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Standard deviation tells you how volatile measurements are not what mean deviation is. Those are both very real life things just not the same thing." While I a

Standard deviation tells you how volatile measurements are not what mean deviation is. Those are both very real life things just not the same thing." While I am not a Taleb fan (he had his own black swan and became exactly the reviled expert his own books warn us about), your hostility in this case seems out of place. The root of his seemingly casual contemplation is that standard deviation is simply misnamed. That this misnaming causes a cognitive dissonance that confuses even knowledgeable practitioners to mentally conflate it with the mean deviation. Which -- as someone in the financial industry -- I can absolutely confirm. It seems like such a minor thing, but the name has tremendous influence on how we parse these things, and the shortcuts we take in understanding things.

marvin 13y ago
What is Taleb's own black swan?
- gggggggggggggg 13y ago
  Correctly predicting the 2008 collapse
- corresation 13y ago
  After being assigned to a currency desk, he was sitting on a lot of Eurodollar options when black Monday happened in October, 1987. http://en.wikipedia.org/wiki/Black_Monday_(1987) http://en.wikipedia.org/wiki/Black_Monday_(1987) That unpredicted event made him and his organization loads of money, and made him a sudden seer of markets. Which is humorous because his book Fooled By Randomness is primarily a bit of a bitter tirade about how we declare people savants because they happened to be in the right place at the right time. Since then he gets the classic seer type treatment, for instance the other post notes that he "predicted" the financial collapse of 2008 (weird that someone would register just to post that). Yet almost everyone predicted 2008. No, seriously, the house bubble and crisis, and the probable impact on the market, was absolutely common knowledge by the time Taleb made his pronouncements, and was the endless material of virtually every financial discussion. There was absolutely nothing of worth predicted in that, but that's what you get when you got lucky once.
  - oskarth 13y ago
    He did make a lot of money in 2008 as well. That is completely aside from the fact that his points would be valid regardless of how successful his individual investments have been. I am not sure what would convince you otherwise though, since it seems like you have made up your mind already. Please loosen up on the snark.
    - corresation 13y ago
      There is no snark in my post: I am outright calling Taleb a false prophet who is guilty of exactly the things he criticizes in Fooled by Randomness. And yes, I've seen a lot of claims of various other successes of Taleb, with a lack of any actual citations or proof at all: His own fund folded after yielding mediocre returns, and then he started consulting for a fund that seems to demonstrate a tremendous amount of bluster, with some curious and cringe-inducing ways of reporting returns, the narrative reading like the story of a gambler, telling you with great pride about the 35:1 payout on their roulette bets, skipping over the 0:37 payout on all their other bets. I've worked with a large number of hedge funds, many of whom made a lot of money in 2008. You haven't heard a word from them because they have no need to do PR or to pitch the one bet they made right. I become suspicious of any who does. And the danger of Taleb's lucky bet was that he is listened to as an expert, at least by some. Virtually everything he had to say about government intervention after the financial crash has been proven fundamentally wrong -- actual reality demonstrated that. Thankfully a lot of people didn't listen to him.
      - kaa2102 13y ago
        I think that you may be missing the point of Fooled by Randomness. The point is knowing whether your success came from luck, skill, or both. It also shined a light on people who took high-probability, "sure bets" (selling out-of-the-money options) that paid off most of the time but would eventually bankrupt them if the stock price jumped.
        corresation 13y ago
bluecalm 13y ago
Well, I read his article as "let's abandon standard deviation and use average mean deviation instead". I think that's what he claims. It's not: "some people are sometimes confused by the concept and in some places mean deviation would serve better, for example here and here". It has way more aggressive tone and way wider assertions about people misusing standard deviation. Remarks about "real life" doesn't help either, especially if you don't provide even one example where standard deviation is commonly used but mean absolute deviation would serve better. >> Which -- as someone in the financial industry -- I can absolutely confirm. This is what he is doing: he takes common sentiment often and makes into war. "Abandon standard deviation", "the confusion started", "PhD's are confused" It's easy to like him and nod in agreement while omitting that he took it way too far, proposed things way too radical and again: didn't give one single example of stuff not working because of it.

marvin 13y ago

What is Taleb's own black swan?

gggggggggggggg 13y ago
Correctly predicting the 2008 collapse
corresation 13y ago
After being assigned to a currency desk, he was sitting on a lot of Eurodollar options when black Monday happened in October, 1987. http://en.wikipedia.org/wiki/Black_Monday_(1987) http://en.wikipedia.org/wiki/Black_Monday_(1987) That unpredicted event made him and his organization loads of money, and made him a sudden seer of markets. Which is humorous because his book Fooled By Randomness is primarily a bit of a bitter tirade about how we declare people savants because they happened to be in the right place at the right time. Since then he gets the classic seer type treatment, for instance the other post notes that he "predicted" the financial collapse of 2008 (weird that someone would register just to post that). Yet almost everyone predicted 2008. No, seriously, the house bubble and crisis, and the probable impact on the market, was absolutely common knowledge by the time Taleb made his pronouncements, and was the endless material of virtually every financial discussion. There was absolutely nothing of worth predicted in that, but that's what you get when you got lucky once.
- oskarth 13y ago
  He did make a lot of money in 2008 as well. That is completely aside from the fact that his points would be valid regardless of how successful his individual investments have been. I am not sure what would convince you otherwise though, since it seems like you have made up your mind already. Please loosen up on the snark.
  - corresation 13y ago
    There is no snark in my post: I am outright calling Taleb a false prophet who is guilty of exactly the things he criticizes in Fooled by Randomness. And yes, I've seen a lot of claims of various other successes of Taleb, with a lack of any actual citations or proof at all: His own fund folded after yielding mediocre returns, and then he started consulting for a fund that seems to demonstrate a tremendous amount of bluster, with some curious and cringe-inducing ways of reporting returns, the narrative reading like the story of a gambler, telling you with great pride about the 35:1 payout on their roulette bets, skipping over the 0:37 payout on all their other bets. I've worked with a large number of hedge funds, many of whom made a lot of money in 2008. You haven't heard a word from them because they have no need to do PR or to pitch the one bet they made right. I become suspicious of any who does. And the danger of Taleb's lucky bet was that he is listened to as an expert, at least by some. Virtually everything he had to say about government intervention after the financial crash has been proven fundamentally wrong -- actual reality demonstrated that. Thankfully a lot of people didn't listen to him.
    - kaa2102 13y ago
      I think that you may be missing the point of Fooled by Randomness. The point is knowing whether your success came from luck, skill, or both. It also shined a light on people who took high-probability, "sure bets" (selling out-of-the-money options) that paid off most of the time but would eventually bankrupt them if the stock price jumped.
      - corresation 13y ago

bluecalm 13y ago

Well, I read his article as "let's abandon standard deviation and use average mean deviation instead". I think that's what he claims. It's not: "some people are sometimes confused by the concept and in some places mean deviation would serve better, for example here and here". It has way more aggressive tone and way wider assertions about people misusing standard deviation. Remarks about "real life" doesn't help either, especially if you don't provide even one example where standard deviation is commonly used but mean absolute deviation would serve better. >> Which -- as someone in the financial industry -- I can absolutely confirm. This is what he is doing: he takes common sentiment often and makes into war. "Abandon standard deviation", "the confusion started", "PhD's are confused" It's easy to like him and nod in agreement while omitting that he took it way too far, proposed things way too radical and again: didn't give one single example of stuff not working because of it.