A two-day program for senior management
November 4th and 5th, 2013
Nassim Nicholas Taleb, Distinguished Professor, Polytechnic Institute of New York University
Yaneer Bar-Yam, President and Professor, New England Complex Systems Institute
Facebook is the perfect platform for eccentric author Nassim Taleb, whose knack for thinking outside the box and waxing poetic is unparalleled.
Here’s how the acclaimed author of “The Black Swan,” describes his Facebook account: “This is for philosophical discussions. Please, no finance (or similarly depraved topics), and no journalists.”
I’ve recently read the book Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb. It’s obviously not a diet book, but the principles in it are highly relevant to weight loss.
But first, a bit of background. We are all familiar with things that are fragile. If you drop a Ming vase from a height, it shatters. Something that is resilient on the other hand, when dropped from a height withstands stress. An example might be an iron bar.
But until now, we didn’t really have a word for something that gets stronger when it’s placed under stress. That’s why Mr Taleb coined the term “antifragile”.
A good example of antifragility is the system of airline safety. Notwithstanding a few recent tragic examples, air travel gets safer and safer every year. The reason being that every time there is a crash, the incident is scrutinised, causes are elucidated and then measures are taken to try and avoid it happening again. Every air crash makes the next one less likely.
In other words, the system is set up to respond positively to negative things. Every bad incident makes the overall system stronger.
From: Nassim Nicholas Taleb, New York.
To: Stewart Brand, Sausalito
3 July 2013
I would like to reply to Brian Eno’s important letter by proposing a methodology to deal with risks to our planet, and I chose you because of your Long Now mission.
First let us put forward the Principle of Fragility As Nonlinear (Concave) Response as a central idea that touches about anything.
Read the rest: http://longplayer.org/what/whatelse/letters.php
Friends, I am presenting this document (summary of recent work) explaining what is wrong with economics models at a conference in France (which is not fully infected with the Anglo-American disease).
Please let me know if you find mistakes as I cut/pasted from *Fat Tails & Fragility*.
Nassim Nicholas Taleb
This is a brief summary of the problems discussed in philosophical terms in The Black Swan and Antifragile with a more mathematical exposition in Fat Tails and Antifragility (2013). Most of the text was excerpted from the latter book.
Note that this is not a critique of modern economic modeling from outside, but from within, using mathematics to put the methods claimed under scrutiny.
The message is simple: focus on measurable robustness to model error and convex heuristics, instead of relying on “scientific” measurements and models. For these measurements tend to cause blowups. And we can measure fragility, not quite statistical risks.
Long article in The Independent Nassim Taleb: ‘The Black Swan’ author in praise of the risk-takers, some excerpts:
“If you take risks and face your fate with dignity, there is nothing you can do that makes you small; if you don’t take risks, there is nothing you can do that makes you grand, nothing.”
“I’m a capitalist but one who is smallist and localist, and who favours businesses where owners are still in charge. We also need to look after the less well-off – so they have skin in the game too. Inequalities of wealth lead to a dispersion in wealth for all.”
“Small is powerful. We should be breaking up the big bureaucratic corporations; use anti-trust laws as Roosevelt did in the US.”
His reasoning is deliciously simple: “It’s much easier to bullshit at the macro-level than it is to bullshit at the micro-level.”
“No public servant or politician should profit more from private business than they earned before. You know who are the worst? Robert Rubin (ex-US Treasury Secretary who made $120m at Citibank) and your Tony Blair. It’s outrageous how they have profited.”
“Top-down knowledge is an illusion. Education without erudition is nothing. Steve Jobs, Bill Gates and Mark Zuckerberg didn’t finish college. Too much emphasis is placed on formal education – I told my children not to worry about their grades but to enjoy learning.”
For him, the ancients had the right notions of justice. “You know Hammurabi’s Code? Well, he was the Babylonian king whose laws were based on an ” eye for an eye” – or lex talionis. So, if a builder built a house and the house collapsed and caused the death of the owner of the house – the builder was put to death. And so on.”
Much has been written about what the paradoxical Taleb doesn’t like. So what does he enjoy? “Aah,” he says, pondering while getting into position for our photographer, whose south London accent he admires, and wishes he had had while trading options: “Walking, anywhere, around cities or the country, running (in five-finger shoes), sitting in cafés listening to chatter, parties, working in my study in the New York suburbs, listening to the birds, to the noises of the countryside, the mathematics of Steve Wolfram, Andalucian music, philology and the history of the Mediterranean and now the Maghreb. That’s my new obsession.” Watch out.
There are serious differences between predictions, bets, and exposures that have a yes/no type of payoff, the “binaries”, and those that have varying payoffs, which we call the “vanilla”. Real world exposures tend to belong to the vanilla category, and are poorly captured by binaries. Vanilla exposures are sensitive to Black Swan effects, model errors, and prediction problems, while the binaries are largely immune to them. The binaries are mathematically tractable, while the vanilla are much less so. Hedging vanilla exposures with binary bets can be disastrous–and because of the human tendency to engage in attribute substitution when confronted by difficult questions, decision-makers and researchers often confuse the vanilla for the binary.
From Nassim’s Facebook Page:
New paper with Phil Tetlock on the difference between the Thalesian and the Aristotelian: On the Difference between Binary Prediction and True Exposure, With Implications For Forecasting Tournaments and Prediction Markets.