One Bank Flagship Seminar by Nassim Nicholas Taleb – Tail Risk Measurement Heuristics

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Date: Thursday 18 February 2016
Time:  4.15-6pm
Venue: Moorgate Auditorium, 20 Moorgate
Speaker: Professor Nassim Nicholas Taleb

The first part of this talk – The Law of Large Numbers in the Real World – presents fat tails, defines them, and shows how the conventional statistics fail to operate in the real world, particularly with econometric variables, for two main reasons: 1) we need a lot, a lot more data for fat tails;  and 2) we are going about estimators the wrong way. The second part – Detecting Fragility – presents heuristics to detect fragility in portfolios. Fragility is shown to be ‘anything that is harmed by volatility’. The good news is that while (tail) risk is not measurable, fragility is.
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This event is free though places are limited. Entry is on a first come, first served basis.  To apply for a place, or for any queries about this event, please contact the One Bank Research Seminar Team.

Twitter Hashtag for this event: #BoETaleb

Sam Harris Responds

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Probably you find yourself as am I, baffled by the recent spat of Twitter hate emanating from NNT towards @SamHarris, @sapinker and many others. The Steven Pinker spat goes back to a 2009 NYT book review by Pinker of Malcolm Gladwell’s “What the Dog Saw”, where Pinker beats up on Gladwell (see also). Taleb, featured in the book, by then a friend of Gladwell, comes to the rescue. Pinker is surprised, Taleb doubles down. From Maclean’s 12/10/2012:

So, when the renowned Canadian-born Harvard psychologist Steven Pinker penned a critical review in The New York Times of fellow Canadian Malcolm Gladwell’s novel, What the Dog Saw, Taleb rushed to Gladwell’s defense. “I got furious. I feel loyalty for someone who does something nice for you, when you are nobody.” Taleb wrote a scathing critique of Pinker’s research in The Better Angels of Our Nature: Why Violence has Declined. In his critique, titled “The Pinker problem,” Taleb claims Pinker’s book is riddled with errors in sampling and doesn’t “recognize the difference between rigorous empiricism and anecdotal statements.” Pinker responded with his own paper in which he writes, “Taleb shows no signs of having read Better Angels.”

NNT’s beef with Sam Harris is a little harder to track.

20151230taleb-harris

The debate Harris talks about, which seems to be the nexus of NNT’s beef with him, happened in 2009.
In a recent podcast, Sam Harris responded to NNT’s Tweets and shared some context.
Listen to the relevant section of the podcast

The entire debate, from La Ciudad de las Ideas 2009, full and unedited, can be found here. What follows are relevant clips from NNT and then Sam Harris.

The neuroscience papers Sam Harris refers to are:
Neural Correlates of Religious and Nonreligious Belief
Functional Neuroimaging of Belief, Disbelief, and Uncertainty (pdf)

Fortune Cookie Science, SITG, Richard Dawkins, 2016, Squid Ink, Minority Rule

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FORTUNE-COOKIE SCIENCE (Facebook), definition: an understanding of science, probability & rationality obtained via slogans of the type found in Chinese restaurants’ fortune cookies, particularly easy to spread on the web.

The other night at a party. (Facebook)
“How do your books differ from those of [X]?”.
Me: “I don’t know I don’t often read contemporary authors, and odds are I will never read “X”.
She: “But you are writing books for an audience, no? You are responsible to tell the audience how you compare to others.”
Me: “Do you have a boyfriend?”
She: “Yes, he is here.”
Me: “Did you ask him how he compares in bed to other men at the party or is it something you found out by yourself?”

https://twitter.com/nntaleb/status/683440614160076800

https://twitter.com/nntaleb/status/683387772120510464

https://twitter.com/nntaleb/status/683329125076058112

Thanks for the symposium on risks. (Facebook)  The article came out in the WSJ. But I wasn’t aware of company: almost fainted.

Anyway wrote only 2 Op-Eds in 2015: NYT and WSJ. The rule is to stay below 3.

Nassim Nicholas Taleb on the Real Financial Risks of 2016

 

Last email from 2015. (Facebook)  Our paper debunking Pinker’s thesis was accepted by a stat journal Physica A: Statistical Mechanics and Applications.

Science Wins! In the months that it took us to publish this our paper was under the scrutiny of professional probabilists and statisticians who deal with Extreme Events, whose comments we collected and incorporated while Pinker and his goons were active in the press, on blogs and social media spreading stawman-clueless commentary.

Happy Science. Happy 2016!

PS- More generally I have to describe the “Pinker fallacy” under fat tails. His claim is sort of, to put it in statistical or scientific terms: “Violence has dropped by .00001 standard deviations. Let us explain WHY.”
PPS- Confirms my idea that, in science, a single comment by a mathematician can outweigh those by a billion BS vendors.

Our paper is here:
http://arxiv.org/pdf/1505.04722.pdf

https://twitter.com/nntaleb/status/683099866638204928

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https://twitter.com/nntaleb/status/681862755360595968

Skin In the Game | Nassim Nicholas Taleb

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Source: http://fooledbyrandomness.com/SITG.html

Skin In the Game

The Logic of Risk Taking

Nassim Nicholas Taleb

Skin In the Game is the fifth volume of the Incerto  which, to repeat, can be read in any order.
Below are selected chapters for comments. It is work in progress.

Never take advice from a salesperson The notion of equality in uncertainty

The domination of the stubborn minority How Europe will eat Halal, why GMOs will be history

The logic of risk taking  The two central chapters: why rationality is precaution, how to reconcile prudence and courage, why critics of ebola-worries are idiots but not those of flying vs driving, etc.

The skin of others in your game Why celibacy has been the only way to be ethically uncompromised; how to punish terrorists; how Ketchum runs smear campaigns

How to own a slave An employee is precisely someone who signals skin in the game and fear of losing a job. A revision of Coase’s theory of the firm

The pope is overtly atheist Without skin in the game, worship never reveals preferences

Life is not a pecking order

Silent Risk, Pascal’s Wager, Baal, Skin In the Game, Trump, Clinton-Malmaison, Gary Ruskin, Popper

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AN INVITATION TO CONTRIBUTE (Facebook)
Friends, I promised to deliver in the next few hours a discussion of the most neglected fragilities and the most overestimated risks. We can tell fragility when we see it… but we first need to look at it.

I won’t say for now what I came up with but would love for you to contribute suggestions. Don’t be shy, don’t be afraid to be out there, but please observe salon rules. And, for Baal’s sake, let’s all be brief.

https://twitter.com/nntaleb/status/681574436768722944

https://twitter.com/nntaleb/status/681562381412102146

https://twitter.com/nntaleb/status/681482579313324032

https://twitter.com/nntaleb/status/681153169313935360

https://twitter.com/nntaleb/status/681128896952164352

Friends, we made a page for the precautionary principle (Facbook) with application to GMOs, with a variety of articles.

1) It looks like PR promoters/smear campaigners are so dumb that they don’t know that we know that they are dumb.

2) Calling GMOs “transgenics” (moving genes from one organism to a different one) better reflects their nature as genetic modification is too vague a designation.

http://fooledbyrandomness.com/PrecautionaryPrinciple.html

https://twitter.com/nntaleb/status/680879127457624064

https://twitter.com/nntaleb/status/680843010389741568

 

https://twitter.com/nntaleb/status/680738137237229568

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https://twitter.com/nntaleb/status/680063562065276929

What I think is my central piece from *Skin in the Game* (Facebook) explaining risk-loving and precaution can live together, how risk taking has a distinct logic (similar to quantum logic)… Risk management is boring, risk taking is exciting; how the two can be reconciled. How can we reconcile Aristotelian precaution and courage, both considered virtues?

www.fooledbyrandomness.com/rationality.pdf

https://twitter.com/nntaleb/status/679701305154244610

A book isn’t just its contents; it’s a state of mind. (Facebook)
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Note: Without a state of mind, a book never survives. Also note that *almost* no book from 15 years ago has survived.

https://twitter.com/nntaleb/status/679357806407995392

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Friends, this is technical. (Facebook) Here is the “Statistical Estimators Under Fat Tails Project” and my small contribution to it during 2015 (7 papers). One can see that very little has been done to understand random events under Extremistan and there is a lot, a lot to do.
https://dl.dropboxusercontent.com/u/50282823/FatTailedpapers2015.pdf

Social networks are a great place for convex optionality. (Facebook) In 2015, I met three collaborators, two co-authors (one probabilist, one economist who specializes in inequality) and one business partner on Twitter (a partner with the Real World Risk Institute). I do not think that I would have been able to initially run into these three collaborators in the physical world, no matter how many parties I had attended (I attended a lot, a lot of parties in 2015). You can tell from people’s twitter conversation whether there can be a possible technical collaboration.

Ironically these technical matches revealed themselves through arguments during fights in my antiBS crusades (such as the Pinker-BS problem). Social life (physical, that is) is too harmonious, too devoid of fights and arguments for some skills to be made apparent.