4 ms·

Probability and Risk in the Real World [pdf]

37 points by platz 13y ago

pella 13y ago
Nassim Nicholas Taleb : "comments are welcome on the aesthetics of this LaTeX formatted technical companion (available for free). The book is half converted." https://www.facebook.com/permalink.php?story_fbid=10151726010213375&id=13012333374 https://www.facebook.com/permalink.php?story_fbid=1015172601...
pella 13y ago
GMO risk Taleb: "Genetically Modified Organisms, GMOs. Top-down modifications to the system (through GMOs) are categorically and statistically different from bottom up ones (regular farming, progressive tinkering with crops, etc.) To borrow from Rupert Read, there is no comparison between the tinkering of selective breeding and the top-down engineering of taking a gene from a fish and putting it into a tomato. Saying that such a product is natural misses the statistical process by which things become “natural”. What people miss is that the modification of crops impacts everyone and exports the error from the local to the global. I do not wish to pay —or have my descendants pay — for errors by executives of Monsanto. We should exert the precautionary principle there —our non-naive version — simply because we would discover errors after considerable damage." http://blog.longnow.org/02013/07/08/the-artangel-longplayer-letters-nassim-taleb-writes-to-stewart-brand/ http://blog.longnow.org/02013/07/08/the-artangel-longplayer-...
mrcactu5 13y ago
In the stock market, probability theory is (mis)used to model the typical random behavior of the market, as Nassim Taleb as seen many times. http://en.wikipedia.org/wiki/Black%E2%80%93Scholes http://en.wikipedia.org/wiki/Black%E2%80%93Scholes http://www.bbc.co.uk/news/magazine-17866646 http://www.bbc.co.uk/news/magazine-17866646 frequentist probability seems like an okay tool for the stock market, but these who knows if the motion of stocks are correctly separated into "drift" and "noise" by Ito processes or whatever model they choose Rare events - "risk" - can and will occur if we leave a process running sufficiently long, and sooner than we predict. This is Taleb's "Black Swan". Game-theoretic strategies seem better here, playing stocks off each other accounting for the "black swan" as much as we can.
stiff 13y ago
Crank science time! What I think he is doing, he is basically taking his philosophical musings, finds concepts from very high level mathematics that seem corresponding, buries it all under a mountain of formalism introduced for no particular reason and then... does absolutely nothing with it. He will plug in some numbers or show some trivial (except for the mountain of formalism) inequality as a supposed mathematical "proof" of his revelations. I don't think he himself understands the mathematics he attempts to write about. If you would like, for a change, to look at a "probability in the real world" book that would make any actual sense, and by someone who has used probability theory successfully in practice, have a look at "The Art of Probability" by Richard Hamming, the inventor of coding theory. He treats things like robustness of models to violation of assumptions that are not often found in other books, and he uses only calculus, although as opposed to Mr Taleb he actually is able to do derivations.
- eli_gottlieb 13y ago
  "The Art of Probability" by Richard Hamming, the inventor of coding theory The same guy who brought us The Art of Doing Science and Engineering? Welp, time to order another book.
- oskarth 13y ago
  He got his PhD in the pricing of derivatives, and wrote the book Dynamic Hedging almost 20 years ago, far before he started with his so called "philosophical musings". If you are gonna criticize someone, it would be better to criticize something that person has said rather than calling him a crank. That aside, the book you posted seems interesting indeed. http://www.amazon.com/Dynamic-Hedging-Managing-Vanilla-Options/dp/0471152803/ http://www.amazon.com/Dynamic-Hedging-Managing-Vanilla-Optio...
  - stiff 13y ago
    The thing with cranks is that there is really nothing to criticize, the words just don't make any sense - terminology is misused or invented and not explained, formalism is introduced without apparent reason, established best practices for communication are not followed (like stating your objectives and conclusions from your work) and so forth. I mean, what the hell is this supposed to mean I can't even imagine: Definition 1. A rule is a decision-making heuristic that operates under a broad set of circumstances. Unlike a theorem, which depends on a specific (and closed) set of assumptions, it holds across a broad range of environments which is precisely the point. In that sense it is stronger than a theorem for decision-making. This is outright nonsense, if he doesn't understand what a theorem is, how can he possibly understand Lebesgue integration and functional analysis?
knodi 13y ago
getting a 404.
- pella 13y ago
  taleb: "New link (Dropbox had too much traffic) " http://www.fooledbyrandomness.com/chaptersprobability.pdf http://www.fooledbyrandomness.com/chaptersprobability.pdf reply
pella 13y ago
taleb: "New link (Dropbox had too much traffic) " http://www.fooledbyrandomness.com/chaptersprobability.pdf http://www.fooledbyrandomness.com/chaptersprobability.pdf
alexscheelmeyer 13y ago
New url for those getting 404 : http://www.fooledbyrandomness.com/chaptersprobability.pdf http://www.fooledbyrandomness.com/chaptersprobability.pdf

37 points by platz 13y ago

pella 13y ago

Nassim Nicholas Taleb : "comments are welcome on the aesthetics of this LaTeX formatted technical companion (available for free). The book is half converted." https://www.facebook.com/permalink.php?story_fbid=10151726010213375&id=13012333374 https://www.facebook.com/permalink.php?story_fbid=1015172601...

pella 13y ago

GMO risk Taleb: "Genetically Modified Organisms, GMOs. Top-down modifications to the system (through GMOs) are categorically and statistically different from bottom up ones (regular farming, progressive tinkering with crops, etc.) To borrow from Rupert Read, there is no comparison between the tinkering of selective breeding and the top-down engineering of taking a gene from a fish and putting it into a tomato. Saying that such a product is natural misses the statistical process by which things become “natural”. What people miss is that the modification of crops impacts everyone and exports the error from the local to the global. I do not wish to pay —or have my descendants pay — for errors by executives of Monsanto. We should exert the precautionary principle there —our non-naive version — simply because we would discover errors after considerable damage." http://blog.longnow.org/02013/07/08/the-artangel-longplayer-letters-nassim-taleb-writes-to-stewart-brand/ http://blog.longnow.org/02013/07/08/the-artangel-longplayer-...

mrcactu5 13y ago

In the stock market, probability theory is (mis)used to model the typical random behavior of the market, as Nassim Taleb as seen many times. http://en.wikipedia.org/wiki/Black%E2%80%93Scholes http://en.wikipedia.org/wiki/Black%E2%80%93Scholes http://www.bbc.co.uk/news/magazine-17866646 http://www.bbc.co.uk/news/magazine-17866646 frequentist probability seems like an okay tool for the stock market, but these who knows if the motion of stocks are correctly separated into "drift" and "noise" by Ito processes or whatever model they choose Rare events - "risk" - can and will occur if we leave a process running sufficiently long, and sooner than we predict. This is Taleb's "Black Swan". Game-theoretic strategies seem better here, playing stocks off each other accounting for the "black swan" as much as we can.

stiff 13y ago

Crank science time! What I think he is doing, he is basically taking his philosophical musings, finds concepts from very high level mathematics that seem corresponding, buries it all under a mountain of formalism introduced for no particular reason and then... does absolutely nothing with it. He will plug in some numbers or show some trivial (except for the mountain of formalism) inequality as a supposed mathematical "proof" of his revelations. I don't think he himself understands the mathematics he attempts to write about. If you would like, for a change, to look at a "probability in the real world" book that would make any actual sense, and by someone who has used probability theory successfully in practice, have a look at "The Art of Probability" by Richard Hamming, the inventor of coding theory. He treats things like robustness of models to violation of assumptions that are not often found in other books, and he uses only calculus, although as opposed to Mr Taleb he actually is able to do derivations.

eli_gottlieb 13y ago
"The Art of Probability" by Richard Hamming, the inventor of coding theory The same guy who brought us The Art of Doing Science and Engineering? Welp, time to order another book.
oskarth 13y ago
He got his PhD in the pricing of derivatives, and wrote the book Dynamic Hedging almost 20 years ago, far before he started with his so called "philosophical musings". If you are gonna criticize someone, it would be better to criticize something that person has said rather than calling him a crank. That aside, the book you posted seems interesting indeed. http://www.amazon.com/Dynamic-Hedging-Managing-Vanilla-Options/dp/0471152803/ http://www.amazon.com/Dynamic-Hedging-Managing-Vanilla-Optio...
- stiff 13y ago
  The thing with cranks is that there is really nothing to criticize, the words just don't make any sense - terminology is misused or invented and not explained, formalism is introduced without apparent reason, established best practices for communication are not followed (like stating your objectives and conclusions from your work) and so forth. I mean, what the hell is this supposed to mean I can't even imagine: Definition 1. A rule is a decision-making heuristic that operates under a broad set of circumstances. Unlike a theorem, which depends on a specific (and closed) set of assumptions, it holds across a broad range of environments which is precisely the point. In that sense it is stronger than a theorem for decision-making. This is outright nonsense, if he doesn't understand what a theorem is, how can he possibly understand Lebesgue integration and functional analysis?

knodi 13y ago

getting a 404.

pella 13y ago
taleb: "New link (Dropbox had too much traffic) " http://www.fooledbyrandomness.com/chaptersprobability.pdf http://www.fooledbyrandomness.com/chaptersprobability.pdf reply

pella 13y ago

taleb: "New link (Dropbox had too much traffic) " http://www.fooledbyrandomness.com/chaptersprobability.pdf http://www.fooledbyrandomness.com/chaptersprobability.pdf

alexscheelmeyer 13y ago

New url for those getting 404 : http://www.fooledbyrandomness.com/chaptersprobability.pdf http://www.fooledbyrandomness.com/chaptersprobability.pdf