[TriinT]

"Taleb's position (and argument in this paper) is that we need to recognize instances where we don't know the answer instead of making decisions based on assumptions that we do."

Have you ever worked at an investment bank? I suspect you have not. Wall Street does not run on the scientific method. It runs on greed, fear and politics. The ones who check the assumptions and know the limits of their models don't have the power to make the decisions. This is the problem. And the Taleban apparently haven't yet figured it out. Quoting Janet Tavakoli: "malfeasance, not models, disrupted the global economy, and Taleb still gets that part wrong."

Last but not least: there's not such thing as a "blackswan theory". You can't steal ideas from probability theory and statistics that have been known for centuries, rename them, wrap them up nicely, and call them new or original.

[jerf]

Malfeasance enabled the models, the models enabled malfeasance. Declaring one thing "the culprit" and not the other is to fail to recognize the dynamic nature of the system. Even in a world of perfect angels, Taleb shows that broken models would still bring the system down. Even in a world of perfect models, unscrupulous jerks can bring the system down. It's all too related to pull apart.

[TriinT]

So, what is the solution? Destroy the financial industry? Good luck.

Taleb is an anti-intellectual. He believes that all models are wrong and useless. To make it worse, he advocates that no further knowledge can be attained. The only knowledge and truth that is right is the "black swan theory". Come on, gimme a break!!! Aren't we HN'ers smarter than that? Why is Taleb's drivel being upvoted?!

[khafra]

The idea I've gotten from reading Taleb (articles, not books) is not that all models are useless, it's that assuming a normal distribution is often unjustified, and that once-in-a-century events come along quite a bit more often than that. Sure; he invented a catchphrase, not the exponential distribution--but "Black Swan" is more than just a cheap Australian Cabernet if it'll generate more positive awareness of systemic risks.

[jamesbritt]

"You can't steal ideas from probability theory and statistics that have been known for centuries, rename it, wrap it nicely and call it a new, original idea."

Do you have any references to work centuries old that describes what Taleb calls 'Black Swans'?

[TriinT]

No need for references. Probability was started by a bunch of bored french aristocrats who wanted to understand risk and uncertainty. Read what they wrote. They're the original thinkers.

Last but not least: in the late 1990s, Lehman Brothers had a trading desk dedicated solely to extremely unlikely events. That was before the so-called "black swan" theory came along. They made money only once. On 9/11.

Taleb's good ideas are not original, and his original ideas are no good.

[rdouble]

To be fair, the work of Pascal and the Chevalier de Mere does not give much insight on how a water leak may turn into a mudslide. Whatever you may think of Taleb, his work is more of a popularization of catastrophe theory than it is basic probability. He even says as much in his writings.