I don't bother with his pop books and I read his tweets for amusement (and hard calculus problems). His papers and technical write-ups are worth something. Like I'm sure if he had an editor they would hate his latest book- it's god awfully written- but the mathematics is good I swear. I've studied a couple of his references. https://arxiv.org/abs/2001.10488
I don't think his fund is structured to beat the market. If his fund is structured for extraordinary events then I would expect it to underperform strategies that are optimized for typical conditions. I would expect his fund to be used as a hedge in a more diversified strategy and IIRC there was publicity that it did exactly what it was intended to do for its clients when COVID-19 became a pandemic.
> your lizard brain is designed to handle futures on the order of seconds and minutes, not months and years, and certainly not decades and centuries.
I guess I should eat my words for using an imprecise phrase like lizard brain but I'm talking about the limbic system which is most assuredly involved in decisions involving fear and ignorance and long term behavior, not snap decisions. Fear in ignorance is good if the possibility space you're ignorant of contains catastrophic consequences. If you have to make a decision that is beyond your intellectual capacity, you should be cautious. We evolved from very stupid creatures that needed to survive phenomena they did not understand. We have not transcended that need. Rationality is also knowing the limits of your rationality.
> the appropriate reaction to an unpredictable event is no reaction at all, since by definition, you can't predict what it is, much less when it will happen.
I'm sorry but this is collective suicide in the face of a pandemic. In the face of an exponentially self-propagating phenomenon that has a wide possibility of effects including: death, permanent injury and the collapse of the healthcare system, waiting around to get more information just means it would be too late if action was needed. Even if it turns out we could have gotten away without it this time, that doesn't mean we overreacted.
> edit: also, fat-tailed typically means a tiny bit fatter than a guassian tail, not some wavy, unknownably fat "tail". otherwise, we'd have enough known events from which to draw reasonable predictions, making it not extreme and unpredictable, nor even a tail at all.
Is this a philosophical point? Are you saying that if I cannot draw enough samples to approximate it that the population distribution doesn't exist?
I'm arguing that there are limits to empirical methods in the face of extraordinary events and I'm making that claim somewhat more concrete by appealing to the divergence in behavior between the population and sample statistics of heavy-tailed, e.g. something with power law decaying tails like a pareto distribution.
Is it ridiculous to conclude that in the face of extraordinary events that cannot be reasonably predicted empirically whose outcomes would be A) widespread, basically affecting everyone and B) potentially catastrophic, we have to be cautious? I don't see how.
> more likely to be coal or nuclear
Nuclear. Naive probability matters relatively little here. The risk of coal plants due to CO2 is a thin-tailed long term risk. No single coal plant will ever cause a headline (or an event) like this. Thin-tailed long-term risks can be mitigated and planned for and the result is always a sum of many smaller choices (albeit global warming is an existential risk for sure!).
Nuclear is different. 99,999% of time it's cheaper and cleaner than coal. Doesn't matter. The tail-risk is what matters and that's also, why (conventional) nuclear can't ever be economically competitive against any other power source without direct or indirect subsidies (there is no insurance that will insure a nuclear power plant).
Highly recommend Taleb`s paper on fat-tailedness .
Taleb has made a career out of popularizing common financial statistics with historical flavor. He usually presents himself as a polymath/oracle in this writing although he has never developed any interesting ideas in the area. His work is mostly a pop-sci rehash of non-gaussian wikipedia stats formatted in Mathematica with a helping of cringey memes. For an especially embarrassing example see https://arxiv.org/abs/2001.10488. All of this serves the purpose of juicing Universa, a fund which charges a generous incentive fee for holding a rolling SPX put, something which I think a dog could do.
Since people don't read books much anymore he picks fights with people on twitter to raise his profile. He targets people who he thinks are likely to engage him (Nate Silver, Elon Musk etc), although most are too smart to take the bait. He fancies himself a powerlifter although he has physique of Homer Simpson. The man is generally a sad caricature of someone who traded volatility once. I personally mathematically model volatility for a living, and although I wouldn't pretend to have done as much as Bergomi I still feel I have the right to find Taleb grotesque.
I agree that a mathematical history of non-Gaussian mathematics would be a fascinating thing, especially the recent past. I also would agree that just following links from "alpha Levy-stable" might not be as digestible as Taleb. But his pretensions and self-importance, in the face of completely superficial understanding and achievement, is gross. If history records his name and not Gatheral's it would be a crime.
"Ray Dalio says 'cash is trash' and advises investors hold a global, diversified portfolio" - Jan 21 2020
Had you have listened to him, you would have just been taken out back, shot, and put in one of wuhans finest crematoriums… better off reading "Statistical Consequences of Fat Tails"
And next to that is a link to https://arxiv.org/abs/2001.10488 "Statistical Consequences of Fat Tails: Real World Preasymptotics, Epistemology, and Applications" by Nassim Taleb which states "Many "biases" found in psychology become entirely rational under more sophisticated probability distributions".
May be "hardwiredness" is not all that hard wired. Or, put it other way, the hardwiredness is not in humans under study but in humans who study them.
I don't think that humans would achieve what we have today being hardwired to dismiss facts that don't fit their worldview.