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Tagged: Taleb RSS

• 9:54 PM on October 12, 2010 Permalink
  Tags: Taleb   

  Nassim Taleb Identifies Real Villain Of The Financial Crisis 

  Nassim Taleb, of Black Swan fame, says the Nobel Prize Committee is the villan everyone should be going after for the financial crisis.

  Taleb said that the Nobel Prize for Economics has conferred legitimacy on risk models that caused investors’ losses and taxpayer-funded bailouts. Sweden’s central bank will announce the winner of this year’s award on Oct. 11. Taleb singled out the Nobel award to Harry Markowitz, Merton Miller and William Sharpe in 1990 for their work on portfolio theory and asset-pricing models. “People are using Sharpe theory that vastly underestimates the risks they’re taking and overexposes them to equities,” Taleb said. “I’m not blaming them for coming up with the idea, but I’m blaming the Nobel for giving them legitimacy. No one would have taken Markowitz seriously without the Nobel stamp.”

  “I want to make the Nobel accountable,” Taleb said today in an interview in London. “Citizens should sue if they lost their job or business owing to the breakdown in the financial system.”

  “If no one else sues them, I will,” said Taleb, who declined to say where or on what basis a lawsuit could be brought.

   

• Pete 1:28 PM on July 29, 2010 Permalink
  Tags: Taleb   

  Taleb on potential sources of fragility 

  Bloomberg interview with Nassim Nicholas Taleb:

  What are potential sources of fragility or danger that you’re keeping an eye on?

  The massive one is government deficits. As an analogy: You often have planes landing two hours late. In some cases, when you have volcanos, you can land two or three weeks late. How often have you landed two hours early? Never. It’s the same with deficits. The errors tend to go one way rather than the other. When I wrote The Black Swan, I realized there was a huge bias in the way people estimate deficits and make forecasts. Typically things costs more, which is chronic. Governments that try to shoot for a surplus hardly ever reach it.

  The problem is getting runaway. It’s becoming a pure Ponzi scheme. It’s very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.