FT.com / Comment / Opinion - Ten principles for a Black Swan-proof world
I did a write up about the above Taleb article at greenfaucet today and plan to do a little further dissection later.
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7 comments:
Hi Roger, I just found your blog and I find it very informative. Thanks for sharing your thoughts. I also write for my blog, which can be found at www.valuehuntr.com
If the government and financial services industries want to restore confidence in financial services, leverage and risk taking, then it could do a lot worse than give every child a decent education in money matters. Then we might not have a repeat of people taking on debt they obviously (to me, you and anyone with more than a cursory knowledge of finance) cannot afford to pay back.
I'm talking about the individual homeowners, although some bankers and mortgage providers may come into that category too.
In my idealized world we'd then have the ridiculous media-storm of making easy money from slapping a few coats on a desperate piece of real estate soon disappear under a tide of bad reviews and laughter. Saving rates would increase as these newly-educated, money-savvy entered the workforce (you can add the topic to all abilities, up to post-grads) without the need for a financial tsunami to clog up our precious internet and tv-news time.
It's cool to live below your means, but for some reason that message has been lost to the majority of the populace for some time.
100% right about living below your means being a lost concept.
I read Taleb's book before it became famous. Not prescient, just happened across it. It's OK.
Call me non-hip, but I'm much less worried about Black Swan events than I am about the routine hazards of life (including investment life). Sure, aliens can land tomorrow and zap me. But it's far more likely that I'll fall off a ladder and break my ankle....ummm, never mind about that.
But, yes, it would have been nice if a few folks in positions of financial responsibility had done a little (a lot) more what-iffing.
BillM
Roger,
You bring up a true thinker, Taleb. Well, one of his other books is Fooled by Randomness. In this book he brings out that while his friends read about earnings and fed reports and other normal stuff, Taleb was busy with his computer and monte carlo simulation. He discovered that in this simulation the bulls did not survive, the bears did not survive but the traders/investors that protected them self with options did survive. I almost never used options but if I had to stay longer in my trades I would consider.
On FNM and FRE in the 2007 David Dreman(The contrarian Investor) in a forbes article recommended one of these stocks saying that on a pull back in the $50's it would be a great buy. Think about those people that took on such advise.
Investing is a serious game. Think of it as if your life depended on it totally.
Taleb brings out lots of points to make you think, and think, and think, so that you would take the articles in the forbes, cnbc's, and the so called professionals with a grain of salt. Then you start looking at your self, your mind and start piecing things together. In such case a metamorphis will happen in your investment style.
Taleb is only the begging to make you start thinking.
Best,
Jeff from Milan Italy
Great points in your greenfaucet article Roger, Couldn't agree more about the need to strengthen the system.
One step in this direction: Congressional Panel Suggests Firing Managers, Liquidating Banks
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJJ_MkIv9VvA&refer=home
Have to say I found Taleb's principle 9. a bit confusing: "Citizens should not depend on financial assets or fallible “expert” advice for their retirement."
While it's true running your own business may be a good way to create wealth, it's not practical for everyone. Are we to worry less about our investments (good) or refrain from investing in financial markets altogether (???).
I too read Taleb's black swan book, which was quite fascinating and thought-provoking. Gave me a new perspective on the need for risk management, which I appreciate as a focus of your blog.
Jeff good stuff on Taleb.
Anon, his number 9 is one I plan to write about either here or over at GF.
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