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Taleb Releases New "Chapter" To Fooled By Randomness - The Return Of Fat Tony
The trader turned economist turned philosopher has just released a brand new post script chapter to his blockbuster "Fooled By Randomness" - Chapter 1. A First Lesson in the Epistemology of Fat Tony: the Grand
Demarcation Between Sucker and NonSucker, with the following subheader: No use for Nero –Tony is not the elephant – On the difference between sucker and nonsucker – Introduction to social epistemology – The bigger the mistake, the better – Reading for 9,000 years --Don’t buy a coffee machine – Beware the gorilla – Is epistemology the sucker-nonsucker problem?
An entertaining read after a quick casual perusal, with the emphasis on the distinction between market-trend followers (i.e., those the "suckers" that all get slaughtered eventually) and the few who do not succumb to this distinction (and instead hope they can hit the sell button and find a buyer at exactly the same time as everyone else is selling - good luck). Some of Taleb's observations:
- Primo, there are some mistakes that are only made very big, in billions, perhaps even trillions rather than millions.
- Secundo, it is easier to fool a crowd than a single person.
- Terso, never trust an idiot with too much education or information.
Don't tell it to the quants.
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Just when I was about to write him off as a narcissistic nut job. Taleb puts out something half decent again.
Meanwhile... Poor Greece is left to pick petals off a daisy while mumbling, "EMU loves me," picks another petal, "EMU loves me not."
Note to Greece: Unless you have a dowry, you'll make a perfect whore.
At some primal, sadistic level, the EMU is enjoying the power. Greece will twist in the wind a while. Get to be their biotch.
"the few who do not succumb to this distinction (and instead hope they can hit the sell button and find a buyer at exactly the same time as everyone else is selling - good luck)."
I beieve Taleb advocates going long volatility, not timing a short. The non-suckers pay for options--willing to lose small amounts for an unreasonable portion of those "Primo" mistakes.
To use his own characters as metaphor - IMO Talib here presents us with scant Tony to balance his Nero.
Nothing really new here for Taleb fans but it's nice to see Nero and Fat Tony (representatives for the respective academic and the intuitive routes to insight into the risks inherent in large-scale, complex systems) alive and well again.
John Paulson probably played the part of Nero in our most recent drama while real life Fat Tony, true to form, is likely relaxing anonymously on some real or metaphorical island of his chosing with a most enviable set of problems.
Reading that last bit it's pretty hard to conclude that taxpayers and owners of property won't prove to be the suckers in the upcoming, science-lite, Obamacare, cap-and-trade and financial reform sweepstakes.
Question...
Will the ratio of suckers to non-suckers ever change? (even when the suckers realized that they got sucker punched in the latest crisis?). Or is the ratio of S's to NS's a constant, no matter how 'enlightened' they become??? If the ratio is a constant, then financial ponzi schemes, and it's related corruption and destruction, will never end.
Also, is Nassim making a second edition of both Black Swan and FBR, or just Black Swan?
(To see more of Taleb's thoughts, micro-thoughts in this case, see his Twitter posting: http://twitter.com/nntaleb )
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