No Turkey

Bird's-Eye View

Source: Bloomberg
A wise old bird: Nassim Nicholas Taleb.
  • Why it matters

    Why it matters

    Mr. Taleb’s unorthodox views on economics and business have gained a wide audience, making his books highly influential.

  • Facts

    Facts

    • Mr. Taleb is a former banker turned author and intellectual.
    • His 2007 book “Black Swan” sold more than three million copies.
    • He is currently professor of risk engineering at New York University.
  • Audio

    Audio

  • Pdf

In principle, anyone familiar with the life and death of a turkey also understands Nassim Nicholas Taleb. So the holiday season, when whole nations settle down to lunch on the bird, is the perfect time for a discussion with this intellectual all-rounder.

Turkeys can’t expect any sympathy from Mr. Taleb. The bird’s unavoidable fate is one of the philosopher’s favorite metaphors, used frequently to explain his major themes of uncertainty, randomness and volatility, as well as our inability to deal with them.

In Mr. Taleb’s world, the witless animal represents stubbornness and shortsightedness. The bird is fed for a thousand days until its date with a butcher shortly before a holiday like Thanksgiving or Christmas. If the turkey were the chief analyst in a company or in politics, it would announce with “increasing statistical confidence” the butcher’s interest in the welfare of all turkeys.

The animal, however, would be making a crucial error by confusing the absence of proof of danger with the proof of an absence of danger. Thus, the day comes when the turkey’s thesis that a butcher is its best friend proves to be a fatal fallacy.

In Mr. Taleb’s world, the witless turkey represents stubbornness and shortsightedness.

Mr. Taleb’s insights are wide-ranging, the fruit of three different careers. He was a Wall Street dealer, a best-selling author and is now one of the most widely acknowledged intellectuals of our time.

To call his books eclectic is an understatement. He delves into philosophy, economics, sociology, mathematics and statistics, kneads them all together and seasons the mixture with a generous pinch of everyday observation. This recipe most recently resulted in his magnum opus, “Antifragile: Things That Gain From Disorder,” a kind of universal manual for an inscrutable and unpredictable world.

The turkey isn’t the only bird to figure prominently in his work. In his 2007 book, “Black Swan,” published shortly before the financial crisis struck, Mr. Taleb examined unpredictable and extremely rare events that have extreme consequences, such as the bankruptcy of the investment bank Lehman Brothers. Its demise almost dragged the entire global financial system into the abyss.

The book’s title refers to the scientific principle that saying “All swans are white” can never be absolutely true, even if every individual swan has been white for as long as man can remember. The appearance of even one black swan is all that is needed to refute the statement.

Mr. Taleb asserts we reach the wrong conclusions because of our inability to deal with the black swans. We assume there is a structured and predictable randomness that determines the major decisive points in life and history, when in reality, the black swans are the result of an unstructured class of uncertainty.

Additionally, we rely on the fallacy that historical data can be used to predict the future. And finally, man “invents” stories that explain events after the fact as being inevitable, but these explanations only work ex post.

More than three million copies of “Black Swan” were sold worldwide. The Sunday Times newspaper in London selected the work as one of the twelve most influential books since the Second World War. These plaudits evoke mixed emotions in Mr. Taleb. “The more people there are reading my books, the more there are who actually shouldn’t read them,” he says. His success has forced him to “integrate too much with the outside world.”

It’s not only turkeys that displease Mr. Taleb. He’s also not very fond of bankers, most rich people, men’s neckties, the World Economic Forum in Davos, genetically modified food and honorary doctorates. Economists, in general, and Paul Krugman, in particular, enjoy his sincere antipathy. And this list is far from being comprehensive.

“The more people there are reading my books, the more there are who actually shouldn’t read them.”

Nassim Nicholas Taleb

In turn, there are large numbers of people who can’t stand Mr. Taleb. He is brilliant and entertaining, but also eccentric, contradictory, stubborn and more than a little narcissistic. Nonetheless, his current job as distinguished professor of risk engineering at New York University brings him much happiness.

“At the moment, I am writing almost only abstract scholarly treatises,” he said. “That is more intellectually compelling and, therefore, much more satisfying.” These writings have titles such as “On the Biases and Variability in the Estimation of Concentration Using Bracketed Quantile Contributions.”

Video: Nassim Nicholas Taleb explains how things handle disorder. Put your thinking caps on…

 

The author is in a good mood throughout the interview, effortlessly moving from the advantages of pessimism (would you prefer to board a plane with an optimistic pilot?) to the blight of lobbyists (they have hijacked the political system) to the advantages of the smaller German states of earlier centuries (small, decentralized entities can absorb external shocks better than big ones).

Antifragile also takes a meandering course. He invented the word to differentiate between three types of systems. Fragile systems suffer when placed under stress while robust systems shoulder the burden, but antifragile systems actually profit from stress and setbacks.

Greatly simplified, antifragile can be described in Nietzschian terms by the phrase, “what doesn’t kill you makes you stronger,” but it also suggests “what kills you makes others stronger.” After all, you learn not only from your own mistakes, but even more from the errors of others.

Every airplane crash reduces the probability of the next catastrophe. Every business bankruptcy shows the next founder of a company what mistakes must be avoided. Trial and error may have terrible consequences for individuals, but they make the system as a whole more stable.

At the moment, Mr. Taleb is contemplating those who maintain genetically modified food is not dangerous.

“The risk of a catastrophe may appear small, but the consequences would be so devastating that we cannot afford a mistake,” Mr. Taleb says. “Biologists have never developed a theory that lasted longer than half a generation.”

And with that comment Mr. Taleb proves that his making of enemies is no black swan event, but a thoroughly predictable one. Just like the fate of a holiday turkey.

 

The author is the associate chief of the finance department in Handelsblatt’s Frankfurt office. To contact the author: maisch@handelsblatt.com

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