Category: Videos

Never use Single-point Estimates for Pandemics

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ERRORS 101
Never produce a point estimate for risk management, esp. in a fat-tailed domain, rather show statistical properties. Never judge a risk management stance from point forecasts.

[YouTube] On Warnings over Systemic Risks from Global Pandemics

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Nassim Taleb, Universa Investment’s scientific advisor and distinguished professor of risk engineering at NYU, warned of an acute virus spreading throughout the planet in his 2007 book “The Black Swan.” In January, he also warned of the systemic risks of the coronavirus pandemic. He joins “Squawk Box” to discuss.

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Bloomberg: Nassim-Advised Universa Tail Fund Returned 3,600% in March

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A tail-risk hedge fund advised by Nassim Taleb, author of “The Black Swan,” returned 3,612% in March, paying off massively for clients who invested in it as protection against a plunge in stock prices

The fund, managed by Universa Investments of Miami, had a year-to-date return of 4,144% through the end of last month, according to an investor letter from President and Chief Investment Officer Mark Spitznagel that was obtained by Bloomberg. He said Universa was able to cash in many of its positions, locking in the gains, while also keeping in place protection against more equity sell-offs, “one of the tricks of the trade.”.

Link to Bloomberg article: Nassim Taleb-Advised Universa Tail Fund Returned 3,600% in March

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Bloomberg: Portfolios to ‘Blow Up’ Without Tail Hedges

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“The worst thing you can do with insurance is try to time it,” Taleb, a distinguished professor of risk engineering at New York University, said in an interview Monday on Bloomberg Television. “If you don’t have tail insurance, you don’t have a portfolio. Your portfolio is going to blow up.”

That’s a sobering reality check from someone who has long argued that instead of turning to the government for help in times of crisis, big investors and corporations should manage their own risks. His pleas for prudence were largely ignored, though, and most parts of the economy were ill-prepared for a sudden downturn when the coronavirus hit.

Link to Bloomberg article: Taleb Says Portfolios to ‘Blow Up’ Without Tail Hedges

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Uncertainty, Certainty and what to do when there is Systemic Risk

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Third conversation between Nassim Nicholas Taleb & Yaneer Bar-Yam about uncertainty, certainty and what to do when there is a systemic risk; what not to do when a truck is headed your way. How acting early would have cost less? They also discuss:

  • John Ioannidis recent post “we are making decisions without reliable data”
  • Why we should make decisions without reliable data & use precautionary principles
  • How the costs would be so much smaller if we would have acted earlier.

Jan 26 Coronavirus Paper (PDF) – Joseph Norman, Yaneer Bar-Yam, and Nassim Nicholas Taleb, Systemic risk of pandemic via novel pathogens – Coronavirus: A note, New England Complex Systems Institute (January 26, 2020).

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Nassim explains the Kelly criterion

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Nassim explains the Kelly criterion and illustrates why “risk aversion” in Behavioral Finance is Micky Mouse(™) Science.

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