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Long-Term Taleb Better Than Short-Term Taleb

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THE BLACK SWAN
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Look, don't waste your time listening to "The Black Swan" author Nassim Taleb (or any of us, really) on granular, short-term events. I'm not sure what the hell happened here. Back in 2001, with the release of "Fooled by Randomness," Taleb made a name by challenging the conventional wisdom of success in markets and even life. He rarely appeared on television, saying he had no use for people making short-term predictions about things which were inherently unpredictable. In his infrequent appearances he eschewed neckties because anyone who appears on television wearing a necktie takes himself too seriously and is probably untrustworthy, something I've found to be entirely true.

But then he closed his fund, wrote a few more books and now all hell has broken loose. He's on television almost as much as Roubini. And he's frequently asked questions about the short-term that he must know make very little sense to answer. Even as I type, Bloomberg is scrolling with the following headline: "Taleb Says U.S. Debt Situation Worse Than Greece," a preview of Taleb's appearance tonight on The Charlie Rose Show.

Most troublesome, however, is his recent insistence on viewing unexpected and unpredictable events as entirely negative. Just because something is unexpected doesn't make it negative. But he knows this. I'm not sure what the angle is here, which is why I enjoyed him more when he was writing posts on his Web site and not taking himself too seriously and poking holes in the prevailing Polyannas appearing on CNBC claiming housing never goes down and so on and so forth...

But those Polyannas have been replaced. Everyone who appears on CNBC or Bloomberg TV now can define a Black Swan, and if asked they would define it this way: A Black Swan is an unexpected and unpredictable event that causes markets to crash, such as the Greece debt situation and the U.S. debt situation, which is worse than Greece's incidentally, and oil at $400 a barrel, which is entirely possible, and another 50 percent decline in U.S. real estate prices, also possible, as well as China and the U.S. going to war over natural resources and... get the picture? The paradox of the unpredictable Black Swan as an entirely predictable set of macro events unfolding in a linear manner as if plotted by a savvy macroeconomist-turned-screenwriter.

All of which is a long-winded way of saying don't watch Bad Taleb on Charlie Rose, instead watch Good Taleb from last year's India Today Conclave in which he discusses the unpredictable and describes today's nation-states as modern inventions which are far more unstable than presently believed. I agree with him on this. However, where I disagree is in the unanimity with which this instability is greeted. Unstable nation states are certainly inconvenient. But inconvenience does not necessarily lead to negative consequences. This is untrue. My point: the unexpected and unpredictable is not, by definition, negative.

Anyway, here are parts one and two of a multi-part video of Taleb's address at the India Today Conclave last year, a far more detailed and nuanced discussion of the power of the unknown than you will get even on longer programs such as Charlie Rose's.


Part 3 is missing, but here is a link to YouTube's search showing parts 4 and 5.

http://www.youtube.com/results?search_query=taleb+india+today&aq=f

POSITION:  No positions in stocks mentioned.

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