The anti-Taleb reviews Antifragile

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Re: The anti-Taleb reviews Antifragile

Postby VictoriaF » Wed Dec 26, 2012 3:14 pm

backofbeyond wrote:Victoria...excellent review. I envy the fact that you got to actually meet him.

Also, I have to acknowledge that you were the one that turned me onto Taleb about 3 months ago with one of your comments on my query about Black Swan. I'm very grateful that you did.

I'm reading his latest book now. I find his way of thinking both refreshing and rather unique. He comes across as both funny and highly intelligent. He also 'eats his own cooking". All things that I admire in a person.

I also agree that most of his books don't deal specifically with investing, more like a way of looking at life. I really admire how he became physically fit to warn off others. I think his ideas about dieting are fascinating. And like another poster, I think Doctors will write him off their Xmas list for next year.

All in all, he is just about my favorite author now.


Thank you, backofbeyond!

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Re: The anti-Taleb reviews Antifragile

Postby Epsilon Delta » Wed Dec 26, 2012 6:32 pm

VictoriaF wrote:The communists were exploiting these individualities while trying to create a unified and expanding force. Thankfully they have not succeeded.

Victoria

The communist did not succeed because they did not exploit the individuality and self interest of the people under their control.

Communist view individuality as a weakness, capitalist view it as a strength. People need to read more Adam Smith and less Karl Marx.
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Re: The anti-Taleb reviews Antifragile

Postby VictoriaF » Wed Dec 26, 2012 6:53 pm

Epsilon Delta wrote:
VictoriaF wrote:The communists were exploiting these individualities while trying to create a unified and expanding force. Thankfully they have not succeeded.

Victoria

The communist did not succeed because they did not exploit the individuality and self interest of the people under their control.

Communist view individuality as a weakness, capitalist view it as a strength. People need to read more Adam Smith and less Karl Marx.


Smith is more relevant to this Forum than Marx. But the point of this sub-discussion is that dictators and instigators of dictators frequently clearly specify their aims, and everyone is ignoring them until it's too late. At least, that's my point.

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Re: The anti-Taleb reviews Antifragile

Postby baw703916 » Thu Dec 27, 2012 6:41 pm

Taleb was interviewed on MSNBC for a brief time this afternoon. Unfortunately I don't think the people interviewing him were that knowledgable, so he had to spend a lot of time explaining his terminology.
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Re: The anti-Taleb reviews Antifragile

Postby Fallible » Thu Dec 27, 2012 8:48 pm

baw703916 wrote:Taleb was interviewed on MSNBC for a brief time this afternoon. Unfortunately I don't think the people interviewing him were that knowledgable, so he had to spend a lot of time explaining his terminology.


Do you have a link to it? Couldn't find one. It pains me when interviewers aren't prepared (unless the appearance is last-minute scheduling), but I'd like to see it.
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Re: The anti-Taleb reviews Antifragile

Postby baw703916 » Thu Dec 27, 2012 9:02 pm

Here's a link to the video:

http://video.msnbc.msn.com/the-cycle/50306825#50306825

Hopefully this will work as a direct link.
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Re: The anti-Taleb reviews Antifragile

Postby Zephyr120 » Thu Dec 27, 2012 10:20 pm

I just finished slogging my way through Antifragile and, like jdb, I felt it was really tough going after 100 pages. I wanted more than the handful of real-world examples of anti-fragility. Taleb mentioned evolution, small forest fires, stress on bones and investing. I also would have liked a taxonomy of Antifragility, since evolution is a distinctly different process than small forest fires. Evolution kills off the variants that no longer fit, while small forest fires "clean house" of dangerous materials.

There are a few things I'll remember from this book: randomness in a casino is distinctly different than randomness in life or investing; looking at situations to see if they are fragile or anti-fragile; and others.

I think for Bogleheads, Antifragile does apply to the Trinity study and the challenge of using *any* historical data or MC techniques to plan SWR for retirement.

BTW, my notes for the book fit on a 3x5 card.
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Thu Dec 27, 2012 10:28 pm

Communism fails for the same reason that capitalism fails and most, if not all, "isms" fail. I defy any one philosophy or mind-set to absorb even a small fragment of the complexities of human nature programmed into our DNA. The tunnel vision of followers of Marx on the one hand and Rand (if one is to even dignify her with the title "philosopher") on the other is remarkably similar and ridiculously naive. "To every thing there is a season and a time for every purpose under heaven"- a time to be charitable and to think of the greater good, a time to be selfish and take care of the individual. Both of those is who each of us are, to varying extents in differing and unpredictable ways. This transcends any simple logic as it has evolved over billions of years.

The most successful contemporary societies seem to be those that have also evolved organically, into social democracies where the citizenry has largely internalized the delicate balance between social responsibility and individual freedoms. Some of the more enlightened western European countries come to mind . In the ideal, it would be nice to think that China will some day head in that direction (though I doubt it).

Valuethinker....thanks for the insightful history lesson. (smile)
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Re: The anti-Taleb reviews Antifragile

Postby Fallible » Fri Dec 28, 2012 12:32 am

baw703916 wrote:Here's a link to the video:

http://video.msnbc.msn.com/the-cycle/50306825#50306825

Hopefully this will work as a direct link.


Thanks for the link. I thought it was a good interview as far as it was meant to go, which was to have Taleb explain some of the main points of the book without much time for follow-up questions. Interesting three-on-one interview I haven't seen often and he handled it perfectly.
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Re: The anti-Taleb reviews Antifragile

Postby Levett » Fri Dec 28, 2012 8:08 am

Another addition (interview) to the Taleb bibliography.

http://www.guardian.co.uk/books/2012/nov/24/nassim-taleb-antifragile-finance-interview

The interview is more about Taleb's attitudes than his book.

Warning: there is a sprinkling of four letter words that some might find offensive, though not unfamiliar. :wink:

The responses to the interview suggest that Taleb is viewed as something of a provocateur, which I doubt he minds.

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Re: The anti-Taleb reviews Antifragile

Postby Valuethinker » Fri Dec 28, 2012 12:32 pm

Epsilon Delta wrote:
VictoriaF wrote:But the thing is that we don't take is seriously until it's too late. Think of Lenin's statement, "The Capitalists will sell us the rope with which we will hang them." The capitalists sold the rope and the communists hung them, literally.

Victoria

Viewing "The Capitalists" as a collective is a communist view of history. To a capitalist "the capitalists" are nothing but a group of competing individuals. Some of whom did quite well by selling the rope to hang their competitors.


The chill runs down my spine because, of course, lots of conservative Germans thought Hitler would not be anything as crazy in office as his speeches, and the Communists were a much greater threat (let alone an alliance with the Social Democrats, who the communists, under orders from Moscow, opposed even more bitterly than they did the Nationalist Socialists). Better than Nazis than a trade union! Her Hitler could be 'tamed'-- he was, after all, a laughable figure with crazy ideas about German destiny.

(Ironically Hitler *did* tame the more socialist extremist part of his party-- the 'Knight of the Long Knives' and the liquidation of Ernst Roehm and the SA (Sturm Abteilung-- ie party assault force) by Himmler and the SS (SchutzStaffel). The extremists who wanted to nationalize (non Jewish) wealth were liquidated from the Party. So you could say Hitler was 'more moderate' than his worst supporters).

I don't think too many people in Revolutionary Russia thought of the Reds as anything but the mortal enemy-- but the Mensheviks and other leftists deeply underestimated Lenin and the Bolsheviks 'Power is there on the street-- give me a handful of disciplined men, and I can overturn Russia'.

Given the White Terror (which ran alongside the Red Terror) I think most Russian capitalists kind of knew what they were in for if Lenin & Co won. Although I don't imagine many people imagined what Stalin would get up to once he had absolute power.

A Revolution always eats its own young. A quick study of the Terror during the French Revolution would have told you that.
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Re: The anti-Taleb reviews Antifragile

Postby Valuethinker » Fri Dec 28, 2012 12:42 pm

protagonist wrote:Communism fails for the same reason that capitalism fails and most, if not all, "isms" fail. I defy any one philosophy or mind-set to absorb even a small fragment of the complexities of human nature programmed into our DNA. The tunnel vision of followers of Marx on the one hand and Rand (if one is to even dignify her with the title "philosopher") on the other is remarkably similar and ridiculously naive. "To every thing there is a season and a time for every purpose under heaven"- a time to be charitable and to think of the greater good, a time to be selfish and take care of the individual. Both of those is who each of us are, to varying extents in differing and unpredictable ways. This transcends any simple logic as it has evolved over billions of years.

The most successful contemporary societies seem to be those that have also evolved organically, into social democracies where the citizenry has largely internalized the delicate balance between social responsibility and individual freedoms. Some of the more enlightened western European countries come to mind . In the ideal, it would be nice to think that China will some day head in that direction (though I doubt it).

Valuethinker....thanks for the insightful history lesson. (smile)


Think Popper. There's no such thing as a perfect political system-- only critiques of existing ones. The virtue of liberal society over all its critics is its ability to adapt and renew.

This seems *very* close to the lessons of evolution. Rapidly adaptable organisms and systems survive better. You can create the 'perfect' society (such as the Ancient Mayan civilization) but then an external shock such as climate change, war, invasion, migration etc. will disrupt everything. Whether you survive is about the flexibility of the underlying system-- the ability of social structures and economic ones to adapt quickly to a changed environment.

An example of a dynamic response is the fall of Medieval Civilization. In 1300 we are building Gothic Cathedrals, we have a universal language and culture (Latin and the Church) and religion, we have an Emperor (the Holy Roman Emperor). By 1346 we have evident signs of soil exhaustion, overpopulation (reminiscent of Ireland just before the Blight), 100 Years War raging in France etc. And the Black Death arrives in Genoa, the first pan European pandemic since the 500s, and 30-40% of Europe is dead within 2 years. The Turkish invasion sweeps in and Eastern Europe goes into isolation for 3 centuries...

Medieval Civilization collapses, many of those Cathedrals are not finished for another 150 years. It is the end of the universal European civilization.

It could have been different: had the Mongols kept going, nothing stood in their way before the Pyrenees and the English Channel, and both were surmountable. The finest armies in Europe were crushed, and no castle in Europe rivalled what was already defeated in Persia and China. But the Khan died, and the Mongols went home to vote on the next one. Europe was saved by a chance.

And yet, from the ruins of the Middle Ages, in Italy, rises the Renaissance-- again torn by war, political disunity and eventually religious revolution. It then spreads north and by the early 1500s has reached England and the Netherlands, and from there it will go on to the New Worlds...

And it brings us: Michelangelo's David and the roof of the Sistine Chapel, Leonardo's Mona Lisa, Erasmus, Machiavelli....
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Re: The anti-Taleb reviews Antifragile

Postby Fallible » Fri Dec 28, 2012 1:26 pm

Levett wrote:Another addition (interview) to the Taleb bibliography.

http://www.guardian.co.uk/books/2012/nov/24/nassim-taleb-antifragile-finance-interview

The interview is more about Taleb's attitudes than his book.

Warning: there is a sprinkling of four letter words that some might find offensive, though not unfamiliar. :wink:

The responses to the interview suggest that Taleb is viewed as something of a provocateur, which I doubt he minds.

Lev


One of the better interviews (and I think he liked his well-prepared interviewer), though I think his attitudes are reflected in the book, so it's sort of the same thing. I haven't yet read the book (89 of 129 on library wait list, sigh...).

I wonder if anyone has asked Taleb if there will be another book or if Antifragile wraps it up.
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Re: The anti-Taleb reviews Antifragile

Postby market timer » Fri Dec 28, 2012 2:07 pm

Valuethinker wrote:And yet, from the ruins of the Middle Ages, in Italy, rises the Renaissance-- again torn by war, political disunity and eventually religious revolution. It then spreads north and by the early 1500s has reached England and the Netherlands, and from there it will go on to the New Worlds...

And it brings us: Michelangelo's David and the roof of the Sistine Chapel, Leonardo's Mona Lisa, Erasmus, Machiavelli....

Taleb makes a very similar point in Antifragile, and alludes to the following scene from The Third Man at least twice: http://www.youtube.com/watch?v=dv1QDlWbS8g
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Fri Dec 28, 2012 10:20 pm

Valuethinker wrote: nothing stood in their way before the Pyrenees and the English Channel, and both were surmountable. The finest armies in Europe were crushed, and no castle in Europe rivalled what was already defeated in Persia and China. But the Khan died, and the Mongols went home to vote on the next one. Europe was saved by a chance.


My understanding was that Western Europe was spared by the Mongols largely because, in contrast to the vast wealth and far more advanced societies of Asia and the Middle East, the Khan viewed Europe as a wasteland, not particularly worth conquering, particularly given that their means of warfare was not suited to vast, thick spreads of forest. The cost/benefit ratio did not make sense. By the 14th century the empire was in an advanced state of collapse, with internecine warfare and, most critically, the plague.
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Re: The anti-Taleb reviews Antifragile

Postby Valuethinker » Sat Dec 29, 2012 12:10 pm

protagonist wrote:
Valuethinker wrote: nothing stood in their way before the Pyrenees and the English Channel, and both were surmountable. The finest armies in Europe were crushed, and no castle in Europe rivalled what was already defeated in Persia and China. But the Khan died, and the Mongols went home to vote on the next one. Europe was saved by a chance.


My understanding was that Western Europe was spared by the Mongols largely because, in contrast to the vast wealth and far more advanced societies of Asia and the Middle East, the Khan viewed Europe as a wasteland, not particularly worth conquering, particularly given that their means of warfare was not suited to vast, thick spreads of forest. The cost/benefit ratio did not make sense. By the 14th century the empire was in an advanced state of collapse, with internecine warfare and, most critically, the plague.



I don't think that was the case. The Mongols were not particularly discriminating, and Western Europe was certainly richer than Russia and Eastern Europe (which they had just overrun).

On the forests, they were there, but by the late Middle Ages they had been much cleared (indeed it was Royal Forests for hunting that was a major protection for woodlands, plus brutal rules about rights to collect wood etc.). Demographic pressures were everywhere, leading to land clearance. There were intensive agricultural practices like marling (the spreading of lime) which were widely practised in Norfolk (because of the wool and grain trades, eastern England-- Norfolk, Suffolk, Cambridgeshire- -was the richest part of the Kingdom, that's why you find those incredible churches and cathedrals in quite small places now) in the late 1200s which were not again practised until the 1600s. The reason was population pressure.

On the actual invasion

http://en.wikipedia.org/wiki/Mongol_inv ... ol_advance

Note 1241-- the Black Death did not arrive in Europe until 1346. Europe was in the full flower of the Middle Ages. I note the debate in the wiki between the 'traditional' view (Churchill) and more modern historians who cite obstacles to Mongol invasion. I don't know that this is one that can be resolved as I doubt the Mongols left their Cabinet minutes ;-).

What I do note is that the Mongols showed little signs of stopping in all their invasions of countries to that point. I don't see why they would have stopped then.

The physical barriers were the Rhine, and the Alps. The latter as dificult as any they might have faced, but there were ways around (ask Hannibal). The Rhine was just another big river- -they'd crossed worse in Asia.

I think a Mongol suzerainty at least to the east side of the Rhine, if not in fact Paris, was perfectly possible. Whether they would have gone on to conquer England and Spain and Italy, I don't know. The devastation they reaped on Russia has retarded its development and integration into western civilization to the present day.
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Re: The anti-Taleb reviews Antifragile

Postby VictoriaF » Sat Dec 29, 2012 12:22 pm

Valuethinker wrote:On the forests, they were there, but by the late Middle Ages they had been much cleared (indeed it was Royal Forests for hunting that was a major protection for woodlands, plus brutal rules about rights to collect wood etc.). Demographic pressures were everywhere, leading to land clearance. There were intensive agricultural practices like marling (the spreading of lime) which were widely practised in Norfolk (because of the wool and grain trades, eastern England-- Norfolk, Suffolk, Cambridgeshire- -was the richest part of the Kingdom, that's why you find those incredible churches and cathedrals in quite small places now) in the late 1200s which were not again practised until the 1600s. The reason was population pressure.

But the Mongols would not know that there was the light at the end of the tunnel unless they had made it through the Western Europe.

Valuethinker wrote:The devastation they reaped on Russia has retarded its development and integration into western civilization to the present day.

The fatalism, propensity for self-destruction, and cruelty characteristic of the Russian character also go back to the Mongolian invasion.

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Re: The anti-Taleb reviews Antifragile

Postby Valuethinker » Sat Dec 29, 2012 1:46 pm

VictoriaF wrote:
Valuethinker wrote:On the forests, they were there, but by the late Middle Ages they had been much cleared (indeed it was Royal Forests for hunting that was a major protection for woodlands, plus brutal rules about rights to collect wood etc.). Demographic pressures were everywhere, leading to land clearance. There were intensive agricultural practices like marling (the spreading of lime) which were widely practised in Norfolk (because of the wool and grain trades, eastern England-- Norfolk, Suffolk, Cambridgeshire- -was the richest part of the Kingdom, that's why you find those incredible churches and cathedrals in quite small places now) in the late 1200s which were not again practised until the 1600s. The reason was population pressure.

But the Mongols would not know that there was the light at the end of the tunnel unless they had made it through the Western Europe.



The Mongols were militarily the most advanced and sophisticated power before the Early Modern Era. So in fact they would have interviewed every merchant and traveller, and perhaps put their own people as spies disguised as merchants.

I suspect they had as good an idea, as anyone did in 13th century Hungary, of what was to be found in Germany and beyond. The Mongols just did not stop moving. They were defeated by the Himalayas and the jungles of SE Asia, but they tried to invade Japan (defeated by the original 'kamikaze' or 'Divine Wind' ie a storm, but they had slaughtered the samurai in their first encounter). And Westwards they went, to Leipzig in East Germany, and to Hungary.

AFAIK the only people who beat the Mongols in battle in their prime were the Mamluks of Egypt, who defeated the Mongols in Syria (the Crusader kingdoms were peripheral to that-- it was towards the end of the Crusader period).

The political and military organization of western Europe was far behind the powers of the Middle East at that time-- and the Mongols beat those. What the Western powers did have was heavy knights, and the Mongols had ways of neutralizing that (heavily armoured knights do not do well against horse archers, and the Mongols were native born in that-- and so the Crusaders were dependent on unreliable allies to provide horse archers).

You'd get to the question of whether western knights, backed by English longbowmen, could beat the Mongols. Which is the subject of an entire series of fantasy novels

http://www.fantasticfiction.co.uk/c/glen-cook/

The Dread Empire series tells the tale of what happens when Vikings and longbowmen (the heroes, kind of) meet first the rise of Islam (The Fire in His Hands, With Mercy Towards None) and then the Chinese Empire (the Dread Empire). All very Glen Cook-- brilliantly rendered military conflict, internecine politics etc.

My answer (being an English patriot ;-)) would be, yes, the English longbowmen and the English knight (maybe allied with the French) could beat the Mongols on a European battlefield. But the campaign would have gone to the Mongols, with superior discipline, mobility, strategy. And more likely the English king would have allied with the Mongols to overcome the French king ;-). Such was political unity in medieval Europe ;-).

The Mongols in Western Europe rather remind me of the colonial forces, especially the Spanish, in the New World. A few hundred Spaniards overthrew whole empires. That's what an advantage in military technology and organization does for you. Of course the Spanish also brought smallpox and other lethal diseases-- but the Mongols brought the Black Death.

Valuethinker wrote:The devastation they reaped on Russia has retarded its development and integration into western civilization to the present day.

The fatalism, propensity for self-destruction, and cruelty characteristic of the Russian character also go back to the Mongolian invasion.

Victoria


Thank you. That's a good way to put it- -adding nuance and insight. 'Europe' really ends at the border between Poland and Belarus, alas. The Mongol and then the Turkish invasions fatally divided Europe to this day. They also talk about the 'Orthodox wall' between the Catholic countries of the East (Hungary, Poland, Croatia) and the Orthodox ones (Serbia, Bulgaria, Greece).
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Sat Dec 29, 2012 10:34 pm

Much of my information regarding my comment above about the Mongols and Europe comes from Jack Weatherford's "Genghis Khan and the Making of the Modern World". Weatherford does tend to exaggerate the achievements of the Mongols to some extent, though the book is a fascinating read. I think you are correct in partially attributing the cessation of the Western European offensive by the Khan to the death of Subutai. In the latter part of the 13th century the empire was already falling apart, and the Mongols were much less comfortable with Western European geography, which would have required them tying up many more horses than Subutai's (spelling??) successor (I forget his name) thought worthwhile if they continued to move westward, when there were, in their eyes, more valuable uses of manpower elsewhere at the time. Wetern Europe was still a bit of a backwater compared with the great civilizations of the East. There was considerable infighting between the khanates which was absorbing a lot of their energy. Essentially their entire fleet (along with many men) was decimated by storms in their failed invasion of Japan in the last half of the 13th century. Europe was not their primary concern. According to Weatherford, the plague in the mid-14th century was the final death blow of the great empire....the Mongols had little resistance and the result was devastating to them.
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Re: The anti-Taleb reviews Antifragile

Postby Valuethinker » Sun Dec 30, 2012 4:01 am

protagonist wrote:Much of my information regarding my comment above about the Mongols and Europe comes from Jack Weatherford's "Genghis Khan and the Making of the Modern World". Weatherford does tend to exaggerate the achievements of the Mongols to some extent, though the book is a fascinating read. I think you are correct in partially attributing the cessation of the Western European offensive by the Khan to the death of Subutai. In the latter part of the 13th century the empire was already falling apart, and the Mongols were much less comfortable with Western European geography, which would have required them tying up many more horses than Subutai's (spelling??) successor (I forget his name) thought worthwhile if they continued to move westward, when there were, in their eyes, more valuable uses of manpower elsewhere at the time. Wetern Europe was still a bit of a backwater compared with the great civilizations of the East. There was considerable infighting between the khanates which was absorbing a lot of their energy. Essentially their entire fleet (along with many men) was decimated by storms in their failed invasion of Japan in the last half of the 13th century. Europe was not their primary concern. According to Weatherford, the plague in the mid-14th century was the final death blow of the great empire....the Mongols had little resistance and the result was devastating to them.


Thank you.

It is hard to overestimate the military successes of the Mongols.

I made the analogy with the Spanish in the New World, and I think it's apt. A technological advantage, coupled with military-organizational superiority, was enough to allow them to beat *every* opponent they came across (except the Mamluks). AFAIK they never lost a battle, never lost a war, never failed (eventually) to conquer a territory (Afghanistan may have been an exception, but then the British Empire found that ;-)). Of course the ferocity and ruthlessness with which they dealt with opposition, and the appetite for mass slaughter, eventually meant their enemies were too traumatized to fight back.

But they were constantly innovative: spreading plague on besieged cities by firing diseases animals (and prisoners) over the walls with catapults. Soaking blocks of wood in water until they were so heavy they could smash walls. Using captured miners to undermine the walls, etc. etc. Using gunpowder for the first time eg to distract horse mounted cavalry.

The army was also known for its tight discipline and rigorous promotion on merit. For its operational and strategic mobility and speed. Again, hundreds of years ahead of its feudal opponents.

They had the military capabilities of a European army of the 1600s, and they had it in the 1200s. Nobody before the Spanish Army of the 1500s would have been able to put a cloth on them.

Whether they would have done Europe is unknowable. But I think they could have done it without question-- the most powerful armies in Europe had been defeated at their feet, and the terrain was not beyond what they had conquered in other places.

The Black Death finished off quite a few Empires (the Roman/ Byzantine Empire of late antiquity in particular, and thus in part allowing the rise of Islam) so it's not surprising if it caught the Mongols (sp?). Their very mobility became the vector by which the disease would spread.

Again note disease and history. We brought smallpox to the New World, and the native populations were absolutely devastated. The settled farming communities of the midwest were gone by the time the white settlers reached it. George Vancouver, in the Pacific NW, reported finding whole villages just wiped out.
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Sun Dec 30, 2012 1:59 pm

Am I correct in assuming that Marxism, the Soviet Union, and Castro are fair game in these forums, but Reaganomics and Greenspan are not? I'm no huge fan of any of the above. So if my observation (from personal experience) is correct, please explain the logic, so that I know who I can safely diss without risk of having my posts or threads deleted. I find this forum stimulating, and would like to stay welcome (smile).
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Sun Dec 30, 2012 2:57 pm

Among other things, the Mongols practiced freedom of religous expression, outlawed torture, supposedly had a system that allowed women to rise to positions of prominence, operated under (in theory at least) a meritocracy, did not impose tax upon physicians and I believe some others working for the common good, and spared intellectuals, academics, architects, engineers, etc. from conquered lands, bringing them back to Karakorum to learn from them. Though they certainly used terror and mass executions as routine strategy, they realized that ruling over cooperative subjects made empire much easier, and spared those lands which willingly surrendered. Such tolerance, unknown in many of the conquered lands in the middle ages, had to contribute to their success (much as religious tolerance contributed to the economic success of places such as Holland and Venice in their heyday).

There was an account in Weatherford's book of how one of the Khans (Kublai??) held a debate in Karakorum where he invited religious leaders of major sects around the known world to a debate to decide which was correct, in formal debating style with appointed judges. As I recall the account, the transportation network was so far superior in the Mongol empire to that of Western Europe that it took the Catholic representative longer to reach the empire's western border (around Hungary?) from his starting point (I forget whether that was France, Germany,???) than it did to make the rest of the journey to Karakorum. Once he arrived he did little in the debate more than proselytizing. Unfortunately, Weatherford did not report as to who actually won the debate.
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Re: The anti-Taleb reviews Antifragile

Postby market timer » Sat Jan 26, 2013 1:44 pm

Hour-long Taleb interview on Antifragile: http://www.zerohedge.com/news/2013-01-2 ... ellectuals
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Re: The anti-Taleb reviews Antifragile

Postby wbond » Sat Jan 26, 2013 2:39 pm

Valuethinker,

If you have not read it, I think you would enjoy a book called "War in human civilization" by Azar Gat.

Without writing a long review, suffice it to say that it is an academic and long but clearly written and tightly reasoned account. It is an ambitious and broad overview of violent human conflict that the author divides into three large sections: 1. Hunter/gatherer. 2. Agrarian/Pastoral. 3. Modern.

Cheers, wbond
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Re: The anti-Taleb reviews Antifragile

Postby magellan » Sat Jan 26, 2013 4:35 pm

market timer wrote:Hour-long Taleb interview on Antifragile: http://www.zerohedge.com/news/2013-01-2 ... ellectuals

I caught this interview last week and thought it was pretty good. Below are some highlights for those not interested in watching the whole thing:

2:00 Economy functions more like a cat than a washing machine
6:07 Debt, especially leverage fragilizes an economic system
10:45 The Tony Blair problem
13:40 If you don't let things fail, a system will tend to concentrate mistakes and become more fragile
18:09 The Island Effect
26:40 The Stoic philosopher Seneca and anti-fragility
29:30 Think like a Roman, not an Arab or a Greek
39:22 Influences - Popper, Nietzsche, Al Ghazali
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Re: The anti-Taleb reviews Antifragile

Postby VictoriaF » Mon Jan 28, 2013 8:58 am

magellan wrote:
market timer wrote:Hour-long Taleb interview on Antifragile: http://www.zerohedge.com/news/2013-01-2 ... ellectuals

I caught this interview last week and thought it was pretty good. Below are some highlights for those not interested in watching the whole thing:

2:00 Economy functions more like a cat than a washing machine
6:07 Debt, especially leverage fragilizes an economic system
10:45 The Tony Blair problem
13:40 If you don't let things fail, a system will tend to concentrate mistakes and become more fragile
18:09 The Island Effect
26:40 The Stoic philosopher Seneca and anti-fragility
29:30 Think like a Roman, not an Arab or a Greek
39:22 Influences - Popper, Nietzsche, Al Ghazali


I picked up Taleb citing Nietzsche's All truly great thoughts are conceived by walking, which works for me quite well.

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Re: The anti-Taleb reviews Antifragile

Postby EyeYield » Mon Jan 28, 2013 3:57 pm

"The stock market is a giant distraction from the business of investing." - Jack Bogle
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Re: The anti-Taleb reviews Antifragile

Postby Kulak » Mon Jan 28, 2013 4:06 pm

protagonist wrote:I have worked in and out of academia. I have known so many people who have dedicated their lives to reading and analyzing....Plato, Aristotle, Aquinus, Kant, Mill, Rousseau, Nietzsche, Marx, Sartre, Freud, yadayada. And others (probably the majority) who may have heard of the above and what they believe but never opened any of their books. If you ask me which group has a better grasp on life, the universe and everything, including how stuff works, and how to live and be happy and satisfied, I would be hard pressed to choose. You might say that the yield on investment in words is low. I learn as much from listening to surfers, musicians and carpenters as I do listening to philosophers, and a lot of times it's more fun.

I have a few theories on why this is, but never mind that. What, in your experience, is correlated with having a firm grasp on life and so forth? What are the high-yield investments?
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Tue Mar 05, 2013 12:33 pm

Kulak wrote:
protagonist wrote:I have worked in and out of academia. I have known so many people who have dedicated their lives to reading and analyzing....Plato, Aristotle, Aquinus, Kant, Mill, Rousseau, Nietzsche, Marx, Sartre, Freud, yadayada. And others (probably the majority) who may have heard of the above and what they believe but never opened any of their books. If you ask me which group has a better grasp on life, the universe and everything, including how stuff works, and how to live and be happy and satisfied, I would be hard pressed to choose. You might say that the yield on investment in words is low. I learn as much from listening to surfers, musicians and carpenters as I do listening to philosophers, and a lot of times it's more fun.

I have a few theories on why this is, but never mind that. What, in your experience, is correlated with having a firm grasp on life and so forth? What are the high-yield investments?


I just noticed this...sorry for not responding sooner. I'd be hard-pressed to answer without a lot of thought, and I am not sure I am qualified to answer. This may seem like a cop-out, but I think DNA probably plays a major part, maybe...probably.... THE major part. Some people just "get it". Unfortunately, that idea would not sell books or compel people to lectures, unless they are evolutionary biologists. How about you? You have theories....
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Re: The anti-Taleb reviews Antifragile

Postby 325e » Tue Apr 30, 2013 12:06 pm

Reviving a dead one!

Halfway through Antifragile and am enjoying it very much. Yes, he is out there a bit, but it is mind stretching.

A few takeaways:
Anti-fragile systems have a feedback loop. That is why a rock doesn't get stronger, but plants or people can. Set up your systems to have a feedback loop, and they will improve (ie budget)
Applying some stress to an antifragile system produces data. Then data is then inputted into the feedback loop, processed, and used to improve the system. That is why some stress in beneficial.
Too much stress (he uses the example of falling from 35 floors) will still destroy even an anti-fragile system. These systems improve with "some stress" not overly stressed.
Systems that have optionality (choices) and limited downside with unlimited upside potential have opportunistic turkey events. Basically, things happen for the way up positive that you could have never foreseen.

My takeaway relating to finances is that he is applying his own advice too extremely. A boglehead portfolio is antifragile in that small shocks help to acquire stocks at lower prices. Intelligent Investor Graham is anti-fragile because he actually uses the dips and undervalued companies to his advantage for reduced risk and additional return. Going 90% cash and some in high flyers is too extreme. I could see paying off your mortgage and starting a business as a better example of his "barbell strategy" of low risk and high risk together, or, reducing expenses to lower risk and investing in stocks/bonds for higher risk of the barbell.

Overall, interesting concepts for the reader to figure out how to apply themselves.
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Tue Apr 30, 2013 12:22 pm

325e wrote:
Systems that have optionality (choices) and limited downside with unlimited upside potential have opportunistic turkey events. Basically, things happen for the way up positive that you could have never foreseen.


So we should all go to the track once a week and put $10, or $100/week (or the upper limit of how much we can comfortably lose) on the darkest horse?

Is the opposite also true? (which I think is many people's argument against investing in bonds in today's market).

325e wrote: Going 90% cash and some in high flyers is too extreme.


Is this what Taleb recommends? Is this what Taleb does with his own portfolio? I actually thought of that kind of strategy back in the 90s but never tried it out. There must be some sort of statistical evidence as to how such portfolios perform, because it seems like a pretty intuitive idea that many have likely entertained. If not, it would certainly make for a profitable investment newsletter.
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Re: The anti-Taleb reviews Antifragile

Postby 325e » Tue Apr 30, 2013 12:48 pm

protagonist wrote:
325e wrote:
Systems that have optionality (choices) and limited downside with unlimited upside potential have opportunistic turkey events. Basically, things happen for the way up positive that you could have never foreseen.


So we should all go to the track once a week and put $10, or $100/week (or the upper limit of how much we can comfortably lose) on the darkest horse?

Is the opposite also true? (which I think is many people's argument against investing in bonds in today's market).

325e wrote: Going 90% cash and some in high flyers is too extreme.


Is this what Taleb recommends? Is this what Taleb does with his own portfolio? I actually thought of that kind of strategy back in the 90s but never tried it out. There must be some sort of statistical evidence as to how such portfolios perform, because it seems like a pretty intuitive idea that many have likely entertained. If not, it would certainly make for a profitable investment newsletter.


Apparently, Taleb is 90% cash and 10% high flyers. My belief is that the overall idea of the "barbell" risk strategy is great, in that instead of trying to take the middle road, build a low risk foundation and seize opportunities that have potential for big returns with limited downside (but I just don't do this with stocks themselves, more of a holistic viewpoint in life).

Edit: I think it is more like a good opportunity has - limited downside risk, high upside rewards, and overall, the odds of success are in your favor. This seems obvious. But for instance, a ticket at the track has limited downside, but also limited upside, and overall you are pretty much guaranteed to lose over a long time since the house takes a cut. So that would not be a good one.

My thought was more like starting a well thought out business. I believe most people can't do this because they don't have the means to cover even the low end of the downside risk. So, living paycheck to paycheck, you can't take a swing at something that has even low risk and big potential returns.

It is not trying to always "swing for the fences" because the odds are better that you'll be able to hit a single.

I would think more holistically and put my investment strategy closer to the low end risk (reasonable emergency fund, then reasonable stocks and bonds allocation like standard boglehead), then take more calculated risks that could pay off with your career instead of the lowest possible risk position. That is where I get confused on how he deduces 90% cash. The odds aren't necessarily in your favor just to take high risk.

One example since Charlie Munger talks a lot about seizing big opportunities. When he met Buffett, he was a lawyer, and he could have stayed there. But he realized he met a smart guy, was abnormally intelligent himself (odds in his favor), and went out on his own. The downside was a certain amount of money, but limited because he could always go back to law. The upside was huge. Again, not taking risk for risks sake but understanding when the odds are in favor and going for it. Investing for most people should probably be the lower end of the barbell with boring stock/bond allocation and looking for favorable risks elsewhere.
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Tue Apr 30, 2013 2:21 pm

325e wrote: a ticket at the track has limited downside, but also limited upside, and overall you are pretty much guaranteed to lose over a long time since the house takes a cut. So that would not be a good one.


Yes,I see the distinction.

I have always thought that, for a reasonably intelligent and reasonably creative person with a lot of drive and patience and a lot of "risk-tolerance", eg little fear of losing, it would be easy to become a millionaire- and education has little to do with it. You just keep coming up with crazy ideas and following them through. Most of the time you will lose and go bust. But by sheer probability, if you keep bouncing back and trying out the next crazy idea, at some point you will come up with the next "pet rock" or "sticky note" or whatever, and your idea will go viral.

I don't know if this is true or not. But I keep giving crazy "get-rich-quick" ideas to my friends, who think they are cool but never pursue them. Some of them were later done by others and were highly lucrative. I don't think I am necessarily that much more creative than many others out there. I just think that, ultimately, the odds would be in your favor.
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Taleb's current portfolio

Postby bobcat2 » Tue Apr 30, 2013 2:24 pm

Taleb's current portfolio

Is this what Taleb recommends? Is this what Taleb does with his own portfolio?

Apparently, Taleb is 90% cash and 10% high flyers.
Taleb appears to change his portfolio a lot over time. Perhaps at some time in the past he was "90% cash and 10% high flyers", but according to Taleb himself his portfolio was nothing like that in December of last year.

Here is what Taleb said about his current portfolio as of December 2012 in an interview with Motley Fool on 12/15/2012.

Selling most of the gold that he bought during the 2008-2009 financial crisis
Owns real estate for rentals (cash flow)
Owns some stocks
Owns some relatively complicated hedges against rising LT interest rates
Owns land

Taleb says he is mainly trying to hedge inflation, but apparently doesn't trust government bonds including TIPS and I-bonds.

Link to interview -
http://www.fool.com/investing/general/2012/12/15/what-nassim-taleb-is-investing-in.aspx

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Re: Taleb's current portfolio

Postby Clive » Wed May 01, 2013 10:42 am

bobcat2 wrote:Here is what Taleb said about his current portfolio as of December 2012 in an interview with Motley Fool on 12/15/2012.

Selling most of the gold that he bought during the 2008-2009 financial crisis
Owns real estate for rentals (cash flow)
Owns some stocks
Owns some relatively complicated hedges against rising LT interest rates
Owns land

Taleb says he is mainly trying to hedge inflation, but apparently doesn't trust government bonds including TIPS and I-bonds.

Taleb looks to have turned Talmud (third each in business, land, reserves). Perhaps upon the realisation that there is no one single safe investment. Even TIPS can have the real value eroded by the likes of taxation on the inflationary uplift element.

protagonist wrote:
325e wrote: Going 90% cash and some in high flyers is too extreme.

Is this what Taleb recommends? Is this what Taleb does with his own portfolio? I actually thought of that kind of strategy back in the 90s but never tried it out. There must be some sort of statistical evidence as to how such portfolios perform, because it seems like a pretty intuitive idea that many have likely entertained.

It distils down to leverage. Some investors buy stocks with debt/equity of 2 - companies that have borrowed twice as much again as their equity value - they plough those funds into the business and if the earnings exceed the cost of borrowing that uplifts earnings. That's little different to you borrowing twice as much again as you might have invested in a stock with no debt in order to buy thrice as much of the stock.

There are various forms of leverage. Some investors hold some foreign currencies and stocks separately (separate stock and currency risk/rewards). Others might buy stocks denominated in foreign currencies and have stock + currency risk/rewards wrapped up into one. Some investors might hold stocks and commodities separately, others might hold oil stocks and have stock + commodity risk/rewards wrapped up into one.

Visit etfreplay.com, backtesting/ETF portfolio option - and test out how 33% in UDOW (3x Dow), 67% TIPS compares to 100% SPY over year long periods. Generally you'll see similar overall portfolio value motions. Loading 10% into something like UDOW, 90% TIPS might be considered as being similar to having loaded 30% Dow, 70% TIPS. I believe Zvi Bodie and Taleb however utilise more extreme leverage such as via LEAPS (longer dated Traded Options) and/or might expand the highly leveraged side up to perhaps 15% weighting (maybe equivalent to 45% Dow, 55% TIPS or more).

Take a bunch of assets individually and some will be more volatile than others. The volatility might be used as an indicator of how much each asset is leveraged relative to others. Level that volatility and broadly each asset provides similar reward. For example using Simba's backtest spreadsheet yearly data (1972 - 2012) and calculating

( Asset CAGR x T-Bill Stdev / Asset Stdev ) + ( T-Bill CAGR x ( 1 - ( T-Bill Stdev / Asset Stdev ) ) )

produces results of :

Image

Whilst there's some variation around the 6.3% average (0.38 standard deviation) - that might be just down to particular circumstances/events over that particular time period.
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Re: Taleb's current portfolio

Postby protagonist » Wed May 01, 2013 11:46 am

Clive wrote:
bobcat2 wrote:Here is what Taleb said about his current portfolio as of December 2012 in an interview with Motley Fool on 12/15/2012.

Selling most of the gold that he bought during the 2008-2009 financial crisis
Owns real estate for rentals (cash flow)
Owns some stocks
Owns some relatively complicated hedges against rising LT interest rates
Owns land

Taleb says he is mainly trying to hedge inflation, but apparently doesn't trust government bonds including TIPS and I-bonds.

Taleb looks to have turned Talmud (third each in business, land, reserves). Perhaps upon the realisation that there is no one single safe investment. Even TIPS can have the real value eroded by the likes of taxation on the inflationary uplift element.

protagonist wrote:
325e wrote: Going 90% cash and some in high flyers is too extreme.

Is this what Taleb recommends? Is this what Taleb does with his own portfolio? I actually thought of that kind of strategy back in the 90s but never tried it out. There must be some sort of statistical evidence as to how such portfolios perform, because it seems like a pretty intuitive idea that many have likely entertained.

It distils down to leverage.


That was a very interesting analysis, Clive. But I wasn't thinking of leverage, which carries with it increased risk. I was thinking of something simpler as described above (which is what I thought 325e was saying was Taleb's suggestion)....90% ultrasafe, and 10% in some potential high-flyer...say some wild new startup IPO that you believe in based on a great idea. Not investing more than you own.

The problem, as I see it, with that plan....if the IPO goes bust (good chance), now you are left with 90% (plus interest) of what you had. What do you do next? Repeat the process? Next round of failure you are left with 81%, and only 8.1% of your original nest-egg to invest in your next crazy idea.

So if you follow this strategy religiously, the downside is not minimal...it is HUGE (arguably much bigger than the "infinite" upside)...you have a finite number of trials following which, if your "crazy idea" with your 10% play money does NOT succeed (and following each failure the success has to be greater since you have less to invest), you are broke. The impact on one's life of losing virtually 100% of everything is much greater than the impact of winning 1000%, or 10,000%...and you have a FINITE number of chances to win, though the potential upside may be infinite.

Does that make sense?
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Re: The anti-Taleb reviews Antifragile

Postby Clive » Wed May 01, 2013 12:37 pm

say some wild new startup IPO that you believe in based on a great idea

That's just an even more extreme version - and accordingly you'd invest less in the riskier holding.

If each year 98% was invested safely and earned 2% real, 2% were invested in a IPO, then you end each year at 0% real overall assuming the IPO is a failure.

One good case out of 20 years, that perhaps can be sold for 25 times what you paid for it in inflation adjusted terms and overall you're portfolio averages 2% real - much the same as had you not bothered and invested all 100% in safe earning 2% real. More than one success (or if the success can be sold for >25 times) and your gains are higher...etc. No successes and you earn 0% real (2% less than had you invested in a safe 2% real investment).
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Re: Taleb's current portfolio

Postby Clive » Wed May 01, 2013 12:46 pm

protagonist wrote:But I wasn't thinking of leverage, which carries with it increased risk....Not investing more than you own.

Many investors utilise leverage without even realising it. Any stock that has debt is a leveraged play - and many stocks have debt (Gearing). Other stocks might have cash, which is a form of de-leverage.
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Re: Taleb's current portfolio

Postby VictoriaF » Fri May 03, 2013 9:11 am

protagonist wrote:
Clive wrote:
bobcat2 wrote:Here is what Taleb said about his current portfolio as of December 2012 in an interview with Motley Fool on 12/15/2012.

Selling most of the gold that he bought during the 2008-2009 financial crisis
Owns real estate for rentals (cash flow)
Owns some stocks
Owns some relatively complicated hedges against rising LT interest rates
Owns land

Taleb says he is mainly trying to hedge inflation, but apparently doesn't trust government bonds including TIPS and I-bonds.

Taleb looks to have turned Talmud (third each in business, land, reserves). Perhaps upon the realisation that there is no one single safe investment. Even TIPS can have the real value eroded by the likes of taxation on the inflationary uplift element.

protagonist wrote:
325e wrote: Going 90% cash and some in high flyers is too extreme.

Is this what Taleb recommends? Is this what Taleb does with his own portfolio? I actually thought of that kind of strategy back in the 90s but never tried it out. There must be some sort of statistical evidence as to how such portfolios perform, because it seems like a pretty intuitive idea that many have likely entertained.

It distils down to leverage.


That was a very interesting analysis, Clive. But I wasn't thinking of leverage, which carries with it increased risk. I was thinking of something simpler as described above (which is what I thought 325e was saying was Taleb's suggestion)....90% ultrasafe, and 10% in some potential high-flyer...say some wild new startup IPO that you believe in based on a great idea. Not investing more than you own.

The problem, as I see it, with that plan....if the IPO goes bust (good chance), now you are left with 90% (plus interest) of what you had. What do you do next? Repeat the process? Next round of failure you are left with 81%, and only 8.1% of your original nest-egg to invest in your next crazy idea.

So if you follow this strategy religiously, the downside is not minimal...it is HUGE (arguably much bigger than the "infinite" upside)...you have a finite number of trials following which, if your "crazy idea" with your 10% play money does NOT succeed (and following each failure the success has to be greater since you have less to invest), you are broke. The impact on one's life of losing virtually 100% of everything is much greater than the impact of winning 1000%, or 10,000%...and you have a FINITE number of chances to win, though the potential upside may be infinite.

Does that make sense?


I was pondering this issue too. My short answer is:
The "90% safe/10% opportunistic portfolio" should not be implemented as the "Asset-Allocation PLUS Re-balancing" model. If it were, it could easily turn into a compounded 10% loss.

The details of my logic are as follows:
It is not prudent to allocate constant 10% of one's assets to highly speculative investments. The "Asset-Allocation PLUS Re-balancing" model of the index-fund investing does not work here. Given high risk, 10% loss compounds very quickly; 5% loss compounds quickly, too.

Implementation of Taleb's bar-bell investing could be as follows:
1. Based on The Black Swan--and not on the recent Taleb's allocation provided by bobcat2 above--Taleb does not recommend putting opportunistic funds into individual companies. In the book he contrasts the high failure rate of entrepreneurs with the high success potential of Venture Capitalists (VC). In other words, someone investing in one or several promising companies should expect a high probability of losing money; someone investing in VCs is better diversified for catching positive Black Swans.

2. A model of separating "safe" funds and "risky" funds could be similar to Bill Bernstein's model of separation between the Liability Matching Portfolio (LMP) and Risky Portfolio (RP). Bernstein's LMP provides the basis assets to meet one's basic living standards; the RP is a nice extra with which one can take risks. Bill suggests never letting the overall assets dropping below the LMP level; but when the markets do well, the excess over the LMP can be added to the RP part.

Taleb's 90/10 portfolio can be treated similarly. First, the risky investments spread across several, already diversified VCs (as I noted in #1 above), are less likely to go from 10% to 0% than investing in individual enterprises. Second, the "positive Black Swan" part of the portfolio should be supplemented not when its proportion falls below 10% (i.e., not based on the Asset Allocation model) but when the "safe" part of the portfolio grows above some level, similarly to Bernstein's LMP.

Taking it one step further: First, divide the funds into LMP and RP. Then take 10% of the RP as the starting point for Taleb's bar-bell. Over time, the Positive Black Swan portion of the RP (PBS-RP) would fluctuate above and below 10% of the RP. It will be mostly below and occasionally (hopefully) spike up.

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Re: Taleb's current portfolio

Postby Kulak » Fri May 03, 2013 10:56 am

VictoriaF wrote:Taleb does not recommend putting opportunistic funds into individual companies. In the book he contrasts the high failure rate of entrepreneurs with the high success potential of Venture Capitalists (VC). In other words, someone investing in one or several promising companies is likely to lose; someone investing in VCs is better diversified for catching positive Black Swans.

Does this "opportunism" describe an ex ante alpha-seeking strategy (expected to outperform because e.g. it exploits systemic risk or behavioral factors), or just a way to scratch one's itch to gamble? If it's gambling, then diversification defeats the purpose, doesn't it? The more diversified those VCs and/or the greater number of VCs you spread your money across, the better your odds of catching a black swan, but the lower the payoff. Taken to its logical conclusion, you'd end up owning something like a small-growth index fund. Or does Taleb believe that VCs in aggregate outperform the market?
Depriving ourselves to boost our 40-year success probability much beyond 80% is a fool’s errand, since all you are doing is increasing the probability of failure for [non-financial] reasons. --wbern
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Re: Taleb's current portfolio

Postby VictoriaF » Fri May 03, 2013 11:19 am

Kulak wrote:
VictoriaF wrote:Taleb does not recommend putting opportunistic funds into individual companies. In the book he contrasts the high failure rate of entrepreneurs with the high success potential of Venture Capitalists (VC). In other words, someone investing in one or several promising companies is likely to lose; someone investing in VCs is better diversified for catching positive Black Swans.

Does this "opportunism" describe an ex ante alpha-seeking strategy (expected to outperform because e.g. it exploits systemic risk or behavioral factors), or just a way to scratch one's itch to gamble? If it's gambling, then diversification defeats the purpose, doesn't it? The more diversified those VCs and/or the greater number of VCs you spread your money across, the better your odds of catching a black swan, but the lower the payoff. Taken to its logical conclusion, you'd end up owning something like a small-growth index fund. Or does Taleb believe that VCs in aggregate outperform the market?


I don't have the book in front of me at the moment. As I recall, he was not alluding to the behavioral factors when he was describing the 90/10 bar-bell. His point was that positive Black Swans do happen and one may try to catch them via VC investing. Considering that Black Swans are rare and unpredictable--negative and positive Black Swans alike--he did not provide numerical values of the probabilities.

You are correct about the inverse relationship between diversification and the potential upside. In the book, Taleb did not offer a rule for choosing between the two. All these concepts are general and probabilistic and are a matter of luck (and lucklessness); I think providing any precision is quite impossible.

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Re: Taleb's current portfolio

Postby protagonist » Fri May 03, 2013 7:58 pm

VictoriaF wrote:I
Implementation of Taleb's bar-bell investing could be as follows:
1. Based on The Black Swan--and not on the recent Taleb's allocation provided by bobcat2 above--Taleb does not recommend putting opportunistic funds into individual companies. In the book he contrasts the high failure rate of entrepreneurs with the high success potential of Venture Capitalists (VC). In other words, someone investing in one or several promising companies should expect a high probability of losing money; someone investing in VCs is better diversified for catching positive Black Swans.
a


Interesting take on it, Victoria...makes sense. I can't comment since I know next to nothing about investing in venture capital. Isn't that something pretty much limited to the already wealthy? Don't you need a lot of capital to start with, and if it is only 10% of your portfolio, wouldn't you have to already be quite successful to play?
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Re: The anti-Taleb reviews Antifragile

Postby Clive » Sat May 04, 2013 6:42 am

Owns real estate for rentals (cash flow)
Owns some stocks
Owns some relatively complicated hedges against rising LT interest rates
Owns land

Say you allocate 20% to stocks, 10% to gold, 70% TIPS, but opt to hold the stock and gold exposure via LETF's, perhaps holding 6.6% in 3x small cap value, 3.3% in 3x gold. A third in a 3x LETF, two-thirds in TIPS tends to replicate 100% in the 1x (underlying ETF) provided that the combination is periodically rebalanced back to target weightings - perhaps once each year or so.

Since 1972 that 20% spicier stocks (such as small cap value), 10% gold allocation 70% TIPS would have provided quite similar risk/reward to a 4x25 Permanent Portfolio (which can drop weightings as low as 15% stocks (or gold), or expand up to 35% stocks (or gold) before looking to be rebalanced back to 25% equal weightings).

For 10% total exposure to more speculative holdings (6.6% in 3x small cap, 3.3% in 3x gold), a similar risk/reward can be achieved to a less leveraged allocation (Permanent Portfolio).

With 10% in speculative, 90% safe (TIPS), you might be content to just hold such a high weighting in TIPS, or you might foresee possible risks with TIPS - perhaps taxation of inflationary uplift element or other risks, and rather than being overweight in a single risk (TIPS), you might opt to diversify that 'safe' allocation more widely, perhaps into some land, hedged conventional treasury bonds ...etc. It looks like Taleb has become less convinced of the safety of a high allocation to TIPS and has diversified that risk accordingly

Taleb says he is mainly trying to hedge inflation, but apparently doesn't trust government bonds including TIPS and I-bonds.

If, as seems reasonable - at least to me, you can achieve similar mid to longer term rewards to a 4x25 Permanent Portfolio by holding something like 20% small cap value, 10% gold, 70% TIPS, but via 6.66% 3x stock and 3.33% 3x gold, 90% TIPS, then if that 90% 'safe' is invested in alternatives to TIPS that yield better results then that would add value overall. Many TIPS at recent levels barely pace inflation and may even be lagging inflation. A piece of land might generally also rise with inflation and if the land was worked (rented or crops grown etc.) might provide a real gain on top of inflation pacing.

I personally take Taleb's Anti-Fragilty to be an indication of how its better to have assets that have inverse correlations rather than just no/low correlations. Rather than cash remaining level, stocks declining and a blend of the two declining less, if one asset zigs as another zags then the combination might counter-balance better, maybe resulting in no loss, or even a gain.

In short - a small allocation to spicier investments diversified in a manner that looks to have inverse correlations (anti-fragility), a large weighting to safe - with a more recent stance of also diversifying those safe holdings more widely rather than relying upon TIPS alone.
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Re: The anti-Taleb reviews Antifragile

Postby bobcat2 » Sat May 04, 2013 1:12 pm

Taleb portfolio 1.
Based on the interview, [Taleb] is very risk adverse and said he doesn't really understand the stock market. I don't know enough about him to know if he is simply being modest.

He said that diversification used to work before people knew about diversification, but it doesn't work now because people know. He is certainly right when it comes to brief declines like we had last week.

His idea for portfolio construction is to put 90% into T-bills from various countries and then with the other 10%, the amount you can stand to lose, you should just let 'er rip. Just go hog wild.
-July, 2007

Link -http://seekingalpha.com/article/43008-portfolio-allocation-nassim-taleb-s-90-solution


Taleb portfolio 2.
Selling most of the gold that he bought during the 2008-2009 financial crisis
Owns real estate for rentals (cash flow)
Owns some stocks
Owns some relatively complicated hedges against rising LT interest rates
Owns land
Taleb says he is mainly trying to hedge inflation, but apparently doesn't trust government bonds including T-bills, TIPS, and I-bonds.

- December, 2012

Link - http://www.fool.com/investing/general/2 ... ng-in.aspx


But how does the individual investor know when to make the drastic change from portfolio 1 to portfolio 2?

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Thu May 09, 2013 1:37 am

bobcat2 wrote:He said that diversification used to work before people knew about diversification, but it doesn't work now because people know. He is certainly right when it comes to brief declines like we had last week.




Is there any rationale to this conclusion, and if so, what is it?

Thanks.
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Re: The anti-Taleb reviews Antifragile

Postby bobcat2 » Thu May 09, 2013 11:07 am

protagonist wrote:
bobcat2 wrote:He said that diversification used to work before people knew about diversification, but it doesn't work now because people know. He is certainly right when it comes to brief declines like we had last week.


Is there any rationale to this conclusion, and if so, what is it?
Thanks.

I didn't write that. I am quoting an article from Seeking Alpha in 2007 - the link to the article is in my post. That article is reportedly based on an interview with Taleb on the Consuelo Mack Show in 2007. So your conjecture is as good as mine. :|

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Re: The anti-Taleb reviews Antifragile

Postby Valuethinker » Thu May 09, 2013 11:59 am

baw703916 wrote:
cbeck wrote:Oh sure, Matt Ridley. Mr. Chairman of Northern Rock when it became the first British bank to have a run in 100 years because of Ridley's management and was subsequently bailed out by the Brits with 30 billion pounds. None of which seems to have dimmed Ridley's abiding faith in the efficiency of markets.

The markets were quite efficient at pointing out that Mr. Ridley's bank was insolvent and that he needed to be removed as chairman.


But government is not efficient.

By dint of excellent choice of ancestors, he is elevated to a hereditary peer in the House of Lords (ie his peerage is passed down). The same reason in fact he was Chmn of Northern Rock (when it was a mutually owned building society, ie a credit union, his grandfather was Chairman).

Ridley writes books praising deregulation and hands off by governments, and simply says he is not allowed to talk about Northern Rock. As the £30bn loser of the other side of that trade (along with 30m other UK taxpayers) I beg to differ-- his books simply provide useful ideological camouflage-- makes what is a viewpoint seem intellectual and substantiated by theories of evolutionary biology.
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Re: The anti-Taleb reviews Antifragile

Postby protagonist » Thu May 09, 2013 1:57 pm

bobcat2 wrote:
protagonist wrote:
bobcat2 wrote:He said that diversification used to work before people knew about diversification, but it doesn't work now because people know. He is certainly right when it comes to brief declines like we had last week.


Is there any rationale to this conclusion, and if so, what is it?
Thanks.

I didn't write that. I am quoting an article from Seeking Alpha in 2007 - the link to the article is in my post. That article is reportedly based on an interview with Taleb on the Consuelo Mack Show in 2007. So your conjecture is as good as mine. :|

BobK


I haven't read Taleb in the original so I don't feel qualified to critique it, but judging from things that others claim he says in this forum (see hsv_climber's posts here for example: viewtopic.php?f=10&t=110648&start=100... I have not seen any rebuttal), his logic appears to be quite flaky. I have no doubt that he is a charismatic character and an entertaining speaker, but I can't help but wonder, given some of the things he is quoted as saying, why he is taken so seriously by people here that I know to be knowledgable and intelligent. The crux of his thesis seems valid, but is not original thought...just a repackaging of chaos theory and behavior of nonlinear systems. The other stuff as presented here frankly seems off the wall. Not eccentric and controversial but with solid basis (eg Matt Taibbi, Hunter S Thompson, Tom Wolfe), but just plain silly and unsupportable. Perhaps I am missing something, and I wish somebody would clue me in.
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