Well, I'm not a nobel prize winner but the problem with Talebs Black Swan approach is the fact that he doesn't discount for the opportunity cost of low frequency events.
In other words, if you look at a distribution with zero alpha and add a single outlier which is the entire alpha, missing to trade this outlier kills your return.
Even if the powerball had positive expectancy you can play it twice a week...and with odds of 1 to 6 billion, you simply don't live long enough to take advantage of the law large numbers. So, you just don't open a HF get long tails and wait for the big bang once in a couple of years, even though you are correct that the outliers aren't priced in.
Inconsistent returns don't scale. There is political, regulatory and overall economic risk to be considered. What do you do when you hit a homerun and cannot cash in because your counterparty defaulted?
Look at the guys who do it the other way around. They have 70 IQ and sell OTM puts every month for 2/20 and when they inevitably blow up, they open shop under a different name.
So from a scientific perspective, Taleb is correct...but the idiots have success and he doesn't.
