tag:blogger.com,1999:blog-7905515.post5702870849375518572..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Taleb Mishandles FragilityEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-7905515.post-88811796315389711312012-12-05T12:14:05.590-06:002012-12-05T12:14:05.590-06:00lol i hate taleb's book. good to see there ar...lol i hate taleb's book. good to see there are some people out there fighting to keep him down the way it should be.<br /><br />-danAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-51984089024319373542012-12-03T13:45:13.949-06:002012-12-03T13:45:13.949-06:00Yes, a genuinely bizarre perspective. By Anon'...Yes, a genuinely bizarre perspective. By Anon's logic, Eric is unqualified to review <i>any</i> book on the NYT or Amazon best-seller lists; their authors are all more famous than he.Mel Chizedeknoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-39985788029131994202012-12-02T10:31:27.604-06:002012-12-02T10:31:27.604-06:00The above sounds like a very "Talebian" ...The above sounds like a very "Talebian" response.<br /><br />"You just don't get it, re-read it. You don't understand what Taleb was trying to say so you resort to criticizing what he actually said"Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-32291704062849420502012-12-02T05:48:22.269-06:002012-12-02T05:48:22.269-06:00Duh, the theme of Antifragile is not to go long ga...Duh, the theme of Antifragile is not to go long gamma, as you suggest Mr Falkenstein. <br />(Aaron Brown already wrote it in one his comment).<br /><br />Does it really bother you so much that options traders all over the world are familiar with, or at least they have heard of, Dynamic Hedging and other Taleb's books, whereas almost all of them reply "Falk-who?" when asked about Falkenstein? I found out about you only because of your extended criticism of Taleb, which I was very much interested in. Big dissapointment. Your writing is envious, emotional, and style-over-substance. Would suggest to drop the topic of Taleb, as you seem unable to, unfortunately for emotional reasons, handle it with proper understanding.<br /><br />Also, I beg you to reread brilliant comment of Aaron Brown and your response. Re-read until you get the point.<br /><br />Good luck and ciao.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-37537843790104954862012-12-01T19:22:49.480-06:002012-12-01T19:22:49.480-06:00Well, I'm sorry about your work situatio. I do...Well, I'm sorry about your work situatio. I don't work with people who don't understand fat tails, or that expected values include events with small probabilities, and never have. I guess those people do need help, and if this can make them understand some simple biases that is a good thing. But as the theme is to go long gamma, I imagine dummies will simply buy more lottery ticket-like investments as they always have, which doesn't really help them.Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-62102042973514205812012-12-01T08:35:52.268-06:002012-12-01T08:35:52.268-06:00I dont fully get the point of your review. Do you ...I dont fully get the point of your review. Do you want to say that the Fooled-Swan-Antifragility trilogy is a work "for dummies", or for no one? <br /><br />If it is the former, one thing to note is that Talebs main aim is not uneducated people. On the contrary, its aimed towards (dumb) educated people. I have spent five years surrounded by these career oriented, "academic achievers". Their ability to handle a huge workload is extremely impressive, but Taleb is right: generally, these are the people that do not see the point of slack or redundancy outside the realm of what (very little) they have seen or been explicitly taught. They are generally the people lacking common sense. <br /><br />If the academic achievers are the dumbest people of our society, why would it be bad to write a trilogy like this "for dummies"? To me, it rather seems very appropriate. <br /><br />Linusnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-35086903251304982852012-11-30T18:23:36.499-06:002012-11-30T18:23:36.499-06:00I don't get it, please elaborate. How is that ...I don't get it, please elaborate. How is that different than predicting?Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-53686387422966221742012-11-30T15:55:25.283-06:002012-11-30T15:55:25.283-06:00That's my point, he never 'predicted' ...That's my point, he never 'predicted' anything. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-52795809311170765512012-11-30T13:53:23.968-06:002012-11-30T13:53:23.968-06:00"That was in a way the technique I used intui..."That was in a way the technique I used intuitively to declare that the Highly Respected Firm Fannie Mae was on its way to the cemetery— and it was easy to produce a rule of thumb out of it." <br /><br />Antifragile<br />Location 5178 in Kindle<br />Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-30028477831559689562012-11-30T02:08:56.863-06:002012-11-30T02:08:56.863-06:00I know that...
In TBS Taleb wrote that Fannie:
Sit...I know that...<br />In TBS Taleb wrote that Fannie:<br />Sits on a barrel of dynamite and every hiccup will make it explode.<br /><br />My question is: Can anyone point to where he "claims he accurately predicted Fannie's failure"?<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-4564047645368245422012-11-29T23:58:25.663-06:002012-11-29T23:58:25.663-06:00Without his arrogance he likely would have sold no...Without his arrogance he likely would have sold no more than a few thousand books. It has served him well. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-86864011455582678052012-11-29T23:21:19.904-06:002012-11-29T23:21:19.904-06:00I second Entsophy's take on Mandelbrot. Nice g...I second Entsophy's take on Mandelbrot. Nice graphics but what else? <br /><br />But "Small raindrops (radius < 1 millimeter (mm)) are spherical; larger ones assume a shape more like that of a hamburger bun. When they get larger than a radius of about 4.5 mm they rapidly become distorted into a shape rather like a parachute with a tube of water around the base --- and then they break up into smaller drops."<br /><br />Taleb should be reviewed as the French (Levantine) cultural philosopher that he is, and not as a fund manager, that he definitely is not. Taleb is an abstract painting, Falken is analyzing it as industrial graphic art. Jhttps://www.blogger.com/profile/05676167615981895061noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-6621017430083333582012-11-29T18:15:32.269-06:002012-11-29T18:15:32.269-06:00Eric,
You nailed it completely. Check out Taleb...Eric, <br /><br />You nailed it completely. Check out Taleb’s guest review of the new Mandelbrot book: http://www.amazon.com/Fractalist-Memoir-Scientific-Maverick/dp/0307377350/ref=sr_1_1?s=books&ie=UTF8&qid=1354231411&sr=1-1&keywords=mandelbrot<br /><br />Choice quotes:<br /><br />“Consider his huge insight about the world around us. ‘Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is not smooth, nor does lightning travel in a straight line’, wrote Benoit Mandelbrot, contradicting more than 2000 years of misconceptions.”<br /><br />In other words, the big secret of the universe which no one else was smart or brave enough to perceive was that clouds weren’t spheres.<br /> <br />Then there is this gem:<br /><br />“Mandelbrot, while a bit of a loner, had perhaps more cumulative influence than any other single scientist in history, with the only close second Isaac Newton. His contributions affected physics, engineering, arts, medicine (our vessels, lungs, and brains are fractal), biology, etc.”<br /><br />I envite anyone who shares Taleb’s assessment to list one single major problem that was solved in some essential way with the help of fractals. The only real influence they ever had was in video game graphics.<br /><br />Another great one was:<br /><br />“The reader is made to feel he are [sic] at the center of twentieth century science as it was produced with fields invented almost from scratch: Max Delbrück with molecular biology, Paul Lévy with the mathematics of probability, Robert Oppenheimer with nuclear physics, even Jean Piaget the psychologist”<br /><br />I don’t know about Delbruck or Piaget but, but it is flat out wrong to say Levy and Oppenheimer almost invented mathematical probability and nuclear physics from scratch. It’s about like saying Zuckerberg invented the internet from scratch.<br /><br />Despite all the praise on Mandelbrot, his ideas in finance were pedestrian and thought of by many others (use Cauchy distribution instead of Normal distribution) or borderline numerology (power laws unlock the secrets of the universe)<br /><br />Incidentally, although clouds aren’t spheres, the tiny suspended water droplets in them are spheres to an extremely good approximation. Even raindrops are spheres and not ‘tear dropped’ as usually portrayed. This fact has repeatedly been used by 19th century physicists to great effect when predicting the scattering of light in our atmosphere. Taleb’s a boob.<br /><br />Entsophynoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-88977145661730439172012-11-29T10:34:48.306-06:002012-11-29T10:34:48.306-06:00Of the Taleb books I’ve read I like his first one ...Of the Taleb books I’ve read I like his first one the best and even though many of his “Black Swan” arguments aren’t particularly novel, many were either new to me at the time or caused me to think about them more in depth. So…it was good for me. <br /><br />And if nothing else, making a bundle on the ’87 crash, surviving cancer and writing a few bestselling books is nothing to sneeze at. He’s certainly a bit of a character which for better or worse is a trait that I find attractive in a world that now seems to be dominated by bland, affectless and conformist personalities.<br /><br />More recently my enthusiasm for Taleb has been tempered - almost exclusively because of EF whom I think presents the most spirited, specific and comprehensive rebuttals.<br /><br />Clearly Taleb can be a bit anti-social which originally I found refreshing in his popular media appearances but again, more recently this kind of thing seems to have blossomed into some really quite off-putting behavior. Here he is a couple weeks ago being quite abrasive to other financial writers whom I respect (dig into the Twitter feeds too if you want more): http://ftalphaville.ft.com/2012/11/19/1267633/deep-thoughts-by-nassim-nicholas-taleb/<br /><br />I hope NNT (whom I’m sure will read this) will consider making the magnanimous gesture of offering to debate some of his favorite topics in a more civil and formal context (for all our benefit) and in the classical tradition which he so clearly loves.<br />Mercurynoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-79949659590033693412012-11-29T09:44:04.076-06:002012-11-29T09:44:04.076-06:00In TBS Taleb wrote that Fannie:
Sits on a barrel o...In TBS Taleb wrote that Fannie:<br />Sits on a barrel of dynamite and every hiccup will make it explode<br /><br /><br />The English meaning of it is a statement of overall risk. Unless, of course you try to theorize "what he meant" <br /><br /><br />Another comment here says that Taleb made the crisis a black swan, which is emirically false. Taleb stated several times that the crisis was not a black swanAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-87973769017214769752012-11-29T06:48:19.555-06:002012-11-29T06:48:19.555-06:00This is writer's envy. And of course strawman ...This is writer's envy. And of course strawman arguments. Falken did not read book I am certain from comment.<br /><br />"Antifragility is desirable in general, but not always, as there are cases in which antifragility will be costly, extremely so." <br /><br />Taleb never says long gamma without conditions. ANd he says "explicit options are usually expensive"Joseph Khourynoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-43948912315735527432012-11-29T04:26:06.777-06:002012-11-29T04:26:06.777-06:00Hi there would you mind stating which blog platfor...Hi there would you mind stating which blog platform you're working with? I'm planning to start my own blog soon but I'm having a hard time deciding between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design and style seems different then most blogs and I'm looking for something completely unique.<br />P.S Sorry for being off-topic but I had <br />to ask!<br /><i>Feel free to visit my page</i> <b><a href="http://www.youtube.com/watch?v=z9kjNVrn15Y" rel="nofollow">free iphone</a></b>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-56570989124810307212012-11-29T01:22:33.376-06:002012-11-29T01:22:33.376-06:00Can you point to where Taleb 'claims he accura...Can you point to where Taleb 'claims he accurately predicted Fannie's failure'?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-72405334039446513632012-11-28T18:59:34.683-06:002012-11-28T18:59:34.683-06:00I think you misunderstand the "timing" o...I think you misunderstand the "timing" of Spitznagel's Universa. Look at the paper you site, he's saying there are no black swans and shows that all of the real drawdowns have come from basically overvaluation (whether you choose to subscribe to Spitznagel's Austrian thing or not). Spitznagel even seems to share many of your criticisms--saying in his paper that the takeaway is to sell expensive volatility. Universa is obviously much more nuanced than Taleb. I agree with pretty much everything you're saying but don't throw out the baby with the bath water. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-19727567517636229742012-11-28T18:54:39.835-06:002012-11-28T18:54:39.835-06:00Great review.
Yes, it is a losing strategy. His ...Great review. <br /><br />Yes, it is a losing strategy. His Empirica fund posted mediocre returns before being closed down.<br /><br />This is from a guy trying to fool everyone the last financial crises was a Black Swan.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-57317140981064222332012-11-28T18:33:04.095-06:002012-11-28T18:33:04.095-06:00Eric, I am wonering if you could clarify the comme...Eric, I am wonering if you could clarify the comment about analyst disagreement; "analyst disagreement, which are also riskier than average yet nonquantifiable have lower-than-average returns".I didn't quite follow that example of lottery ticket type investments. Thanks. This article was a very good description of some of the talebian flaws. Thanks. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-37298841787273754622012-11-28T16:06:25.490-06:002012-11-28T16:06:25.490-06:00having spent quite a while figuring out the esoter...having spent quite a while figuring out the esoteric nonsense of both of you gents...I have come to a conclusion<br /><br />Falkenstein is correct - risk premium is a ridiculous concept. <br /><br />I've also reached a conclusion that I would have been better off having if I had stuck thumb up my ass than having spent time trying to understand what you gents are preaching. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-47049600508406210372012-11-28T15:06:29.689-06:002012-11-28T15:06:29.689-06:00I agree, you have as many differences from Taleb a...I agree, you have as many differences from Taleb as similarities, and I don't think you're unfair. I view the two of you as useful point and counterpoint and hope people read both. I'm not writing for you as much as for your readers.Aaron Brownhttp://www.eraider.comnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-7451249838947917952012-11-28T15:04:15.486-06:002012-11-28T15:04:15.486-06:00You got that exactly right. Taleb has always irri...You got that exactly right. Taleb has always irritated me with his abiliy to prententiously go on with the uninteresting or the obvious. He's minted quite a career out of this image that he has created for himself and has sold to quite a few people. JoshKhttps://www.blogger.com/profile/17028441526311718240noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-22002414603185675302012-11-28T13:58:52.475-06:002012-11-28T13:58:52.475-06:00Aaron: I do understand that there are many smart p...Aaron: I do understand that there are many smart people I respect such as yourself who like Taleb, including some in my office. It's like people I know and like who believe in things I find absurd or even evil, such as certain religions or socialism. I'm not like von Mises or Rand, who needs all my friends and colleagues to agree with me on philosophy or who we like. I have several friends who are good friends with a guy who had me in litigation for 1.5 years. <br /><br />As to our similarities, yes, there are some, but as I mention in my book, I strangely find myself much more in agreement with Fama/Cochrane/etc. than their critics on things, even if we have a very fundamental disagreement. I get lots of anti-market types contacting me because I don't like the orthodox view, but our conversations don't go on very long because our source of disagreement with the standard view is so different we have almost nothing in common. I think if I got published in the Journal of Heterodox Economics, I would be convincing people who are irrelevant, so I don't bother. I'd rather convince one top finance professor than 100 bloggers. I haven't been very successful, but I have been right thus far on low vol investing, and if the risk premium is quietly abandoned in 50 years, and utility function more prominently oriented towards relative performance, I'll have real satisfaction regardless.<br /><br />But, as he is very harsh on others, much harsher than me I think, I don't think being harsh on him is unfair. Further, I think he isn't honest with himself or his readers (eg, his fannie call), or has good faith, in that his antifragility equation is intentionally obfuscating, it just isn't useful, he's just blustering like someone who makes obscure references to Shakespeare and Livy to get an opponent to be quiet. I don't respect that style. <br /><br />But most importantly, why I think this deserves public discussion as opposed to barroom banter, I think he's wrong in a profound way when you try to pull out a take-away. Sure, systems subject to selection pressures are more resilient than those that aren't, but it isn't clear what that implies for investing, or choosing a career, other than it helps to be very energetic and smart. The 'long gamma' via equal weighted teenies seems the kind of instinctive bias that drives the low-vol premium in stocks, as people gravitate towards the risky stocks with their speculative bets. People should be dissuaded from this, not encouraged. <br /><br />I'm not optimistic I'll win the broad debate, which is fine, because I advocate low vol investing that anticipates this.Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.com