As if we did not have enough problems, banks are now more vulnerable to the Black Swan and the ludic fallacy than ever before with "scientists" among their staff taking care of exposures. The giant firm J. P. Morgan put the entire world at risk by introducing in the nineties Risk Metrics, a phony method aiming at managing people's risks, causing the generalized use of the ludic fallacy, and bringing Dr. Johns into power in place of the skeptical Fat Tonys. (A related method called "Value-at-Risk", which relies on the quantitative measurement of risk, has been spreading.) Likewise, the government-sponsored institution Fanny Mae, when I look at their risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events "unlikely."
(The ludic fallacy simply refers to people trying to use the restrictive world of games and dice to make predictions in the real world. Fat Tony and Dr. John were two acquaintances of Taleb's that he uses to illustrate the street-smart vs. the overly-intellectual approach to life.)
This is likely one of those times that Taleb wishes he was wrong. And remember, every time you see some Wall Street type crying about how they "didn't know" and their "models all said..." that they could have known and that they had been told that their models were crap. The guys like Taleb that work in the trading pits have been saying for years that what we are seeing now was going to happen. That there were massive amounts of risk that lay outside all the fancy computer models being used by the researchers and managers. So don't spend a lot of time crying in your beer for any of these fools. Just like I don't feel any pity whatsoever for someone who loses their house after failing to make the very first mortgage payment. Willful ignorance has a price.
From the conclusion of the Black Swan:
I once received another piece of life-changing advice, which... I find applicable, wise, and empirically valid. My classmate in Paris, the novelist-to-be Jean-Olivier Tedesco, pronounced, as he prevented me from running to catch a subway, "I don't run for trains."
Snub your destiny. I have taught myself to resist running to keep on schedule. This may seem a very small piece of advice, but it registered. In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behavior, a sense of being in control of my time , my schedule, and my life. Missing a train is only painful if you run after it! Likewise, not matching the idea of success others expect from you is only painful if that's what you are seeking.
You stand above the rat race and the pecking order, not outside of it, if you do so by choice.
Quitting a high-paying position, if it is your decision, will seem a better payoff than the utility of the money involved (this may seem crazy, but I've tried it and it works). This is the first step toward the stoic's throwing a four-letter word at fate. You have far more control over your life if you decide on your criterion by yourself.
Mother nature has given us some defense mechanisms: as in Aesop's fable, one of these is our ability to consider that the grapes we cannot (or did not) reach are sour. But an aggressively stoic prior disdain and rejection of the grapes is even more rewarding. Be aggressive; be the one to resign, if you have the guts.
It is more difficult to be a loser in a game you set up yourself.
In Black Swan terms, this means that you are exposed to the improbable only if you let it control you. You always control what you do; so make this your end.
Take a week and read this book.
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