Nassim Nicholas Taleb likens modern-day financial markets to medicine in the 1800s, when going to a hospital in London or Paris multiplied your risk of death by four times, he says. Similarly, quants increase risk by deploying flawed financial tools designed to reduce it, he argues.

Chris F. Masse — Thu, 27 Mar 2008 15:40:39 +0000

Via Stan Jonas, Nassim Nicholas Taleb cited in a Bloomberg article (Taleb Outsells Greenspan as Black Swan Gives Worst Turbulence):

Stress tests are inherently risky because they ignore rare but potentially devastating events. [...] .. ["stress test" = Wall Street lingo for examining how a market rout will play out]

Past shortfall doesn’t predict future shortfall. [...]

Bayesian is necessary but not sufficient. [...]

If you are in banking and lending, surprise outcomes are likely to be negative for you. Put yourself in situations where favorable consequences are much larger than unfavorable ones. [...]

Go to parties! If you’re a scientist, you will chance upon a remark that might spark new research. [...]

Also, see Stan Jonas’ 2 takes on FOMC.

Midas Oracle .ORG » financial tools

Nassim Nicholas Taleb likens modern-day financial markets to medicine in the 1800s, when going to a hospital in London or Paris multiplied your risk of death by four times, he says. Similarly, quants increase risk by deploying flawed financial tools designed to reduce it, he argues.