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Taleb's aphorisms

Just in time for holiday sales Nassim Taleb is back with what The New York Times dubs a “happily provocative new book of aphorisms,” The Bed of Procrustes. If you are among the unwashed who don’t understand the reference, “the Procrustes of Greek mythology was the cruel and ill-advised fool who stretched or shortened people to make them fit his inflexible bed.” It’s easy to understand why Taleb invoked this fool: “we humans, facing limits of knowledge, and things we do not observe, the unseen and the unknown, resolve the tension by squeezing life and the world into crisp commoditized ideas, reductive categories, specific vocabularies, and prepackaged narratives, which, on the occasion, has explosive consequences.”

The book is short and inexpensive. I will undoubtedly succumb and buy it even though it evokes mixed memories of exchanged aphoristic barbs with a titan in his (very different) field. Academic cleverness can easily turn ugly. But then why should the battles for intellectual capital be any different from those for other forms of capital?

Nassim Taleb: Soros versus Buffett

If given a choice between investing with Buffett and billionaire investor George Soros, Taleb also said he would probably pick the latter.

 “I am not saying Buffett isn’t as good as Soros,” he said. “I am saying that the probability Soros’s returns come from randomness is much smaller because he did almost everything: he bought currencies, he sold currencies, he did arbitrages. He made a lot more decisions. Buffett followed a strategy to buy companies that had a certain earnings profile, and it worked for him. There is a lot more luck involved in this strategy.”

 [From: http://www.businessweek.com/news/2010-09-25/obama-s-stimulus-plan-made-crisis-worse-taleb-says.html]

 I have high respect for your intelligence and thinking, and I believe that “Fooled by Randomness” and “The Black Swan” are must-read books for everyone. However, I believe your observation on Warren Buffett is wrong.

 You justified your pick on Soros because you have observed his thousands if not millions of trades; therefore, giving you comfort that he is making decisions and his success, to quote what you said, is “2 million times more statistically evidence that his results are not by chance than Buffett does”.

 You are implying that Soros is making thousands more decisions that Buffett. It seems to me that your understanding of Buffett is superficial, leading to your flawed conclusion.

 During a meeting with MBA students from the University of Georgia in early 2007, Buffett told the group of students that “There were four Moody’s manuals at the time. I went through them all, page by page, over 10,000 pages twice. On page 1433, I found Western Insurance Securities. Its earnings per share were as follows: 1949 – $21.66, 1950 – $29.09. In 1951, the low-high share price was $3 – $13. Ten pages later, on page 1443, I found National American Fire Insurance….”

 Again, in 2004, Buffett searched through the entire Korean stock market by reading Citigroup Investment Guide to Korean Stocks (that is over 1,700 companies). In 4 hours he found 20 companies that he liked and put $100 million to work.

 These two examples illustrated that Buffett did make thousands of decisions of not to invest. Those who study Buffett intensely know that he works extreme hard and study all companies available from A to Z, leaving no stone unturned. Deciding not to buy is just as important as deciding to buy. However, inactivity is commonly misunderstood for not making any decision.

 To quote Albert Einstein, “Not everything that counts can be counted, and not everything that can be counted, counts.”

The 150 Things the World's Smartest People Are Afraid Of

Every year, the online magazine Edge–the so-called smartest website in the world–asks the top scientists, technologists, writers, and academics to weigh in on a single question. This year, that question was “What Should We Be Worried About?” and the idea was to identify new problems arising in science, tech, and culture that haven’t yet been widely recognized. 

This year’s respondents include former presidents of the Royal Society, Nobel prize-winners, famous sci-fi authors, Nassem Nicholas Taleb, Brian Eno, and a bunch of top theoretical phsycists, psychologists and biologists. And the list is long. Like, book-length long. Tthere are some 130 different things that worry 151 of the planet’s biggest brains. And I read it, so you don’t have to: here’s the Buzzfeedized version, with the money quote, title, or summary of the fear pulled out of each essay. Obviously, go read the rest if any of the below get you fretting. 

What keeps the smartest folks in the world awake at night? Here goes:

1. The proliferation of Chinese eugenics. – Geoffrey Miller, evolutionary psychologist.

2. Black swan events, and the fact that we continue to rely on models that have been proven fraudulent. – Nassem Nicholas Taleb

3. That we will be unable to defeat viruses by learning to push them beyond the error catastrophe threshold. – William McEwan, molecular biology researcher

4. That pseudoscience will gain ground. – Helena Cronin, author, philospher

5. That the age of accelerating technology will overwhelm us with opportunities to be worried. – Dan Sperber, social and cognitive scientist (more…)

Is your Trading Fragile? Robust? or Anti-Fragile

Fragile- “Easily broken, shattered, or damaged; delicate; brittle; frail.”

Robust- “Strong and healthy; hardy; vigorous.”

Anti-Fragile- “A postulated antithesis to fragility where high-impact events or shocks can be beneficial. Anti-fragility is a concept developed by professor, former trader and former hedge fund manager Nassim Nicholas Taleb. Taleb coined the term “anti-fragility” because he thought the existing words used to describe the opposite of “fragility,” such as “robustness,” were inaccurate. Anti-fragility goes beyond robustness; it means that something does not merely withstand a shock but actually improves because of it.”