Adonis Diaries

Posts Tagged ‘The Black Swan

Minority rule: it takes a few very intolerant and tenacious people to make the system more honest

No troll should be able to abuse the media and academic system!

Ethical Breaches

Background: After being called a BS vendor by Nassim Nicholas Taleb in the past, Smith in a vendetta, has written 4 articles with similar attempts at discrediting and distorting without the slightest familiarity with the subject. More on these, later, as this is not the end.

Rule 1: You shall not use a media company such as Bloomberg to troll people you hate.
Rule 2: You shall not use the credibility of an academic position to troll people, particularly when you have failed academia and are concealing that you were terminated.
The article makes sure we know that Noah Smith is an assistant professor at Stony Brooks.
Except that I was told in January that he had been “resigned” for not meeting academic standards and was not coming back for the Jan 2016 semester,
in fact “never coming back”.
Smith claimed a sabbatical which conflicts with what I was told by faculty members.
Smith should not be using sham affiliations for positions he doesn’t have so he can talk about a subject he knows nothing about.

This is a public service for others who might fall prey to the overactive BS operator passing for expert Noah Smith (who was thrown out of academia for not meeting standards), with the misfortune of having been given a voice on Bloomberg, thus risking to turn Bloomberg (otherwise with tight standards) into a BS vending operation.

John Peter  shared this link of Nassim Nicholas Taleb. April 18 at 4:38pm ·

Added a page as public service (he will now leave me alone, this is to protect others, preserve the integrity of the system)
This is the minority rule: it takes only a few very very intolerant and tenacious people to make the system more honest.
http://www.fooledbyrandomness.com/SmithBSVendor.html

Summary of Breaches of Journalistic Ethics & Logic  in Noah Smith’s Bloomberg View Article on The Black Swan of April 16, 2016

Ethical Flaw

Taleb in The Black Swan:

There are two varieties of rare events:

a) the narrated Black Swans, those that are present in the current discourse and that you are likely to hear about on television, and

b) those nobody talks about, since they escape models—those that you would feel ashamed discussing in public because they do not seem plausible. I can safely say that it is entirely compatible with human nature that the incidences of Black Swans would be overestimated in the first case, but severely underestimated in the second one.
[…]
This miscalculation problem is a little more subtle.

In truth, outliers are not as sensitive to underestimation since they are fragile to estimation errors, which can go in both directions.

As we saw in Chapter 6, there are conditions under which people overestimate the unusual or some specific unusual event (say when sensational images come to their minds)—which is how insurance companies thrive.

So my general point is that these events are very fragile to miscalculation, with a general severe underestimation mixed with an occasional severe overestimation.

Noah Smith in Bloomberg View: [goes on and on presenting the Black Swan as only overestimating market crashes]… In other words, Taleb might be wrong — people might be overestimating, rather than underestimating, the risk of market crashes.

So visibly Noah Smith is not familiar with the book that he is discussing.

This led to an incoherent response: Noah Smith said he “agrees with points above” (not explaining then his Taleb is “wrong” other than to create hype), and his editor, James Grieff saying “He read the book but disagrees with it”. His editor claims that “he read the book”is like someone claiming he read War and Peace, it takes place in Venezuela.

Background: Noah Smith has a long documented track record of writing critiques of books he hasn’t seen, and discussing papers he hasn’t read.

Here you have authors spending 10 years writing a book, and some troll with a megaphone critiquing it on things that have nothing to do with the content.

I first became aware of it when he previously commented on my skin-in-the-game without realizing there was the expression of a mathematical theorem, when it was on page 2.

Logical Fiasco

The editor has to have a problem to miss the severe asynchrony. Noah Smith  takes a book published in 2007 (before the last crisis), discussing events until 2006, then says “Taleb is wrong” from inference on market estimation of probability between 2007-2016 and what decision to take today based on prices today, 2016.

Perhaps the participants adjusted to events of 2007, the book, or something else.  The claim by Noah Smith about the Black Swan concerns the market value of risk, not the structure of risk, which is something subsequent to the book. That his editor missed the asynchrony is very, very strange…

Other Violations of Professionalism

Noah Smith has no familiarity with finance.

In 2009 I made a statement in Moscow about 4 trades to do. I was not aware of being filmed and used trader language.

One of them was short T Bonds. After I communicated to Noah Smith that he was a BS vendor, he advertised in 2014 my claim of short bonds … in 2009 as a way to wreck my credibility in every way possible.  Did he report on the other trades in the ensemble? No.

Did it hit him that trades are something that don’t last 4 years? No.

Did it hit him that bonds collapsed after the talk? (markets happen to go up and down).  No.

Did he realize that I have several hundred thousand trades in my career and no self respecting scientist would play the media megaphone to select one, particularly 5 years later without knowing the true outcome?

This is why he couldn’t write an academic paper: his mind has a defect in its logical wiring.

No finance academic would commit the lack of professionalism of cherry-picking a trade in a portfolio, and, worse, not realizing that a dynamic trader buys and sells and there is low correlation between the trade and the fate of the market.

How can someone that ignorant about finance write about finance?

 

The Trouble With the Genetically Modified Future

Like many people, are you wondered about the safety of genetically modified organisms?

They’ve become so ubiquitous that they account for about 80% of the corn grown in the U.S., yet we know almost nothing about what damage might ensue if the transplanted genes spread through global ecosystems.

Mark Buchanan

this Nov 16, 2014

How can so many smart people, including many scientists, be so sure that there’s nothing to worry about?

Judging from a new paper by several researchers from New York University, including “The Black Swan” author Nassim Taleb, they can’t and shouldn’t.

The researchers focus on the risk of extremely unlikely but potentially devastating events.

They argue that there’s no easy way to decide whether such risks are worth taking — it all depends on the nature of the worst-case scenario.

Their approach helps explain why some technologies, such as nuclear energy, should give no cause for alarm, while innovations such as GMOs merit extreme caution.

The researchers fully recognize that fear of bad outcomes can lead to paralysis. Any human action, including inaction, entails risk. That said, the downside risks of some actions may be so hard to predict — and so potentially bad — that it is better to be safe than sorry.

The benefits, no matter how great, do not merit even a tiny chance of an irreversible, catastrophic outcome.

For most actions, there are identifiable limits on what can go wrong. Planning can reduce such risks to acceptable levels. When introducing a new medicine, for example, we can monitor the unintended effects and react if too many people fall ill or die.

Taleb and his colleagues argue that nuclear power is a similar case: Awful as the sudden meltdown of a large reactor might be, physics strongly suggests that it is exceedingly unlikely to have global and catastrophic consequences.

Not all risks are so easily defined.

In some cases, as Taleb explained in “The Black Swan,” experience and ordinary risk analysis are inadequate to understand the probability or scale of a devastating outcome.

GMOs are an excellent example. Despite all precautions, genes from modified organisms inevitably invade natural populations, and from there have the potential to spread uncontrollably through the genetic ecosystem.

There is no obvious mechanism to localize the damage.

Biologists still don’t understand how genes interact within a single organism, let alone how genes might spread among organisms in complex ecosystems. Only in the last 20 years have scientists realized how much bacteria rely on the so-called horizontal flow of genes — directly from one bacterium to another, without any reproduction taking place.

This seems to be one of the most effective ways that antibiotic resistance spreads among different species. Similar horizontal exchange might be hugely important for plants and animals. No one yet knows.

In other words, scientists are being irresponsibly short-sighted if they judge the safety of GMOs based on the scattered experience of the past couple decades. It’s akin to how, ahead of the 2008 financial crisis, analysts looked at 20 years of rising house prices and assumed they would always go up.

The honest approach would be to admit that we understand almost nothing about the safety of GMOs, except that whatever happens is pretty likely to spread.

Science is at its best when it acknowledges uncertainty and focuses on defining how much can be known. In the case of GMOs, we know far too little for our own good.

To contact the author on this story:
Mark Buchanan at mbuchanan32@bloomberg.net

 Note:

Arguing with biologists about risk is exactly like arguing with George W. Bush about algebraic geometry.
This is by Mark Buchanan, a physicist.
http://bv.ms/1vfU8oK

Antifragile: what can Gain from Disorder (Incerto)?  And Nassim Nicholas Taleb

Nassim Nicholas Taleb, the bestselling author of The Black Swan and one of the foremost thinkers of our time, reveals how to thrive in an uncertain world.

I have reviewed and developed on the Black Swan theory in several articles https://adonis49.wordpress.com/2011/06/01/part-1-black-swan-model-can-rare-catastrophic-events-of-man-made-systems-be-controlled/

Black Swan is a term coined after discovering a black swan a couple of years ago.  People firmly believed that all swans were white:  A few might have observed a black swan but refused to identify it as a swan; or black swans are common sight in particular regions and people had no idea that black swans are considered rarity all over the world and might be purchased for their weight in gold to be raised in zoos!

You know the adage: “If an event can occur, it will happen“, meaning, it does not matter how low the predicted probability of occurrence of the rare events, it will strike “unexpectedly”.

If there is a chance in a million for an asteroid to smash onto earth, an asteroid will fall on our head: Asteroid did fall and transform earth several times in the last four billion years.

Just as human bones get stronger when subjected to stress and tension, and rumors or riots intensify when someone tries to repress them, many phenomena in life benefit from stress, disorder, volatility, and turmoil.

What Taleb has identified and calls “antifragile” is that category of things that not only gain from chaos but need it in order to survive and flourish.

The Black Swan theory states: “In complex systems, especially man-made complex systems, it is not feasible to comprehend all the interactions among the hundred of variables affecting outcomes. In man-made systems, we have to allow natural fluctuations that are at work.

The rare predicted calamitous events  will strike unexpectedly, and we will fail to react accordingly and adequately if we consciously avoid to consistently take them into consideration in our analysis and reports.”

The unexpected events cannot be analyzed as odds in card games or casino games:  Human behavior with thousands of variability in moods, emotions, conventions, conviction, personal experiences… cannot be predicted as games are.

In The Black Swan, Taleb showed us that highly improbable and unpredictable events underlie almost everything about our world.

In Antifragile, Taleb stands uncertainty on its head, making it desirable, even necessary, and proposes that things be built in an antifragile manner.

The antifragile is beyond the resilient or robust. The resilient resists shocks and stays the same; the antifragile gets better and better.

The antifragile is immune to prediction errors and protected from adverse events.

Why is the city-state better than the nation-state,?

Why is debt bad for you, and why is what we call “efficient” not efficient at all?

Why do government responses and social policies protect the strong and hurt the weak?

Why should you write your resignation letter before even starting on the job?

How did the sinking of the Titanic save lives?

The book spans innovation by trial and error, life decisions, politics, urban planning, war, personal finance, economic systems, and medicine.

And throughout, in addition to the street wisdom of Fat Tony of Brooklyn, the voices and recipes of ancient wisdom, from Roman, Greek, Semitic, and medieval sources, are loud and clear.

Antifragile is a blueprint for living in a Black Swan world.

Nassim Nicholas Taleb said:

The most rewarding moment in an author’s career. Finally, I am no longer the author of several books. I am now the author of a single book in 4 volumes: INCERTO, plus technical companions.

Why does it matter? I don’t know, but it is a big, very big deal to see your work as a single large coherent and self contained unit, to which you keep adding pieces to, ultimately, leave very few stones unturned

   

adonis49

adonis49

adonis49

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