Monday, March 1, 2010

Video by Nassim Nicholas Taleb, Author of Fooled by Randomness and The Black Swans

References: Watch Nassim Nicholas Taleb Video

Read from BigFatPurse about this video. For those who don't know, he is the writer of Fooled by Randomness, the Black Swan, books about probability. Black Swans refer to improbable events. There is some candid and he definitely is a skeptic of certain prediction and daring to mention certain things. In a French Polytechnic, he even mentioned that using Bell Curve to measure risks is not only silly but immoral. There is transcript of the video available too, although not well-transcripted.

Some points I like from the video

Problem of Low probability Prediction
There was this article about a chance of a finanical event happening once every 10,000 year. The point is how can someone predict something is 1 in 10,000 years when 10,000 year of finances/stock market didn't even occur? Also, low probability event occur very little so there is might be more error since you get less of it to conclude the prediction.

The rich get richer, the big get bigger?
He mention if that is true, how did Google come out of nowhere and beat some other companies. Also, why did only 75 of the S&P500 survived for that four years? He then mention, people will then add a twist to their (prediction) model that can make company go bust when they grows big.

Mention of his investment
He don't buy stock(probably meant individual stock) and got a medium risk portfolio. He is also afraid of the stock market.

Other investors
He is neutral whether Buffett is great or just lucky. He thinks there are only 2 person he is sure they are not just lucky. They are George Soros and Simons of Renaissance Technologies. I heard of Soros, but nothing of Simons or Renaissance Technologies. I should probably read up about it.

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