3 ms·

A lot of this has to do with the way we "score" forecasts. Applying some kind of uniform weighting over forecasts is the natural, and wrong, way to think about

by aothman 16y ago

A lot of this has to do with the way we "score" forecasts. Applying some kind of uniform weighting over forecasts is the natural, and wrong, way to think about things. Nassim Nicholas Taleb (black swan, fooled by randomness) has written about his trading strategy. At his fund, he consistently takes positions that predict extreme events, and he's wrong almost all the time, consistently producing grinding, negative returns. He's only been right a couple times, but when he's right he's really right, making enough money that he doesn't need to make money anymore.

borism 16y ago
he's wrong almost all the time, consistently producing grinding, negative returns. He's only been right a couple times, but when he's right he's really right, making enough money that he doesn't need to make money anymore AFAIK his hedge fund haven't been right "big" even once so far and clients are only withdrawing money with a loss after few years...
- patrickgzill 16y ago
  20 seconds of search engine gets me: http://en.wikipedia.org/wiki/Nassim_Taleb#Finance_career http://en.wikipedia.org/wiki/Nassim_Taleb#Finance_career Perhaps you should invest the extra 19 seconds between typing "AFAIK" and actually, you know, Knowing. ==== "founder of Empirica Capital, after which Taleb retired from trading and became a full-time author and scholar in 2004.[33] Taleb is currently Principal/Senior Scientific Adviser at Universa Investments in Santa Monica, California, a tail protection firm owned and managed by former Empirica partner Mark Spitznagel. Taleb reportedly made a multi-million dollar fortune during the financial crisis that began in 2007, a development which he attributed to the failure of statistical methods in finance.[34] Universa is a fund which is based on the "black swan" idea and to which Taleb is a principal adviser. Separate funds belonging to Universa made returns of 65% to 115% in October 2008.[20][35] In the wake of the economic crisis that started in 2008, Taleb has become an activist for a "black swan robust society"" ===
  - _debug_ 16y ago
    > Taleb reportedly made a multi-million dollar fortune during the financial crisis that began in 2007 "Reportedly". Also, "multi-million dollar fortune" is really vague. Sorry to spoil a good story, but the entire Taleb thesis is just a very entertaining way to say : "Shit happens". There is absolutely nothing new that he has to add, other than the entertainment and sheer drama. If there was, he would be able to publish it as a paper in a journal, not merely as a popular paperback. As an analogy, Taleb's position is akin to a religious zealot shouting, "Science dosen't know everything". Science's response is : "Sure, we know that. Why don't you help push the border by proposing and publishing a better model?". No, he is content to just shout from the rooftops and make a living out of it. Even his recent attempt to publish an academic paper in 2010 is full of negativity: it's just a way to say, "You're wrong, you're wrong, you're wrong. Here are citations to show you're wrong." Also, note that Taleb is merely an adviser to Universa. Any credit for profitability at Universa goes to their founder, traders and portfolio managers. When he was the trader (at Empirica), they had to fold the fund. That's when he wrote the books. What fans of Taleb probably don't realize is that the enemy is not the models or the quants who published the models, who clearly stated their simplifying assumptions in order to make approximate models, (because Newton's laws are a good-enough intermediate model compared to nothing even though they may be wrong at extreme points, and that's where relativity comes in,) but overleveraging (trading with money that you don't have), and good old greed (using a model that states clearly on the label that it is only an approximation, 90% correct, as if it were 100% correct). Taleb's recent arguments with Scholes (who was awarded a Nobel Prize for the Black-Scholes model) is like a dolt shouting a Newton, saying, "But you didn't consider relativity! You must be jailed for that!". So what, at least he DID something concrete!
    - naradaellis 16y ago
      Are you not allowed to call bullshit on something unless you can do better? I believe the contrary; I think that reading around and saying "You're wrong, you're wrong, you're wrong. Here are citations to show you're wrong" is actually a very valuable contribution to science and society -- what are the point of such models if they don't work? The difference between Newton and the securities traders that Taleb dislikes is that Newton actually managed to predict things with certainty. A large part of the Black Swan is Taleb pointing out that barely any retrospective review is done on predictive models.

by aothman 16y ago

borism 16y ago

he's wrong almost all the time, consistently producing grinding, negative returns. He's only been right a couple times, but when he's right he's really right, making enough money that he doesn't need to make money anymore AFAIK his hedge fund haven't been right "big" even once so far and clients are only withdrawing money with a loss after few years...

patrickgzill 16y ago
20 seconds of search engine gets me: http://en.wikipedia.org/wiki/Nassim_Taleb#Finance_career http://en.wikipedia.org/wiki/Nassim_Taleb#Finance_career Perhaps you should invest the extra 19 seconds between typing "AFAIK" and actually, you know, Knowing. ==== "founder of Empirica Capital, after which Taleb retired from trading and became a full-time author and scholar in 2004.[33] Taleb is currently Principal/Senior Scientific Adviser at Universa Investments in Santa Monica, California, a tail protection firm owned and managed by former Empirica partner Mark Spitznagel. Taleb reportedly made a multi-million dollar fortune during the financial crisis that began in 2007, a development which he attributed to the failure of statistical methods in finance.[34] Universa is a fund which is based on the "black swan" idea and to which Taleb is a principal adviser. Separate funds belonging to Universa made returns of 65% to 115% in October 2008.[20][35] In the wake of the economic crisis that started in 2008, Taleb has become an activist for a "black swan robust society"" ===
- _debug_ 16y ago
  > Taleb reportedly made a multi-million dollar fortune during the financial crisis that began in 2007 "Reportedly". Also, "multi-million dollar fortune" is really vague. Sorry to spoil a good story, but the entire Taleb thesis is just a very entertaining way to say : "Shit happens". There is absolutely nothing new that he has to add, other than the entertainment and sheer drama. If there was, he would be able to publish it as a paper in a journal, not merely as a popular paperback. As an analogy, Taleb's position is akin to a religious zealot shouting, "Science dosen't know everything". Science's response is : "Sure, we know that. Why don't you help push the border by proposing and publishing a better model?". No, he is content to just shout from the rooftops and make a living out of it. Even his recent attempt to publish an academic paper in 2010 is full of negativity: it's just a way to say, "You're wrong, you're wrong, you're wrong. Here are citations to show you're wrong." Also, note that Taleb is merely an adviser to Universa. Any credit for profitability at Universa goes to their founder, traders and portfolio managers. When he was the trader (at Empirica), they had to fold the fund. That's when he wrote the books. What fans of Taleb probably don't realize is that the enemy is not the models or the quants who published the models, who clearly stated their simplifying assumptions in order to make approximate models, (because Newton's laws are a good-enough intermediate model compared to nothing even though they may be wrong at extreme points, and that's where relativity comes in,) but overleveraging (trading with money that you don't have), and good old greed (using a model that states clearly on the label that it is only an approximation, 90% correct, as if it were 100% correct). Taleb's recent arguments with Scholes (who was awarded a Nobel Prize for the Black-Scholes model) is like a dolt shouting a Newton, saying, "But you didn't consider relativity! You must be jailed for that!". So what, at least he DID something concrete!
  - naradaellis 16y ago
    Are you not allowed to call bullshit on something unless you can do better? I believe the contrary; I think that reading around and saying "You're wrong, you're wrong, you're wrong. Here are citations to show you're wrong" is actually a very valuable contribution to science and society -- what are the point of such models if they don't work? The difference between Newton and the securities traders that Taleb dislikes is that Newton actually managed to predict things with certainty. A large part of the Black Swan is Taleb pointing out that barely any retrospective review is done on predictive models.