ai5000 Interviews Nassim Taleb

Nassim was the feature speaker at ai5000’s Chief Investment Officer Summit in New York (May 2010). The summit had more than $1 trillion in pension, endowment, foundation, and insurance fund assets under management represented at the event. The following videos are from a Q&A with him (before) the event.

 

The most important issues for Chief Investment Officers (CIOs)

Summary

  • Be over insured, have as low leverage as you can.
  • Change your way of thinking by adopting at your core a defensive strategy.
  • Don’t be afraid of being aggressively in cash.
  • Avoid clustering, following what other CIOs are doing, following the crowd just because that is what everyone else is doing.
  • Use Taleb’s ‘Barbell Strategy’: Be very aggressive with a small part of your portfolio, and massively paranoid with the rest, giving on average medium risk portfolio. This strategy means cannot lose more than a certain amount of money that you have already allowed for the possibility of happening. Your actual risks are not dependant on a prior computation of risks.
  • The key central point is to generally be robust, namely being resistant to adverse shocks (black swans).

 

Nassim’s Investments & Exchange-Traded Funds (EFTs) for Institutional Investors

Avoid Blowups: Accept caution as a strategy

On the mishandling of the bank bailouts

Principles for a Black Swan robust world

Look to Mother Nature for Robustness

Culture change for CIOs: Insurance is not money wasted

Getting Personal with Nassim

Nassim Taleb at Davos (2009)

Transcript:

Presenter: Show of hands, who thinks this will be repeated? Why is that?

Nassim Taleb: Can I tell you what’s happening? This happened in the past, it keeps repeating itself. We keep bailing them out. The only way this will not be repeated this if you have punishment. The only place in which you had punishment is here switzerland, they went back and clawed back the bonuses. Until we do that we will always live under moral hazard from banks.

Presenter: So the leaders who were in charge taking on that risk, selling those complex products, should give money back?

Nassim Taleb: Yes, there is a gentleman who is a government official Bob Rubin. I think he pocketed 150 Million dollars from Citibank. Now I don’t know how many American tax payers we have here but we are paying for that. That should not happen again but it had happened, it has happened several times in history, unless you have punishment you will never be immune from these abuses.

Presenter: So the bonuses for the last how many years?

Nassim Taleb: I don’t care, whatever, something. In Switzerland they settled it. They did it very properly and very responsibly. This is the only country here, Switzerland that acted responsibly.

Nassim Taleb & Benoit Mandelbrot on 2008 Financial Crisis

Nassim Taleb & Benoit Mandelbrot on PBS Newshour talk about the current ecology of the financial industry during 2008 Financial Crisis (Air date October 21, 2008).

Transcript available here: Top Theorists Examine Rippling Economic Turbulence
As the financial sector shifts, so does the reach of the jolt to economic structures around the world. Economist Nassim Nicholas Taleb and his mentor, mathematician Benoit Mandelbrot, speak with Paul Solman about chain reactions and predicting the financial crisis.

A chat with Nassim at Heathrow Airport Terminal

A peculiar video on YouTube titled “Nassim Nicholas Taleb” and only coming with the vague description: “Tips on life from a man who’s done a lot of thinking and knows a lot of people.” It is not clear who this video is from, possibly Nassim himself but unlikely, probably more likely a friend/acquaintance. As he describes at the start it is filmed at Heathrow Airport Terminal, a place he often criticises for being terribly designed and over optimized, the planners obviously having no appreciation of the non-linear effects of congestion.

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PBS NewsHour Interviews Nassim Taleb on Hedge Funds & Black Swans

Paul Solman explains “hedge funds” and why “Black Swan” events make it harder than might be expected to reduce investment risk (October, 2006).

Transcript:
“Nassim: The difference between Hedge Funds, and Mutual Funds, is that Mutual Funds take your money and they have a lot of constraints on what they can do for you. A Hedge Fund has usually more freedom, to invest, to make bets, to gamble, to do whatever you want.

Paul: OK lets take it back to 2000, I have a lot of finance professor friends, so of whom would presumably go on my board. People know me on television as a financial somethingerather. Do you think I could have actually started a Hedge Fund?

Nassim: You would have billions under management currently.

Paul: I would have billions??

Nassim: Yes, because all you would had to do was go to university and pickup a couple professors ok, hire a couple risk managers–usually they have a foreign accent, you know they’re quants…

Paul: Quants??

Nassim: Quants, like me, my background is a quant.

Paul: [to the camera] Quants, as in quantitative types, so called financial engineers like Taleb, himself a mathematician, a Hedge Fund owner, and author of a steeply sceptical book on investing called Fooled by Randomness.

Nassim: All you had to do is provide these steady returns, or, the illusion of low-risk returns.”