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This was the same argument that salespeople would use whenever you stepped into a bank between 2005 and 2008 in Spain: "Real estate prices never go down". Then

by josu 11y ago

This was the same argument that salespeople would use whenever you stepped into a bank between 2005 and 2008 in Spain: "Real estate prices never go down". Then they did, and the most of the banking system in Spain went bankrupt. I'm using the Spanish example because it's the one that I am familiar with, but this happened pretty much in every developed country. People tend to forget that generally we can't predict the future, specially not by extrapolating the data from the past few years. Ironically I think that economists tend to make this mistake more than any other group except for fortune tellers and weather forecasters. Related to this I won't get tired of recommending "The Black Swan: Second Edition: The Impact of the Highly Improbable" by NN Taleb [1]. [1] http://www.amazon.com/The-Black-Swan-Improbable-Robustness/dp/081297381X http://www.amazon.com/The-Black-Swan-Improbable-Robustness/d...

sytelus 11y ago
Problem is that these black swans happen only once in blue moon in a given area. For most other times if you look at trends, it's probabilistically correct to say that oil almost never goes down and real estate almost always goes up. I would estimate that there are less than 10 black swans occur during a life time of adult person that violates conventional "wisdom" in oil, stock and real estate. If you run your life believing that they would occur every year, you are likely to be at bigger loss. BTW, Nasim Taleeb don't suggest that you wait for one big black swan in one field like oil or real estate. His main argument is that you want maximize your exposure to all different kind of black swans in all different kind of places by putting lots of small bets on them. YC is a perfect example of implementation of Taleeb's theory. A bad implementation of Taleeb's theory would be to put a large bet that Apple stock would go down to $10.

by josu 11y ago

sytelus 11y ago

Problem is that these black swans happen only once in blue moon in a given area. For most other times if you look at trends, it's probabilistically correct to say that oil almost never goes down and real estate almost always goes up. I would estimate that there are less than 10 black swans occur during a life time of adult person that violates conventional "wisdom" in oil, stock and real estate. If you run your life believing that they would occur every year, you are likely to be at bigger loss. BTW, Nasim Taleeb don't suggest that you wait for one big black swan in one field like oil or real estate. His main argument is that you want maximize your exposure to all different kind of black swans in all different kind of places by putting lots of small bets on them. YC is a perfect example of implementation of Taleeb's theory. A bad implementation of Taleeb's theory would be to put a large bet that Apple stock would go down to $10.