In the end I added this to the ‘haters’ category. Especially after I read this post. He seems to be writing anonymously. Anyone know who it is?
According to philosopher Taleb we can have heuristics, but not optimization. Optimization leads to airport delays. It also leads to cheaper tickets and in this exciting two part installment I will merely attempt to clarify, and separate, the two separate pieces of advice which have been rather successfully promulgated:
It is wise to bet on unexpected outcomes, because markets underprice them
It is wise to adopt a bar-bell portfolio eschewing a middle ground of only moderately risky investments
My hope is that those of you falling for the long-shot lure might nevertheless hear me out, because you have not considered the possibility that 2 does not follow from 1. You are fools, frankly, but I have little interest in arguing about the first belief per se, just at the moment, because nobody has been able to explain to me why Taleb’s redressing of the longshot lure does not apply to situations where it is obviously wrong (like the racetrack).
It is the implication 1 => 2 I find rather more intriguing because like most pseudo-science it sounds perfectly reasonable, almost compelling. Yet if you were assuming that the world’s foremost thinker on probability and uncertainty has thought about it carefully on your behalf, and you need not, think again. We shall pry the two beliefs apart because the benefits of long-shot betting, real or imagined, do not suggest a bar-bell strategy.
via A Quant’s Apology: Bar Humbug – The Talebian Bar-Bell Portfolio, Part I.
HatTip to Dave Lull!
Have you ever gazed upon classical Greek philosopher Nassim Nicholas Taleb and thought to yourself, “That man has a body from the gods. I could never hope to match him in brains, but what about brawn? If only I could obtain the details of his diet and fitness regimen”? Well, friends, today is your lucky day. Despite still being on his second tour of self-imposed quiet time, Taleb granted several interviews to publications reviewing his new book, “Antifragile: Things That Gain From Disorder,” and, naturally, the topic of his physique came up, specifically the various ways he keeps it in such enviable shape. (He also touches on the exercises that led to him having a brain three times the size of the typical astrophysicist, though please note that these should be appreciated but not be attempted by average humans, who could hurt themselves quite badly.)