Friday, November 14, 2008

Damn those pesky schoolboy errors

Cheers to anon for these clips of Nassim Taleb and Benoit Mandelbrot strutting their funky stuff

Personally, I agree with virtually everything Taleb is saying, and has been saying for some time now

Except one tiny little thing

Taleb seems to think he was the only fucker out there who saw what was coming

Taleb is essentially promoting a varient of the 'cockup not conspiracy' aka 'tragic schoolboy error' explanation of how the world works

This is important, I think, because some variant of Taleb's Black Swan' thesis is set to become the orthodox explanation for what is happening to the world's finances

and, as such, no-one is to be held accountable for what lies ahead

Sure, the majority of mid-level contributors to this mess were daft fools driven by greed and fear; with no comprehension of where they were headed

But to believe that only Nassim Taleb, and some net based Loons, were the only people who could see a crash coming is nonsense - and more than a little arrogant

It's also worth remembering that, at the same time the seeds for the current crash were being sown, the key components of a fully-blown surveillance and detention state were being rushed into place in the same countries that were inflating the bubble.

It's also worth asking yourself just how much, or little, wealth the people responsible for inflating the bubble have lost personally

The fact that history is littered with, admittedly simpler, smaller scale, occurrences of the same kind of kleptocratic economic terrorism is also a bit of a give away

No doubt any non Loons passing through this blog would, if they could be bothered, dismiss my outpourings as being those of a deranged paranoid lunatic

But then there's the small matter of my blog, and countless others out there, detailing quite specifically what lay ahead

So, sorry, claims that what is happening was inherently unpredictable don't impress me much at all. And shame on all those fuckers out there in cyberspace and the mainstream media who devoted their time to sticking the knife into us 'tinfoil hatters' when the infrastructure for chaos-driven rape and pillage was being laid down piece by piece

Taleb's almost certainly correct when he argues that the specific outcomes of this crash can't be predicted with any degree of certainty

But, there again, if you control all the guns, money and food would you need to?

(Something which dawned on me whilst pondering the Conspiraloon vs the Non Conspiraloon mental models for comprehending how the world of high finance works is that the Loon looks upon the financial markets as being a means of waging war on ordinary people. And, in war, any successful general makes provision for the unexpected, engages in contingency planning,
retains reserves, and makes cold-blooded calculations about what proportion of his own forces he is willing to expend. In warfare, chaos and Black Swan events are pretty much a given and positively encouraged. Your objective is to comprehensively fuck up your enemy's ability to comprehend and respond to what you are doing, and then kill him. Non Loons who simply take the markets at face value will probably lose me totally at this point...)



not anonymous said...

Interesting interview.

Seems to make a lot of sense.
I´d say however that mans deviousness and greed combined with random events and planned events (911)have combined to cause the so called crisis.If I had to put a% on it Id say 50% greed and deviousness 45% planned and 5% unforeseen events!!!

It will all come out in the wash

not anonymous said...

Now if it is impossible to get at all the causes it is equally impossible to get at all the effects. We shall never comprehend in its fullness any structure in the universe, any event in history, any purpose in human consciousness or consequence of human action.

I like that quote.

Anonymous said...

Interesting post.

"Personally, I agree with virtually everything Taleb is saying, and has been saying for some time now"

So do I.

"Except one tiny little thing"

But he's constrained by something called MaxEnt. His starting point is maximum ignorance. Yours isn't.

Your prior is different from his; your methods are the same.

(Trying to find a link to a paper by Stephen Senn titled, "We're all Bayesians now" to illustrate the point, but can't find it).

"Loon looks upon the financial markets as being a means of waging war on ordinary people"

A good illustration of this is given by Sir John Davies' Case of Mixed Money 1603; ie, for hundreds of years they've been rigging/gaming the system in the manner pointed out by you. (Thickypedia link not especially informative).

Curiously, it's all in the open; discussed by academics etc (compare the work of Peter Dale Scott et al) yet completely ignored by the herd. I read about it here (a bit heavy if you're not into that sort of thing). It is the root of the justification for the crime against humanity that is fiat currency.

not anonymous said...

latest from max keiser.on form.Afshin Rattansi talks to Max Keiser about G20 and the Dollar

Stef said...

The Conspiraloon Alliance approves of Peter Dale Scott immensely

Stef said...

and, for some reason, I feel the urge to post a link to that Collapse Gap essay

I suspect that page's traffic is clipping along nicely

Wolfie said...

I caught the Taleb slot on Newsnight a few weeks back and it inspired me to finally complete FBR which I'd put down before at about the 3/4 mark due to its repetitiveness and very much "yep thought/observed that" content.

Quite simply if Taleb ever wondered of the "its all randomness" script he would at best be ridiculed and at worst silenced in the more traditional method. There are quite a few people who now have to keep their mouths shut for the simple reason of self-preservation while the evidence gets dispersed. I am getting emails from former colleagues daily who are becoming part of that very process.

Wolfie said...

wondered of = wondered off

Stef said...

I was chatting today with some chums who I used to work with in a company that was transformed into a rather large hedge fund over the last decade or so

At one point in the conversation I commented on how lucky the group's chairman and chief executive had been to retire from the group (but not from City life) and flog their humongous share holdings off only a few short months before everything went tits up and the share price crashed almost 70%

By the shocked look on their faces it was clear they thought I was inferring something

paul said...

"Personally, I agree with virtually everything Taleb is saying, and has been saying for some time now"

That is the magic of modern publishing, most 'readers' will not get past the back cover.
That looks interesting and it makes comforting sense
And he will wrap up his tiny , and I think erroneous thesis, with a lot of unfalsifiable common sense.
For me, the problem is that the central idea, as presented,is ridiculous.
Willed fuck ups are the problem, not random events.
If there is such a thing as a black swan, which by its own consstricted definition, is unforeseesable, you can only deal with them as they occur.
There is no way you can organise round them as they are beyond the moment's understanding.
From my second hand reading, Taleb is disguising wilful criminality while trying to illuminate the limits and utility of probability theory.
I'm sure he understands his subject, but I am unsure he relates meaningfully to the object.

Wolfie said...

If they really do suspect nothing then they probably aren't so good at their job. If they do have an idea as to what's going on they could well be acting.

I've decided its best not to blog about the details too much. If you were wondering about how he knew when to get out of the market, there have been the odd hints :
Short Sale Tick Test Rule (Uptick Rule) Ends

I just love the line... "Not that anybody would be shorting in this market!" FLW - a beauty.

Wolfie said...

Background for confused readers.

Anonymous said...

"One of The hottest investment advisors these days Nassim Taleb... who's been warning of a crash for years, betting on one and winning big."


What's that? Some kind of call to respect him? Some gambler who stated the bleedin obvious (that big changing events will occur), dresses it up calling in new terminolgy (a trait common to most ecomomists)? Wow. Wow. My hero.

I am reminded of some movie I half watched once, featuring George Harrison. There was a temporary 'swimming pool' filled with all sorts of filth. Pig blood, faeces, fat, etc, Money was put in the pool and people dived in in order just to get some money.

This kind of respect was given to people like Scholes and Merton simply becasue they were able to MILK money from others, before others! It's a bit like people respecting Gates and Buffet. It's perverse.

Well Mr. Taleb, you've respect free in my corner.

You drink from the poisoned chalice - kept full with the blood of millions other decent people who have been drained by people like you.

Musn't forget to say.. For every "successful" 'Money darling' like Taleb, there are lots of other prophet$ who predicted many other things, made bets, but failed. Strangely these people are not piked up until one day one of their bets pays off.

Oh, and by the way, I guess then Pythagoras, Gallelio, Pascal, Newton/Leibniz, Euler, Heisingberg, Godel and many others never touched on chaos theory either. I really must go and reeducate myself.

Stef said...

He was a strange one that Harrison chap, and just a little bit schizo on the subject of lucre

First he wrote Taxman (1966)

Let me tell you how it will be,
There’s one for you, nineteen for me,
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
Should five per cent appear too small,
Be thankful I don’t take it all.
‘Cos I’m the Taxman,
Yeah yeah, I’m the Taxman.

(If you drive a car car), I’ll tax the street,
(If you try to sit sit), I’ll tax your seat,
(If you get too cold cold), I’ll tax the heat,
(If you take a walk walk), I’ll tax your feet.

‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
Don’t ask me what I want it for
(Ah Ah! Mister Wilson!)
If you don’t want to pay some more
(Ah Ah! Mister Heath!),
‘Cos I’m the Taxman,
Yeeeah, I’m the Taxman.

Now my advice for those who die, (Taxman!)
Declare the pennies on your eyes, (Taxman!)
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
And you’re working for no-one but me,

then, a little while later, he wrote Piggies (1968)

Have you seen the little piggies
Crawling in the dirt
And for all the little piggies
Life is getting worse
Always having dirt to play around in.

Have you seen the bigger piggies
In their starched white shirts
You will find the bigger piggies
Stirring up the dirt
Always have clean shirts to play around in.

In their sties with all their backing
They don't care what goes on around
In their eyes there's something lacking
What they need's a damn good whacking.

Everywhere there's lots of piggies
Living piggy lives
You can see them out for dinner
With their piggy wives
Clutching forks and knives to eat their bacon.