One of the most influential books to my economic and political thinking is Nassim Taleb’s “Fooled by Randomness” and “The Black Swan”.
These books opened an interest in randomness and probability and their application in modern affairs. In the first book Taleb surmised that much of the success attributed to overpriced talent on Wall Street was more accurately attributed to random success. After substantial success as a trader Taleb has become a philosopher of sorts.
as reported in Bloomberg
“The financial ecology is swelling into gigantic, incestuous, bureaucratic banks — when one fails, they all fall,” Taleb wrote in “The Black Swan: The Impact of the Highly Improbable,” which was published in 2007. “The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup.”
Taleb is angry that Wall Street is continuing to use traditional tools such as value at risk, which banks use to decide how much to wager in the markets.
“We would like society to lock up quantitative risk managers before they cause more damage,” Taleb said.
Investors advised by “Black Swan” author Nassim Taleb have gained 50 percent or more this year as his strategies for navigating big swings in share prices paid off amid the worst stock market in seven decades.
Universa Investments LP, the Santa Monica, California-based firm where Taleb is an adviser, has about $1 billion in accounts managed to hedge clients against big moves in financial markets. Returns for the year through Oct. 10 ranged as high as 110 percent, according to investor documents. The Standard & Poor’s 500 Index lost 39 percent in the same period.
Taleb said the current crisis is a “White Swan”, not a Black Swan, because it was something bound to happen.
Tips to Douglass Ott