Nassim Taleb: “One can study randomness, at three levels: mathematical, empirical, and behavioral. The first is the narrowly defined mathematics of randomness, which is no longer the interesting problem because we've pretty much reached small returns in what we can develop in that branch. The second one is the dynamics of the real world, the dynamics of history, what we can and cannot model, how we can get into the guts of the mechanics of historical events, whether quantitative models can help us and how they can hurt us. And the third is our human ability to understand uncertainty. We are endowed with a native scorn of the abstract; we ignore what we do not see, even if our logic recommends otherwise. We tend to overestimate causal relationships. When we meet someone who by playing Russian roulette became extremely influential, wealthy, and powerful, we still act toward that person as if he gained that status just by skills, even when you know there's been a lot of luck. Why? Because our behavior toward that person is going to be entirely determined by shallow heuristics and very superficial matters related to his appearance.”
The video linked in the above may be worth seeing to get an idea of what Taleb looks and sounds like, but it the content of the video is effectively (with minor stylistic alterations) transcribed in the talk below his op-ed.
Rajesh Jain linked to Malcolm Gladwell's profile of Taleb in The New Yorker: “Taleb buys out-of-the-money options by the truckload. He buys them for hundreds of different stocks, and if they expire before he gets to use them he simply buys more. Taleb doesn't even invest in stocks, not for Empirica and not for his own personal account. Buying a stock, unlike buying an option, is a gamble that the future will represent an improved version of the past. And who knows whether that will be true? So all of Taleb's personal wealth, and the hundreds of millions that Empirica has in reserve, is in Treasury bills. Few on Wall Street have taken the practice of buying options to such extremes. But if anything completely out of the ordinary happens to the stock market, if some random event sends a jolt through all of Wall Street and pushes G.M. to, say, twenty dollars, Nassim Taleb will not end up in a dowdy apartment in Athens. He will be rich.”
Taleb invests in the belief that a "black swan"—“an outlier, an event that lies beyond the realm of normal expectations”—is all but inevitable, and that the reason nobody sees them coming is that because they are so unpredictable that if someone predicts them and is correct, they are labeled lunatics before the fact. He has written a paper on black swans [PDF] which I am not allowed to quote without explicit permission (says so on page 1) and which I have not yet read.
Rajesh Jain has more links and commentary on black swans and entrepreneurship and even commentary on black swans and technology.
