Quote from Allmighty1:
Your comment is well taken. Lets put my own in the proper context.
First, Taleb is an educated man, he does have skills as regards math and stats. No question. Additionally, he makes good points as regards our inability to forecast what he calls "Black Swan" events (more properly called multi-sigma events or events of a multi-sigma magnitude). His comments on dynamic hedging are on the money.
Recently however, he has taken the easy way out. Instead of using that skill and intellect to develop a significant breakthrough in our capability to use stats for forecasting and hedging, he simply decides "it can't be done" and "I am no longer interested in finance"....because "it bores me"...
I can do better than that. So can a lot of other folks at the top tier brokerages. The folks who manage accounts for high value clients know that they have to deliver when it comes to account security and profitability. High worth individuals generally have little patience with underperformance. So what has happened is that these top tier brokerages ALREADY have solutions to these issue available, but the common guy here at ET, never hears about it, because they pay their people NOT TO PUBLISH. In my view Taleb is just trying to obtain enough buzz to sell his book and to keep his personal "star" on the rise.
I characterize that as a "sellout" and for that reason I classify the man as irrelevant.
I welcome your comments.
A1
It seems to me that we have to distinguish questions of the truth or falsity of Taleb's position from value judgments about how he might have acted based on those judgments.
In particular, if we infer from Taleb's position or background that he could have done something that he did not do, and then make a value judgment about what he did not do, we are obligated to defend both the inference and the judgment.
In your second paragraph, you infer from what you know of him that Taleb could have developed methods of trading or investing that capitalized on his research and insights and make a negative judgment of him for not doing so. My view is that Taleb is simply being consistent with what he has come to understand. If you conclude that something cannot be done, and then you don't attempt to do that, I don't see how it is reasonable to criticize you for your non-action.
Your position essentially contradicts Taleb's. Taleb says that statistics and mathematics are not useful, or not very useful, in prediction and forecasting (I'm not sure he says that about hedging). You take him to task for not developing a significant breakthrough in the use of statistics for forecasting. It seems to me that before you can criticize Taleb's actions you have to show what's wrong with his basic claim that statistics is not a viable means of forecasting.
I don't know, perhaps for the reason you cite, whether or not there are solutions for high income people at top-tier brokerages. If there are, then this is a counter-example to Taleb's position, a falsification of it. Taleb would simply be wrong. If that is the case, then I would really like to know it, and I suspect Taleb would also. So I have to ask how you know that these solutions exist (since they are highly secret)? What grounds can you give for me to accept that? I can't very well give up the logic of Taleb's position on what appears for now to be rumour.
On the other hand, it is precisely Taleb's claim, in my understanding, that such supposed solutions contain deep flaws that will appear at inconvenient times in the future. The Long Term Capital Management case is an example. It was just such a "solution" by genuinely intelligent people deceived by their math and statistics. Taleb cites many such examples, not limited to high finance.
Your comments about Taleb attempting to generate "buzz" and keep his "star on the rise" implies a sort of intellectual dishonesty on Taleb's part; as though there is nothing of value in his work and he is just trying to sell hot air. But whether one agrees with his conclusions or not, I don't see anything other than serious intellectual work.
I gather you think it is a "sellout" because Taleb has not developed methods to do what his whole argument shows cannot be done; and you think it he is "irrelevant" because his argument is just wrong. You may well be right, but so far, it seems to me that you have made the statements without backing them up very well.
By the way, the last I heard, Taleb was running a fund that traded based on his "black swan" theories. Has this changed?
