Nassim Taleb

Fooled by Randomness

• Survivorship Bias means you don't hear from the losers on a topic, you only hear from the winners.
  • Watch out judging a person by their results because history will only show you the winners. You won't hear the stories of the losers
• Over short terms, you see variance, not returns. Don't monitor your portfolio on a daily basis
• AFTER an event has occurred, it is easy to make a story as to why it happened and why people should have seen it. But it is difficult to see in advance BEFORE it happens
  • Events are more random than we think
• Negative pangs cause a 2.5x more emotional response than a positive one
• It is not how likely an event is to happen that matters, it is how much is made or lost when it happens that should be the consideration
  • Maximize your profit expectancy, not probability
• I try to benefit from "rare events", events that do not tend to repeat themselves frequently
• I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price
• Investors for pure emotional reasons, will be drawn into strategies that experience rare but large variations.
• Pascal's Wager – The optimal strategy for humans is to believe in God because if God does exist the believer will be rewarded and if he doesn't exist, the believer has nothing to lose.
  • IE - Inequality of outcomes, don't try to pick up nickels in front of a train
• There is no point in searching for patterns that are available to everyone; once detected, they would be self-canceling
• "One cannot judge a performance in any given field by the results, but by the costs of the alternative (i.e. if history played out in a different way). Such substitutes courses of events are called alternative histories. Cleary the quality of a decision cannot be solely judged based on its outcome.
• Past events will always look less random than they were (hindsight bias)
• Probability almost never presents itself as a mathematical problem or brain teaser
• No one accepts randomness in their success, only in their failure
• Take into account the costs of mistakes
• Bad information is worse than no information at all
• 5 traits of a Market Fool
  • Overestimating accuracy of data or overconfidence
  • Getting married to positions
  • Changing story
  • No plans for taking losses or exit strategy
  • Denial of luck and randomness

**

Nassim Taleb, who you may know from the fact that he has written a book once, also has a YouTube channel, where he talks about probability theory, statistics, and occasionally fails to understand IQ. While his takes on IQ have been addressed in a variety of places, Taleb also isn't beneath commenting on other psychological issues. The topic of this post is a video where he takes on a very brief lit-review like summary paper investigating human biases in judging character on the basis of facial appearance. The paper is rather short, only encompassing ~ 2 pages of text and 2 pages of images. You may get a sense of its content by the abstract:

>Our success and well-being, as individuals and societies, depend on our ability to make wise social decisions about important interpersonal matters, such as the leaders we select and the individuals we choose to trust. Nevertheless, our impressions of people are shaped by their facial appearances and, consequently, so too are these social decisions. This article summarizes research linking facial morphological traits to important social outcomes and discusses various factors that moderate this relationship.

While this may seem like your standard gen psych paper, Taleb is concerned with two elements in particular:

1. He compares it to craniometry and implies that it is either racist itself or at least fueling racism.
2. He takes issue with the methodology.

We will address both points individually.

The racism take

I do not want to spend too much time on this one as Taleb himself doesn't seem to know how it logically follows. At the very least, he doesn't bother explaining it to us. He merely makes the claim that it somehow fuels scientific racism. A few things to note:

1. The paper makes no distinction between races. In fact, it doesn't group people into categories at all.
2. The authors explicitly discuss the invalidity of facial features as a predictor of human traits/behavior and express their interest in mitigating these biases. Another quote from the paper:

>*The fact that

I’m very curious on what the general thinking about Nicolas Taleb is in Lebanon. He’s a very interesting character with some very good books but he also has the tendency to sometimes say very controversial stuff.

I’m Jordanian myself and recently saw that he’s had a conference with a Greek minister regarding Rum people who he regards as arabised Christians that are actually originally Greek.

Being a Christian Jordanian and having parents who were born into the Rum church, I found this topic quite interesting. There’s a few similar movements happening in Jordan at the moment.

In "The Black Swan", Nassim Taleb discusses probability and the impact of unlikely but extreme events. He argues that we have a hard time understanding impacts and probabilities that are very large or very small. That what we do not know can be much more meaningful than anything we do know. Taleb argues that most of the course of human history has been dominated by extreme, unexpected, improbable events. And that human society will become more so in the future.

Taleb argues that we would benefit from improving how we think about unlikely, impactful events, and offers several tips for doing this. In this review I will outline the book itself, and then collect and present a summary of tips. Scroll down to "What To Do About It" if you just want the list of tips.

What is a Black Swan?

A Black Swan event has three properties:

• Unexpected. Nobody saw it coming.
• Impactful. Causes a big change.
• Explained after the fact. We look back and invent an explanation for it, even though we didn't know it would happen.

Taleb lists the Internet, the laser, and the start of World War One as examples of Black Swan events. Black Swans can be either negative (like a sudden war) or positive (like discovering a new drug or invention - like penicillin).

Throughout his book, Taleb argues that history moves in large leaps and bounds, not small steps. Most of the big changes in human history come from Black Swans.

Taleb believes we should work to make our lives and society more robust to Black Swans. Understand them better. Become less surprised by them. And be more ready, so we aren't as impacted. "The surprising part is not our bad errors, or even how bad they are, but that we are not aware of them".

Mediocristan and Extremistan

Taleb distinguishes between two types of random probability and events - “mild” randomness with slight variations vs “wild” randomness with extremely impactful events. He calls these “Mediocristan” and “Extremistan”.

In Mediocristan - all of the events and data are about average. No single event or person greatly changes the total.

• Imagine gathering 1,000 people into a stadium, and comparing their weight. Even if you have one person with a very small weight (perhaps a baby) or a very large weight (the heaviest possible human) - they will not make up much of the total weight in the entire stadium.
• Examples of data or events in Mediocristan: height, w

Just a thought that came to mind re the recent episodes...

Nassim Nicholas Taleb (@nntaleb) Tweeted: When people die after eating pistachio ice cream [unsweetened], you don't naively attribute their death to what they ate. With 2 M followers, @jordanbpeterson is under moral obligation to not be spreading statistical disinformation. Or to learn statistics.

Peterson is a fraud. https://twitter.com/nntaleb/status/1470722259836973057?s=20

When I encounter a new public intellectual or author, I have found myself doing this:

1. Google [Nassim Taleb] + [Insert Person]
2. Sift through any relevant tweets or blog posts

As we all know, Taleb has called out a great many BS'ers in his online life and thus this process tends to turn up results more often than not. I don't think Taleb is always right in his BS detection, but I do believe he's right more often than not. I also don't write off anyone just because Taleb has called them out but it does give me a more informed starting position of which to evaluate new people and ideas.

I have also realized that this is, in some way, the point of why Taleb attacks people online publicly. It's not just to be a jerk. By calling out BS'ers and naive thinkers, it helps curtail the destruction they can do in the real world.

Does anyone else find themselves doing this or a similar process when encountering new public people and ideas?

Hi all,

I'm so glad I found this subreddit ! I've been a fan of Taleb for years and always wanted to find the time to delve into the workings of his investment/speculation strategies.

I feel like I have a great understanding of the principles (e.g. it's not entirely about the probability of an event the payoff matters too). I also have a fairly solid understanding of money, economics, leverage and options. I also have a solid IT/technical skill set including basic to intermediate Python knowledge.

What I want to gain next is some knowledge and experience around specific events, markets and tools. I've found a few very good related things on this subreddit e.g:

https://www.reddit.com/r/nassimtaleb/comments/g7r9uz/how_did_the_nassim_taleb_hedge_fund_make_so_much/

And have searched the web. But I cannot find anything more specific than "automated tools" and "machine learning". I'm guessing there an infinity of potential tools (or at least an infinity of strategies and configurations of a handful of tools). And also that whatever tools Taleb used to make a killing in the 1987 stock market crash might be outdated or inapplicable to my situation today. But I think knowing what these tools were, what they did and how they worked might help me understand what I can do with the tools and skills I have today. And what available skills and tools I can acquire and develop.

Does anyone have any knowledge of this they'd be willing to share ? Also if anyone can share (even broadly) what tools and and associated strategies I'd very much appreciate it.

Thanks !

Chapter 2 of Nassim Taleb’s book, Skin in the Game: Hidden Asymmetries in Daily Life, develops the concept of skin in the game within the context of the Minority Rule — a phenomenon that enables a stubborn minority to assert its preference on the broader population. The Minority Rule provides a framework for understanding how Bitcoin Maximalists are influencing our financial lives.

Nassim Taleb**

Fooled by Randomness

• Survivorship Bias means you don't hear from the losers on a topic, you only hear from the winners.
  • Watch out judging a person by their results because history will only show you the winners. You won't hear the stories of the losers
• Over short terms, you see variance, not returns. Don't monitor your portfolio on a daily basis
• AFTER an event has occurred, it is easy to make a story as to why it happened and why people should have seen it. But it is difficult to see in advance BEFORE it happens
  • Events are more random than we think
• Negative pangs cause a 2.5x more emotional response than a positive one
• It is not how likely an event is to happen that matters, it is how much is made or lost when it happens that should be the consideration
  • Maximize your profit expectancy, not probability
• I try to benefit from "rare events", events that do not tend to repeat themselves frequently
• I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price
• Investors for pure emotional reasons, will be drawn into strategies that experience rare but large variations.
• Pascal's Wager – The optimal strategy for humans is to believe in God because if God does exist the believer will be rewarded and if he doesn't exist, the believer has nothing to lose.
  • IE - Inequality of outcomes, don't try to pick up nickels in front of a train
• There is no point in searching for patterns that are available to everyone; once detected, they would be self-canceling
• "One cannot judge a performance in any given field by the results, but by the costs of the alternative (i.e. if history played out in a different way). Such substitutes courses of events are called alternative histories. Cleary the quality of a decision cannot be solely judged based on its outcome.
• Past events will always look less random than they were (hindsight bias)
• Probability almost never presents itself as a mathematical problem or brain teaser
• No one accepts randomness in their success, only in their failure
• Take into account the costs of mistakes
• Bad information is worse than no information at all
• 5 traits of a Market Fool
  • Overestimating accuracy of data or overconfidence
  • Getting married to positions
  • Changing story
  • No plans for taking losses or exit strategy
  • Denial of luck and randomness

Nassim Taleb

Fooled by Randomness

• Survivorship Bias means you don't hear from the losers on a topic, you only hear from the winners.
  • Watch out judging a person by their results because history will only show you the winners. You won't hear the stories of the losers
• Over short terms, you see variance, not returns. Don't monitor your portfolio on a daily basis
• AFTER an event has occurred, it is easy to make a story as to why it happened and why people should have seen it. But it is difficult to see in advance BEFORE it happens
  • Events are more random than we think
• Negative pangs cause a 2.5x more emotional response than a positive one
• It is not how likely an event is to happen that matters, it is how much is made or lost when it happens that should be the consideration
  • Maximize your profit expectancy, not probability
• I try to benefit from "rare events", events that do not tend to repeat themselves frequently
• I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price
• Investors for pure emotional reasons, will be drawn into strategies that experience rare but large variations.
• Pascal's Wager – The optimal strategy for humans is to believe in God because if God does exist the believer will be rewarded and if he doesn't exist, the believer has nothing to lose.
  • IE - Inequality of outcomes, don't try to pick up nickels in front of a train
• There is no point in searching for patterns that are available to everyone; once detected, they would be self-canceling
• "One cannot judge a performance in any given field by the results, but by the costs of the alternative (i.e. if history played out in a different way). Such substitutes courses of events are called alternative histories. Cleary the quality of a decision cannot be solely judged based on its outcome.
• Past events will always look less random than they were (hindsight bias)
• Probability almost never presents itself as a mathematical problem or brain teaser
• No one accepts randomness in their success, only in their failure
• Take into account the costs of mistakes
• Bad information is worse than no information at all
• 5 traits of a Market Fool
  • Overestimating accuracy of data or overconfidence
  • Getting married to positions
  • Changing story
  • No plans for taking losses or exit strategy
  • Denial of luck and randomness

**

Nassim Taleb

Fooled by Randomness

• Survivorship Bias means you don't hear from the losers on a topic, you only hear from the winners.
• Watch out judging a person by their results because history will only show you the winners. You won't hear the stories of the losers
• Over short terms, you see variance, not returns. Don't monitor your portfolio on a daily basis
• AFTER an event has occurred, it is easy to make a story as to why it happened and why people should have seen it. But it is difficult to see in advance BEFORE it happens
• Events are more random than we think
• Negative pangs cause a 2.5x more emotional response than a positive one
• It is not how likely an event is to happen that matters, it is how much is made or lost when it happens that should be the consideration
• Maximize your profit expectancy, not probability
• I try to benefit from "rare events", events that do not tend to repeat themselves frequently
• I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price
• Investors for pure emotional reasons, will be drawn into strategies that experience rare but large variations.
• Pascal's Wager – The optimal strategy for humans is to believe in God because if God does exist the believer will be rewarded and if he doesn't exist, the believer has nothing to lose.
• IE - Inequality of outcomes, don't try to pick up nickels in front of a train
• There is no point in searching for patterns that are available to everyone; once detected, they would be self-canceling
• "One cannot judge a performance in any given field by the results, but by the costs of the alternative (i.e. if history played out in a different way). Such substitutes courses of events are called alternative histories. Cleary the quality of a decision cannot be solely judged based on its outcome.
• Past events will always look less random than they were (hindsight bias)
• Probability almost never presents itself as a mathematical problem or brain teaser
• No one accepts randomness in their success, only in their failure
• Take into account the costs of mistakes
• Bad information is worse than no information at all
• 5 traits of a Market Fool
• Overestimating accuracy of data or overconfidence
• Getting married to positions
• Changing story
• No plans for taking losses or exit strategy
• Denial of luck and randomness

**

Mark Spitznagel/Nassim Taleb

The Dao of Capital

• "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy." Hazlet
• "You have to love to lose money and hate to make money to be successful" Klopp
• Far better to avoid direct, head-on competition and instead, pursue the roundabout path toward an intermediate step that leads to an eventual position of advantage
• Natural systems – from forests to markets – continuously seek balance.
• Austrian investing takes a roundabout path to market success by pursuing immediate loss during the investment process so you can gain more advantageously in the future.
• If investors could use history to predict market movements, they'd never be surprised by them or lose huge amounts of money.
• The market cannot be understood as predictable and law-abiding since it's unpredictable and chaotic at its core.
• The roundabout – the pain of positioning and paying now for the advantage and payoff later – only works when we remove our temporal blinders that keep us hyper focused in the moment. Then, and only then, can we pursue those proximal aims intended to give us an intermediate advantage from which the distal ends are more easily and effectively achieved. To say this is extremely challenging is an understatement.
• To succeed with the strategy of Austrian Investing, you must be able to tolerate initial setbacks.
• A system should naturally achieve balance through internal guidance. Attempts to intervene in the system will usually cause more problems than they solve. The Austrian School of Economics believes this about markets: government intervention doesn't help balance markets, it distorts them.
• We can only succeed with Austrian investing if we can stop focusing on the short term. This is extremely difficult, but it's also critical to our success in the long run. It's hard because humans are designed to prefer things that benefit them now rather than later.
  • This is part of our evolution as humans; we had to focus on immediate threats in order to survive and thrive as a species. Our culture also teaches us that the moment is all that matters—we live in an instant gratification society where people want everything right now without having to work hard for it or wait long periods of time (such as saving money).
• Patience is the most precious treasure
  • Most people are una