Hopping Mad about the Financial Crisis

6 responses to “Hopping Mad about the Financial Crisis”

1. 

   aeroculus

   Sep 16, 2008 at 3:24 am

   mediocristan:
   gradualism in evolution (evo by creeps)

   extremistan:
   punctuated equilibrium (evo by jerks)

   Reply
2. 

   AcroYogi

   Sep 17, 2008 at 5:54 am

   aeroculus — genius! 🙂

   Reply
3. 

   Apollo 11

   Sep 20, 2008 at 5:01 pm

   Take a theater full of people. Do a statistical analysis on all the characteristics that you can think of to describe those people. For the most part, the individuals will be weakly correlated on most things, except perhaps their choice of movies.

   Now yell fire.

   All of these uncorrelated people run to the exits en masse, some get hurt, some may be trampled in the panic. The only thing these people have in common is their desire to live.

   All chaotic systems and dynamic equilibriums, like capitalism, have a tipping point, when small correlations are amplified and lead to results that cannot be described by a statistical analysis of the ensemble — a Butterfly Effect.

   The challenge is how to run a business, how to live your life, within the context of this reality.

   Reply
4. 

   Wonderlane

   Sep 21, 2008 at 6:11 am

   Hi, I’m an admin for a group called You Don’t Have to be Rich to be Wealthy, and we’d love to have this added to the group!

   Reply
5. 

   jurvetson

   Sep 26, 2008 at 12:39 am

   Apollo11: Jaron Lanier just posted a similar critique of the wisdom of crowds and a further generalization of contexts:

   "This is a superb piece and I hope it is widely read and taken to heart in Wall Street, Silicon Valley, and Washington. All these centers of power and creativity are drowning in illusions brought about by thunderous misuses of statistics that have become implacably seductive only with the recent availability of vast, connected computer resources.

   Taleb addresses finance, but similar madness has appeared in connection with:

   • Science, where it has been proposed that statistics in the computing cloud can and should replace the process of understanding within a scientist’s brain

   • Arts, where it has been proposed that "big n" business models should replace taste, artistic voice, or the idea of "artist" as profession

   • Education, where it has been proposed that wikis can do better than textbooks and teachers

   • Journalism, where many believe blogs, Twitter streams, wikis, and so on can do better than reporters in the mold of Woodward and Bernstein

   • Technology, where it has been proposed that an uncannily smooth historical determinism is in charge, propelling us to the Singularity.

   There are many other examples. What is discouraging is that the complete failures of all these claims have only bolstered the faith of the seduced believers."

   from http://www.edge.org/documents/archive/edge258.html#rc

   Reply
6. 

   simply innocuous

   Sep 28, 2008 at 10:36 pm

   Did he discuss that the current financial crisis, though reported as a problem with mortgage backed securities, really was only tipped by them. Mortgage backed securities can be unscrambled back to the original loans which are backed by real estate, even if the only value there is a pile of mold-prone gypsum board. However, the other instruments financial firms have, the intertwined web of promises, have no intrinsic value. "Value" is nothing but empty promises. Including short-term commercial paper, this weekend’s reported problem.
   How did Taleb bet against this to make money for his clients?

   Reply