Nassim Nicholas Taleb
by Cark Green

My notes from interview Russ Roberts had with Nassim Nicholas Taleb.

Nassim Nicholas Taleb & Russ Roberts - Listened to a fascinating interview on EconTalk between Nassim Nicholas Taleb and Russ Roberts. Roberts (the interviewer) does a terrific job drawing out Taleb and clarifying the randomness expert's unconventional ideas and arguments.

Listening to Taleb is like watching a magician. His thought experiments and arguments seem like a slight of hand, and I'm often surprised by their conclusions. Makes for a wonderfully satisfying discussion. Roberts, again, doesn't let anything pass without getting clarity from Taleb.

Taleb says there are two or three kinds of investments. Some investments are prone to negative black swans, e.g., banking and insurance. Some are not affected by black swans. And other investments are prone to positive black swans, e.g., pharma, book publisher, game software, movies.

Model error is where we take data (results) and try to explain where they came from. Such an approach is VERY prone to error because there are a million possible theories to explain an result. It's just like taking a puddle of water on ground and trying to explain how it got there. Was it ice cube melting? Did someone pour it there? There are infinite possibilities. So selecting the correct theory from among the infinite possibilities is, by odds, quite unlikely.

Serendipity.

"We're not good at knowing, planning, forecasting. We're only good at 'doing,'" Taleb says.

Collectively good at knowing, but not individually (?)

Accidents. Serendipity.

Cancer institute looked at 130,000 compounds. Only real progress came from accidental discovery of effect of mustard gas, which led to chemo therapy.

Scientists don't typically find what they are looking for. They discover things by accident.

The importance of trail and error. You don't go out and say your going to find. (By definition?)

ROBERTS: "You don't just sit around and figure out the right thing to do...entrepreneurship (or other discplines) is very much a hit and miss process....You throw a lot of things out there, and some things work that you couldn't have predicted in advance."

Separate the necessary from the causal. It may be necessary for me to wear a tie to be a banker, but wearing a tie doesn't cause me to be a banker.

All bankers wear ties, doesn't mean that all people who were ties are bankers.

Marx: I want to turn knowledge into action.

Taleb: I want to turn lack of knowledge into action.

Cool....

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb
The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

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