Money and Finance
Link to article: The Calm Before the Storm: Why Volatility Signals Stability, and Vice Versa
Related book (which I re-read again this year): Antifragile: Things That Gain from Disorder
- Quotes...
Below are some quotes that I thought were good ones on which to end 2013 and keep in mind as we enter 2014. From Ray Dalio:The biggest mistake investors make is to believe that what happened in the recent past is likely to persist.From Howard Marks:If...
- Learning To Love Volatility – By Nassim Taleb
Several years before the financial crisis descended on us, I put forward the concept of "black swans": large events that are both unexpected and highly consequential. We never see black swans coming, but when they do arrive, they profoundly shape our...
- The Economist Magazine - The World In 2036: Nassim Taleb Looks At What Will Break, And What Won't
Paradoxically, one can make long-term predictions on the basis of the prevalence of forecasting errors. A system that is over-reliant on prediction (through leverage, like the banking system before the recent crisis), hence fragile to unforeseen “black...
- Why Did The Crisis Of 2008 Happen? - By Nassim Nicholas Taleb
Found via Farnam Street.Summary of Causes: The interplay of the following five forces, all linked to the misperception, misunderstanding, and hiding of the risks of consequential low probability events (Black Swans). I-CAUSES 1) Increase in hidden risks...
- The Washington Post: A Conversation With Nassim Nicholas Taleb
How do you define a Black Swan? If they're so unexpected, how can we prepare for them? A Black Swan is an exception, like the bird. It is an event with massive consequences that is unexpected. My idea is not simply to say that these things happen....
Money and Finance
The Calm Before the Storm - By Nassim Nicholas Taleb and Gregory F. Treverton
Link to article: The Calm Before the Storm: Why Volatility Signals Stability, and Vice Versa
The divergent tales of Syria and Lebanon demonstrate that the best early warning signs of instability are found not in historical data but in underlying structural properties. Past experience can be extremely effective when it comes to detecting risks of cancer, crime, and earthquakes. But it is a bad bellwether of complex political and economic events, particularly so-called tail risks—events, such as coups and financial crises, that are highly unlikely but enormously consequential. For those, the evidence of risk comes too late to do anything about it, and a more sophisticated approach is required.
Thus, instead of trying in vain to predict such “Black Swan” events, it’s much more fruitful to focus on how systems can handle disorder—in other words, to study how fragile they are. Although one cannot predict what events will befall a country, one can predict how events will affect a country. Some political systems can sustain an extraordinary amount of stress, while others fall apart at the onset of the slightest trouble. The good news is that it’s possible to tell which are which by relying on the theory of fragility...................
Related book (which I re-read again this year): Antifragile: Things That Gain from Disorder
- Quotes...
Below are some quotes that I thought were good ones on which to end 2013 and keep in mind as we enter 2014. From Ray Dalio:The biggest mistake investors make is to believe that what happened in the recent past is likely to persist.From Howard Marks:If...
- Learning To Love Volatility – By Nassim Taleb
Several years before the financial crisis descended on us, I put forward the concept of "black swans": large events that are both unexpected and highly consequential. We never see black swans coming, but when they do arrive, they profoundly shape our...
- The Economist Magazine - The World In 2036: Nassim Taleb Looks At What Will Break, And What Won't
Paradoxically, one can make long-term predictions on the basis of the prevalence of forecasting errors. A system that is over-reliant on prediction (through leverage, like the banking system before the recent crisis), hence fragile to unforeseen “black...
- Why Did The Crisis Of 2008 Happen? - By Nassim Nicholas Taleb
Found via Farnam Street.Summary of Causes: The interplay of the following five forces, all linked to the misperception, misunderstanding, and hiding of the risks of consequential low probability events (Black Swans). I-CAUSES 1) Increase in hidden risks...
- The Washington Post: A Conversation With Nassim Nicholas Taleb
How do you define a Black Swan? If they're so unexpected, how can we prepare for them? A Black Swan is an exception, like the bird. It is an event with massive consequences that is unexpected. My idea is not simply to say that these things happen....