The Black Swan: Quotes & Warnings that the Imbeciles Chose to Ignore
Nassim Nicholas Taleb: The Black Swan: The Impact of
the Highly Improbable (April 2007)
For the last 12 years, I have been telling
anyone who would listen to me that we are taking huge risks and massive
exposure to rare events. I isolated some areas in which people make bogus
claims --epistemologically unsound. The Black Swan is a philosophy book
(epistemology, philosophy of history & philosophy of science), but I used
banks as a particularly worrisome case of epistemic arrogance --and the use of "science" to
measure the risk of rare events, making society dependent on very spurious
measurements. To me a banking crisis --worse than what we have ever seen -- was
unavoidable and NOT A BLACK SWAN, just as a drunk and incompetent pilot would
eventually crash the plane. And I kept receiving insults for 12 years!
Quotes From the Black Swan (written b. 2003-2006) that
the IMBECILES did not want to hear
Globalization creates interlocking fragility, while reducing volatility
and giving the appearance of stability. In other words it creates devastating
Black Swans. We have never lived before under the threat of a global collapse.
Financial Institutions have been merging into a smaller number of very large
banks. Almost all banks are interrelated. So the financial ecology is swelling
into gigantic, incestuous, bureaucratic banks – when one fails, they all
fall. The increased concentration among banks seems to have the effect of
making financial crises less likely, but when they happen they are more global
in scale and hit us very hard. We have moved from a diversified ecology of small
banks, with varied lending policies, to a more homogeneous framework of firms
that all resemble one another. True, we now have fewer failures, but when they
occur ….I shiver at the thought.
Banks hire dull people and train them to be even more
dull. If they look conservative, it's only because their loans go bust on rare,
very rare occasions. But (...)bankers are not conservative at all. They are
just phenomenally skilled at self-deception by burying the possibility of a
large, devastating loss under the rug.
The government-sponsored institution Fannie Mae, when I look at its
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".
There is no way to gauge the
effectiveness of their lending activity by observing it over a day, a week, a
month, or . . . even a century!
(...) the real- estate collapse of the early 1990s in which the
now defunct savings and loan industry required a taxpayer-funded bailout of
more than half a trillion dollars. The
Federal Reserve bank protected them at our expense: when
"conservative" bankers make profits, they get the benefits;
when they are hurt, we pay the costs.
Once again, recall the story
of banks hiding explosive risks in their portfolios. It is not a good idea to
trust corporations with matters such as rare events because the performance of
these executives is not observable on a short-term basis, and they will game
the system by showing good performance so they can get their yearly bonus. The
Achilles’ heel of capitalism is that if you make corporations compete, it is
sometimes the one that is most exposed to the negative Black Swan that will
appear to be the most fit for survival.
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 RiskMetrics, 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.)
Please, don’t drive a school bus blindfolded.
Owing to [...] misunderstanding of the causal chains between policy and
actions, we can easily trigger Black Swans thanks to aggressive ignorance—like
a child playing with a chemistry kit.
Warning hedge fund imbeciles about the next blowups: at 100 Women in Hedge Funds lecture, 2004, “Long-Term
Capital Management is a picnic compared to what’s going to happen to you
guys".
My war against "Value
at Risk" started in 1996 in
this interview.
Pablo Trianas’ comment
EN FRANCAIS
Comme si nous n’avions pas assez de
problèmes comme cela, les banques sont aujourd’hui plus que jamais sujettes au
Cygne Noir et à l’erreur ludique, tandis que des « scientifiques » appartenant
à leur personnel gèrent leur exposition éventuelle à ces phénomènes. dans les
années 1990, le géant J. P. morgan mit le monde entier en danger en
introduisant Riskmetrics, méthode de gestion des risques bidon, entraînant la
généralisation de l’utilisation de l’erreur ludique et portant au pouvoir non
pas de Gros tony adeptes du scepticisme, mais des dr. Johns (depuis, se répand
une méthode liée à celle-là, baptisée la vaR [de l’anglais « value at Risk » –
mot à mot : « valeur sous risque » – N.d.T.] – fondée sur la mesure
quantitative du risque).
Quand
je regarde les risques encourus par Fanny mae, une institution de prêts
hypothécaires sponsorisée par le gouvernement, elle semble assise sur une
poudrière, sujette au moindre soubresaut. mais il n’y a rien à craindre : les
nombreux « scientifiques » qui en font partie ont jugé ces événements «
improbables ».
LA
MONDIALISATION: elle génère une fragilité qui se répercute en cascade tout en
diminuant la volatilité et en créant une apparence de stabilité. En d’autres
termes, la mondialisation produit des Cygnes Noirs foudroyants. Nous n’avons
jamais vécu sous la menace d’un effondrement général. Jusqu’à présent, les
institutions financières ont fusionné, donnant naissance à un nombre plus
restreint de très grandes banques. maintenant, les banques sont pratiquement
toutes liées entre elles. ainsi l’écologie financière est-elle en train
d’enfler pour former des banques bureaucratiques gigantesques, incestueuses
(souvent « gaussianisées » en termes d’évaluation des risques) – la chute de
l’une entraîne celle de toutes les autres. La concentration accrue des banques
semble avoir pour effet de rendre les crises financières moins probables, mais
quand elles se produisent, c’est à une échelle plus globale et elles nous
frappent très cruellement. Nous sommes passés d’une écologie diversifiée de
petites banques, avec différentes politiques de prêt, à un ensemble plus
homogène de sociétés qui se ressemblent toutes. Certes, nous enregistrons
maintenant moins d’échecs, mais quand ils se produisent… Cette pensée me fait
frémir. Je reformule mon idée : nous allons avoir moins de crises, mais elles
seront plus graves. Plus un événement est rare, moins nous connaissons les
chances qu’il a de se produire. autrement dit, nous en savons toujours moins
sur les possibilités qu’une crise a de survenir.