Nassim Taleb, deservedly, has become a star in the intellectual sky. He is the perfect example of his own theory of the Black Swan. He is one of those rare thinkers whose ideas transform the landscape; he is a black swan himself. Here is a recent discussion of his ideas The New Sage of Wall Street. (Sadly, I don’t see that Wall Street has or will accept a new sage. They will go on until a new generation of analysts and traders replaces the current group.)
A Black Swan is a paradigm-shifting event, a rare but consequential event that so strongly falsifies the existing paradigm that it must be rejected. One black swan is sufficient to falsify the theory that all swans are white. This Popperian view of science was the source of Nassim’s inspired title and metaphor — The Black Swan. We have seen many crises in the financial markets, but they were ignored. Prevailing financial theory and models that fail to incorporate large-scale low-probability events (the black swans) are thoroughly discredited. The rare crises that ought not to have happened according to prevailing financial models in the bond market, Saving and Loan, and banking produce losses dominate all the accumulated earnings of these industries.
Until we discard the old model for a new one and devise new financial instruments better adapted to the extreme events, the Black Swans, that dominate financial markets, we will have more of these banking and credit crises. As banker and insurer of last resort, the US government and we taxpayers have been on the receiving end of the failed models and practices in the financial community. I am afraid it is not over because we have now stepped over the line with the “Bail Out” and our politicians have set us on a course that has ruinous consequences.
I have been working on this problem for some time myself driven by the statistical modeling I developed to understand the movie business where the block busters, the rare, dominating films, drive outcomes and earnings. I have designed financial instruments, the Stable Option and the Extremal Security, that are adapted to the “wild” environment of the movies and to other industries where extreme events drive returns. My company, Extremal Security Partners LLC, will soon be offering these instruments and the correct statistical models for license. We are currently in negotiations with two major options exhanges to bring these 21-st Century products to financial markets. Inquiries about our products and company should be sent to Aleck Grishkevich at aleck@extremalsecurity.com.
I am proud to say that Nassim will be writing a preface to my book on Evolutionary Fitness, when it is published by Harper Collins in the US and Vermilion in the UK. Over the course of many discussions for some years, I convinced him to move his eating and exercise from Mediocristan to Extremistan and he has thrived on the change.
Nassim Taleb, deservedly, has become a star in the intellectual sky. He is the perfect example of his own theory of the Black Swan. He is one of those rare thinkers whose ideas transform the landscape; he is a black swan himself. Here is a recent discussion of his ideas The New Sage of Wall Street. (Sadly, I don’t see that Wall Street has or will accept a new sage. They will go on until a new generation of analysts and traders replaces the current group.)
A Black Swan is a paradigm-shifting event, a rare but consequential event that so strongly falsifies the existing paradigm that it must be rejected. One black swan is sufficient to falsify the theory that all swans are white. This Popperian view of science was the source of Nassim’s inspired title and metaphor — The Black Swan. We have seen many crises in the financial markets, but they were ignored. Prevailing financial theory and models that fail to incorporate large-scale low-probability events (the black swans) are thoroughly discredited. The rare crises that ought not to have happened according to prevailing financial models in the bond market, Saving and Loan, and banking produce losses dominate all the accumulated earnings of these industries.
Until we discard the old model for a new one and devise new financial instruments better adapted to the extreme events, the Black Swans, that dominate financial markets, we will have more of these banking and credit crises. As banker and insurer of last resort, the US government and we taxpayers have been on the receiving end of the failed models and practices in the financial community. I am afraid it is not over because we have now stepped over the line with the “Bail Out” and our politicians have set us on a course that has ruinous consequences.
I have been working on this problem for some time myself driven by the statistical modeling I developed to understand the movie business where the block busters, the rare, dominating films, drive outcomes and earnings. I have designed financial instruments, the Stable Option and the Extremal Security, that are adapted to the “wild” environment of the movies and to other industries where extreme events drive returns. My company, Extremal Security Partners LLC, will soon be offering these instruments and the correct statistical models for license. We are currently in negotiations with two major options exhanges to bring these 21-st Century products to financial markets. Inquiries about our products and company should be sent to Aleck Grishkevich at aleck@extremalsecurity.com.
I am proud to say that Nassim will be writing a preface to my book on Evolutionary Fitness, when it is published by Harper Collins in the US and Vermilion in the UK. Over the course of many discussions for some years, I convinced him to move his eating and exercise from Mediocristan to Extremistan and he has thrived on the change.