb's, I do believe that he allowed himself to be "watered down" by the popular media and has lost himself in the theatrics of weekly appearances to talk over short-term trends and to mention how everyone else is wrong but he is not.

He used to firmly refuse to predict or comment on anything that might sound like a prediction. His best answer was "I don't know and I don't think anyone else knows either". He has slowly become just another "Analyst Face" on Bloomberg/CNBC with his own personal opinion about the way things are going now.

Personally I think he should pursue his idea with the academic world, not the popular media to feed the addicted mind.

Nov 08 04:10 PM

[GreenMom:]

The popular media simply trashes what it cannot hope to understand.

Roubini and Taleb trying to explain their research to the popular media is like watching two physicists explain quantum theory to hyper kindergarteners.

But at least serious, intelligent investors trying to avoid another bloodbath get introduced to these great minds, and others like them, through the popular media, and they can take it from there.

Nov 08 05:33 PM

[Nick Gogerty:]

Here is a good Taleb presentation to congress, he is reasoned and focused. nickgogerty.typepad.co...

Nov 08 05:38 PM