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Taleb’s MOOCs | Binary vs Vanilla Payoffs and Predictions: An error in the research/risk literature

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“Micro-Mooc on a paper by Taleb and Tetlock (one manifestation of the LUDIC FALLACY). There are serious statistical 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. Yet much of the economics and decision making literature confuses the two. 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.”
The paper is here: http :// papers. ssrn. com/ sol3/ papers.cfm? abstract_id= 2284964
More general Fat Problems with Tails: http:// www. fooled by randomness. com/ FatTails. html

Taleb’s MOOCs | Law of Large Numbers and Fat Tails (Note #3)

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Micro Mooc #3. The law of large numbers is the most important thing in life and science. It is the basis of epistemology and problem of induction. How many observations do you need to know if something is true? We get into the plumbing and show how it is too slow under fat tails. This is a simplified (but technical) presentation of a segment of “Probability and Risk in the Real World”, the Technical Companion for The Black Swan http:// www. fooled by randomness. com/ FatTails. html

[Video] Nassim Taleb speaking at the Rafael del Pino Foundation

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Rafael del Pino Foundation organized, on July 3, 2013, the keynote of Nassim Nicholas Taleb titled “Antifrágil. Las cosas que se benefician del desorden” (Antifragile: Things that gain from disorder) on the occasion of the presentation of his work with the same title.

Preview: Entrevista. Antifrágil. Las cosas que se benefician del desorden

Full talk: Conferencia. Antifrágil. Las cosas que se benefician del desorden.

Nassim Taleb replies to Brian Eno: The Artangel Longplayer Letters

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The Artangel Longplayer Letters:

From: Nassim Nicholas Taleb, New York.
To: Stewart Brand, Sausalito

3 July 2013

Dear Stewart,
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