File Size: 5044 KB
Print Length: 444 pages
Publisher: Random House; 2nd ed. edition (May 4, 2010)
Publication Date: May 11, 2010
I bought this guide with Mandelbrot's Behavior of Markets, and for the same purpose. I needed to get a strong intuitive understanding of the consequences of the difference between the real behavior (power-law) and the assumed behavior (Gaussian) of markets. I wanted to understand what the power-law associations were, so that We could build my own statistical models. And i also needed an analysis of real data showing that, in fact, markets in question do follow power-law relationships. Have been I to rate this book solely on its ability to provide on these expectations, I might have to give it two superstars; for this book has nothing to do with the actual empirical facts. It is, instead, a highly rhetorical appeal to us to use scientific facts in making selections about the market while it nevertheless manages to completely dodge the task of presenting any real market data.
The inquiry this is much broader. Taleb is painstaking, almost encyclopedic, in the enumeration of ways in which our understanding of information breaks down. He draws on ideas from Greek, Roman, Arabic, French, and English thinkers spanning more than two millennia. He also draws from the fine work of contemporaries Kahneman and Tversky which demonstrates how - when guessing about things - we all systematically underestimate our likelihood of being wrong can be a factor of 20 or so. He asserts that people with MBA's and those operating large banking institutions do so a great deal more than, say, taxicab drivers and trash collectors.
This individual visits physical models which prove that we are unable to know much about the physical world, like the three-body problem. The point is that after even physical systems which can be described very exactly in mathematical equations are unable to be predicted with irrelavent accuracy, what's the desire of predicting things for which we don't even know the variables or maybe the math one might used in describing them? Here this individual misses some opportunities by needlessly scoffing at the uncertainty principle, and by failing to include feedback by one towering physicist of the twentieth hundred years, probably Von Karman*, about how no physical phenomenon seemed spookier - i. electronic. more difficult to spell out accurately using mathematics - than turbulent flow in liquids. This is an unlucky omission since Mandelbrot actually uses the term "turbulence" to describe the variances in market prices of goods and securities.
One reaction to Taleb's quarrels about how little we can eventually know and on what shaky ground our beliefs lie is to stand, such as a deer in the headlights, waiting for better information. Taleb states that this is a blunder. It might be somewhat better to proceed, looking for evidence that could prove one's course of action wrong, then modify a person's model of reality and repeat the process. Doing this has the advantage that one can learn quite quickly about how any issue is bounded, and get some sense for the shape of the space inside. This individual quotes Warren Buffet: it is a great offer better to be around right than it is to be precisely wrong. And when choosing among things to believe, this individual advises us to rank beliefs not by their implausibility but by the harm they may cause. Despite the fact that there are robust methods that draw to both decision, this is generally very sound advice.
The guide is highly irreverent. Within financial circles it is seen as blasphemous, not merely because it flies in the face of regular wisdom, but because the writer has so much fun demolishing revered ideas. Anybody who can take it seriously and follow its advice ought to be much better at assessing information and making decisions. This quality gives you a much better chance of becoming rich and famous like Taleb - though as Taleb might explain, there is certainly still a vanishingly small chance of this happening. The down side is that subsequent Taleb's advice is likely to make one a great deal less promotable (especially in financial firms) because - according to Taleb - reaching high levels of a company depends almost exclusively on making others believe you know things about that you are actually completely clueless; and only sociopaths and very self-deluded people do this convincingly.
This suggests that one would read the guide for the sole joy of realizing that you're the only person in the room who is sane enough to know how little you actually learn about pretty much anything at all.
*Taleb makes great use of footnotes, and I recommend reading them all. Some of the best material available is in them. Van Karman is most famous, perhaps, for his role in adjudicating what to do after the collapse of the Tacoma Narrows connection - arguably a Black Swan event. One day not long after this long suspension bridge was erected, it commenced twisting and oscillating in a fifty MPH wind. Some minutes later it collapsed. Vonseiten Karman was called in to evaluate so what happened. This individual told the town council that the vortex dropping frequency of the connection in a 50 WITH wind happened to strongly match the natural vibrational frequency of the connection. The bridge had gone into harmonic oscillation which created stresses that were much higher than patients created by static loads for which it was designed, and this was why it failed. Though it is to avoid collapsing bridges via harmonic oscillation that British soldiers fell out of step when crossing connections over several centuries earlier, the town council experienced never heard of anything at all like this happening before. They declared "It was a very well-built bridge" and therefore "we should build it exactly as it was before. " In order to which Von Karman responded "If you build it exactly as it was before, it shall failure exactly as it did before. " To their credit, they had the connection re-designed., Any time a decision-making-adverse process-oriented manager requests a QRA (quantitative risk analysis) where you know that the available data is most often ridiculously unrepresentative, give her this guide, and tell her she needs to become antifragile.... (keep the handkerchief ready), We can't say that this book was fun, because I couldn't breeze through it but, as a PHD in Psychology who struggled through so many statistics courses, together to use a statistical research to get my doctorate, it was an extremely interesting viewpoint: Anyone not hanging around the center of the bell curve, on any measure, is going to have problems, large or small. Same for occasions, making decisions, or estimations. Who is the "average May well? " And is life, or our society predictable, really? Its a blunder to rely solely on numbers.
I have had a lifelong battle with math, so of course I was gratified to learn a cogent argument that numbers don't accurately describe everything. I'm not sure what the author's Lebanese background revolved around anything. Also did not appreciate his sneering attitude towards experts who probably are certainly not, like him, up there on the high ending of the bell curve on measures like language center, making money, philosophy, and just about everything else.
I intend to check out this book again., This guide is a marvellous skepticism of modern life and can challenge your firmest beliefs in science, economics and statistics. In order to quote Mark Twain, "There are three sorts of lies: lies, damn is, and statistics., Mr. Taleb's views of randomness, fortune and the effect of the occurrence of the highly improbable are fascinating and offer an unusual point of view on the world and human existence. The author demonstrates a droll sense of humor that experienced me laughing out high in volume a couple of times. You will spend time imagining all the hero's that never were recognized because of all the things that never happened due to their unrecognized surrender. Mr. Taleb will make you think about what really was, and what might maintain the future. A very enjoyable guide., Tough read. The author is more impressed with themself than I am. We do agree with his view (dim view) of social "scientists" and economic analysts and the the Harvard MBAs, THE BLACK SWAN makes a single prominent point: the future is largely shaped by the unexpected and unpredictable. And that thought, as simple since it is, is profound.
Regarding many years, swans were, by definition, white. Nevertheless that paradigm was shattered when a black swan, a highly improbable event, was found out in Australia. The black swan is Taleb's proxy for the unexpected.
In the us, for example, the events which have shaped our lives; the Great Depression, WWII, the JFK assassination, pcs, 9/11, were unpredictable but changed our world forever. It is the unforeseen, not the expected, which rocks our world.
Within the securities industry, there is an axiom which the law requires be disclosed to each open public investor: Past performance is not indicative of future results. In other words, the unexpected happens. And yet, as a culture and as an investment public we often view the future being an file format of the past, seriously expecting tomorrow to be much like yesterday. Exactly why? Because nearly all of the time, it is. And then, a black swan emerges and changes everything.
Typically the quality of writing is uneven and in places, tedious. I think it is somewhat hypocritical, too, when foreign writers deride America (and our cultural idiosyncrasies which they don't understand) and surely enjoy the wealth and celebrity our free markets create for them. Nonetheless, Taleb scores his key point and gives us all reason to pause and consider the black swans of our lives.
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