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Philosophical and practical aphorisms
This elegant little hardback is Taleb’s latest publication (2010). It contains thoughts that carry straight on from his arguments in ‘Fooled by randomness’ and ‘The Black Swan’. Instead of a narrative and argument in a full book, he presents us with his private almost-poetry. We are given a series of aphorisms, well spaced out, only four or five to a page. This slows us down and persuades us to pause to think about each cluster of words.
The aphorisms are generally witty and designed to provoke a fresh perspective. They do not have the frivolity of Oscar Wilde, and do not achieve his level of charming, mischievous humour. They are certainly often wise and counter-intuitive, shaking us out of a conventional, shallow view of our modern world. Some structure is given by clustering them in chapters, revealing the preoccupations with which his readers will already be familiar. For instance, there is a chapter called ‘Fooled by Randomness’, one on ‘The scandal of prediction’ and one on ‘Robustness and fragility’.
Taleb is a wise man, and well worth listening to. His erudition and originality are on full display. Here are samples to give you a flavour:
“The calamity of the information age is that the toxicity of data increases much faster than its benefits.”
“Mental clarity is the child of courage, not the other way round.”
“You can only convince people who think they can benefit from being convinced.”
“English does not distinguish between arrogant-up (irreverence towards the temporarily powerful) and arrogant down (directed at the small guy).”
“To understand the liberating effect of asceticism, consider that losing all your fortune is much less painful than losing only half of it.”
“Suckers think that you can cure greed with money, addiction with substances, expert problems with experts, banking with bankers, economics with economists and debt crises with debt spending.”
You may notice that he blends a wide vocabulary with American idioms such as ‘Guy’ and ‘Sucker’, which lends a disconcerting instability to his voice. But he generally achieves the balance of an epigrammatic style, and there is an immediate impact for most of his aphorisms, plus an added sequence of afterthoughts, akin to the sensation of a perfume.
I remain a fan of Mr Taleb, and would urge others to read this book too. However I have a complaint that must be articulated. This may sound like an ‘ad hominem’ attack. I agree that the ‘ad hominem’ riposte of questioning a man’s motives or qualifications for saying something is inadmissible in civilised argument. His book is not an argued case, but much closer to a literary work, hence I believe this complaint is valid.
The author has made a lot of money trading options, and more recently from the sales of his books. Fine, and the best of luck to him. Possibly he is the beneficiary of randomness, as he may admit. Now he sets himself up as a philosopher and part poet. He has valuable things to say, but (and here is my complaint) he adopts a sneering tone against the majority of humanity, believing himself as someone much superior in understanding and heroism. I find it hard to stomach his long stream of aphorisms despising those having to work – which is the majority of us. Hence he shows a lack of respect for the readers.
“Work destroys your soul by stealthily invading your brain during the hours not officially spent working.”
“There is no intermediate state between ice and water but there is one between life and death: employment.”
“Karl Marx, a visionary, figured out that you can control a slave better by convincing him that he is an employee.”
And so on. Mr Taleb has revealed too much of his nasty side, diminishing himself. While he sits on his millions in Treasury Bills, I can do without the sound of him snickering as I trudge off to earn an honest penny. Where is his heroism in this attitude?
Showing posts with label Taleb. Show all posts
Showing posts with label Taleb. Show all posts
Sunday, 30 January 2011
Fooled by Randomness, by Nassim Taleb
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The hidden role of chance
There is more chance in the universe than we acknowledge. Mr Taleb has meditated deeply and acted wisely on the implications of chance. In this book he shares with us the fruits of his eloquence and meditations and readings and experiences. A quotation from ‘Fortune’ on the front cover of my Penguin paperback describes this as “one of the smartest books of all time”. I agree – or at least within the limited universe of books I have chanced to read.
I read and reviewed this book in 2008, and the financial crisis was unfolding. Now, over two years later, with the financial crisis still burning in some underground patches and the forest fire of the sovereign debt crisis gathering force, I have felt impelled to read it again, and write on it more extensively. It strikes me a even more smart on a second reading. The author is smart in several senses: a high pure intelligence quotient; a stunningly wide knowledge of literature; the deployment of remorseless logic; creative lateral leaps between seemingly unrelated but truly interconnected topics; an ability to out-fence and de-throne revered figures or ideas; a wonderfully wide vocabulary; elegant writing style; a sharp street-wise roughness; an engaging sense of humour; the deft speed of a card sharp.
This man clearly is lucky enough to be endowed with the right genes of intelligence, as he would admit, and not hide with false modesty. This may strike some people as arrogance, but we need his forthright intelligence in some many dumbed-down fields. I defer to his intelligence and hope to pick up a few scraps of wisdom from his books. He has read widely books of classical civilisation, psychology, medicine, history, mathematics and many other categories of knowledge. Maybe his voracious reading efficiency is partly down to his self-discipline in avoiding the time-wasting ‘noise’ that pours from 24-hour TV ‘News’ and Economics. I plod slowly in his footsteps, and feel that he pats me on the head when I can claim some passing acquaintance with some of his reading, such as Montaigne.
He drops vocabulary for me to pick up. For instance: ‘Péché mignon’ – a guilty pleasure. He mentions this is describing his own and our universal humanity. We are not pure rational calculating machines, as assumed by many economic theories. We all have and need our guilty pleasures, whether they are chocolate or cigarettes or something far worse. He has flashes of wry humour, and more moments of self-depreciation that I had previously noticed. His outspoken attacks on stupid thinking had made a stronger impression when I first read this book. That is what I mean by a street-wise toughness; as well as the fact that he has been through the refining fire of a dealing room, where he succeeded, whereas I failed (though still benefited from the experience in the long run).
When I say he is a ‘card sharp’, I do not mean he is literally dishonest or even intellectually dishonest. He is quick –way ahead of most of us. I would not engage in a trading contest against him, for he would probably take money off most of us – in the long run.
In the short-run, as he explains, many things in life are dominated by chance. What we are seeing is randomness in action, and we are often fooled by it. The daily ticks up or down of the stock market reported on the news constitute pure noise. The variations of daily weather (even seemingly extreme snow or wind) cannot be said to constitute a climate pattern until many many years of data come in. The performance of football teams on a game by game basis has a high variability. Why sack a manager after a run of 10 bad games? The performance of a fund manager cannot be ascribed to any genius over the short run. It is frightening to consider how long that ‘short-run’ really is. Can you be sure that you have a genius fund manager after even 5 years (20 quarters) of performance data? Taleb would be very sceptical.
One of the most challenging aspects of the book is what he calls ‘The problem of induction’. Induction is the process of arriving at a general hypothesis from particular data. One can gather as much data as one likes, but it never proves anything with 100% certainty. He gives an amusing absurd example: “I have just completed a thorough statistical examination of the life of President Bush. For fifty eight years, close to 21,000 observations, he did not die once. I can hence pronounce him as immortal, with a high degree of statistical inference.”
We laugh, but we can observe versions of this fallacy all around us. “The market has never gone down 20% in a given three-month period”. We also attach too much importance to the immediate past, and what is in front of us: “It has been snowing for the past five days, so global warming is obviously a fallacy.” Also the opposite: “We have observed 10 of the hottest years in the past 20 of our records, so global warming is a certainty”. And so on.
Taleb explains succinctly the answer propounded by the great philosopher Karl Popper. He expresses it completely baldly as follows:
“There are only two types of theories: 1) Theories that are known to be wrong, as they were tested and adequately rejected; 2) Theories that have not yet been known to be wrong, not falsified yet, but are exposed to be proved wrong.”
By shifting the burden from verification to falsification, Popper gives us a whole new and adequate solution to the problem of knowledge. It is also deeply uncomfortable, and goes against our natural propensity to write stories about things, or to find causal links between things. Taleb recognises how difficult it is for all of us to keep rational amidst a cacophony of random noise and genetic instincts endowed to us by evolution, which is itself not concerned with rationality but survival of genes.
Having stripped away many of our illusions, one of the best things of the book is that he gives us some practical ‘tricks’ to overcome our human weaknesses, and made randomness work to our advantage. Want to know what those tricks are? Read the book! Actually, I find his prescriptions at the end the weakest part of the book: preaching stoicism in the face of fickle fortune may be wise, but some more practical suggestions might be useful. Maybe I am expecting too much.
Nassim Taleb is exhibit ‘A’ for advocating the virtues of a wide liberal education, fighting back the tide of stupid pseudo-scientists who increasingly dominate our world, unfortunately. I am sure many of you will agree that this is one of the smartest books of our time.
NOTE: THIS IS THE SECOND REVIEW OF THIS BOOK I HAVE PUBLISHED
The hidden role of chance
There is more chance in the universe than we acknowledge. Mr Taleb has meditated deeply and acted wisely on the implications of chance. In this book he shares with us the fruits of his eloquence and meditations and readings and experiences. A quotation from ‘Fortune’ on the front cover of my Penguin paperback describes this as “one of the smartest books of all time”. I agree – or at least within the limited universe of books I have chanced to read.
I read and reviewed this book in 2008, and the financial crisis was unfolding. Now, over two years later, with the financial crisis still burning in some underground patches and the forest fire of the sovereign debt crisis gathering force, I have felt impelled to read it again, and write on it more extensively. It strikes me a even more smart on a second reading. The author is smart in several senses: a high pure intelligence quotient; a stunningly wide knowledge of literature; the deployment of remorseless logic; creative lateral leaps between seemingly unrelated but truly interconnected topics; an ability to out-fence and de-throne revered figures or ideas; a wonderfully wide vocabulary; elegant writing style; a sharp street-wise roughness; an engaging sense of humour; the deft speed of a card sharp.
This man clearly is lucky enough to be endowed with the right genes of intelligence, as he would admit, and not hide with false modesty. This may strike some people as arrogance, but we need his forthright intelligence in some many dumbed-down fields. I defer to his intelligence and hope to pick up a few scraps of wisdom from his books. He has read widely books of classical civilisation, psychology, medicine, history, mathematics and many other categories of knowledge. Maybe his voracious reading efficiency is partly down to his self-discipline in avoiding the time-wasting ‘noise’ that pours from 24-hour TV ‘News’ and Economics. I plod slowly in his footsteps, and feel that he pats me on the head when I can claim some passing acquaintance with some of his reading, such as Montaigne.
He drops vocabulary for me to pick up. For instance: ‘Péché mignon’ – a guilty pleasure. He mentions this is describing his own and our universal humanity. We are not pure rational calculating machines, as assumed by many economic theories. We all have and need our guilty pleasures, whether they are chocolate or cigarettes or something far worse. He has flashes of wry humour, and more moments of self-depreciation that I had previously noticed. His outspoken attacks on stupid thinking had made a stronger impression when I first read this book. That is what I mean by a street-wise toughness; as well as the fact that he has been through the refining fire of a dealing room, where he succeeded, whereas I failed (though still benefited from the experience in the long run).
When I say he is a ‘card sharp’, I do not mean he is literally dishonest or even intellectually dishonest. He is quick –way ahead of most of us. I would not engage in a trading contest against him, for he would probably take money off most of us – in the long run.
In the short-run, as he explains, many things in life are dominated by chance. What we are seeing is randomness in action, and we are often fooled by it. The daily ticks up or down of the stock market reported on the news constitute pure noise. The variations of daily weather (even seemingly extreme snow or wind) cannot be said to constitute a climate pattern until many many years of data come in. The performance of football teams on a game by game basis has a high variability. Why sack a manager after a run of 10 bad games? The performance of a fund manager cannot be ascribed to any genius over the short run. It is frightening to consider how long that ‘short-run’ really is. Can you be sure that you have a genius fund manager after even 5 years (20 quarters) of performance data? Taleb would be very sceptical.
One of the most challenging aspects of the book is what he calls ‘The problem of induction’. Induction is the process of arriving at a general hypothesis from particular data. One can gather as much data as one likes, but it never proves anything with 100% certainty. He gives an amusing absurd example: “I have just completed a thorough statistical examination of the life of President Bush. For fifty eight years, close to 21,000 observations, he did not die once. I can hence pronounce him as immortal, with a high degree of statistical inference.”
We laugh, but we can observe versions of this fallacy all around us. “The market has never gone down 20% in a given three-month period”. We also attach too much importance to the immediate past, and what is in front of us: “It has been snowing for the past five days, so global warming is obviously a fallacy.” Also the opposite: “We have observed 10 of the hottest years in the past 20 of our records, so global warming is a certainty”. And so on.
Taleb explains succinctly the answer propounded by the great philosopher Karl Popper. He expresses it completely baldly as follows:
“There are only two types of theories: 1) Theories that are known to be wrong, as they were tested and adequately rejected; 2) Theories that have not yet been known to be wrong, not falsified yet, but are exposed to be proved wrong.”
By shifting the burden from verification to falsification, Popper gives us a whole new and adequate solution to the problem of knowledge. It is also deeply uncomfortable, and goes against our natural propensity to write stories about things, or to find causal links between things. Taleb recognises how difficult it is for all of us to keep rational amidst a cacophony of random noise and genetic instincts endowed to us by evolution, which is itself not concerned with rationality but survival of genes.
Having stripped away many of our illusions, one of the best things of the book is that he gives us some practical ‘tricks’ to overcome our human weaknesses, and made randomness work to our advantage. Want to know what those tricks are? Read the book! Actually, I find his prescriptions at the end the weakest part of the book: preaching stoicism in the face of fickle fortune may be wise, but some more practical suggestions might be useful. Maybe I am expecting too much.
Nassim Taleb is exhibit ‘A’ for advocating the virtues of a wide liberal education, fighting back the tide of stupid pseudo-scientists who increasingly dominate our world, unfortunately. I am sure many of you will agree that this is one of the smartest books of our time.
NOTE: THIS IS THE SECOND REVIEW OF THIS BOOK I HAVE PUBLISHED
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