Falken on Taleb

Taleb, author of Fooled by Randomness and The Black Swan, has a new book out about a term he's coined called anti-fragility. The idea is that insitutions should benefit from mishandling rather than be harmed by it.  At first I thought this was a word coined because using the word "adaptive" sounds too normal until it occured to me that new terms were also useful for authors who want to group a lot of not quite related concepts under one roof. He recently published an editorial in the WSJ promoting the concept and his book. 
 
Some of the anti-fragile industries he mentions favorably are the airline and restaurant industry due to their ability to handle failure. A world full of anti-fragile institutions like these would become poor quite quickly. Maybe anti-fragile economies already are poor, as a society without complex systems that rely on each other can only produce so much wealth. Or perhaps our current society is actually already quite adaptable, as despite many different crisis over the past 5 years life has gone on normally for the majority of the developed world.
 
But rather than expand my view on his op ed, I would direct the reader towards Falkenblog's take on Taleb's new book. Before diving in, it's important for those unfamiliar with Nassim Taleb to note that he is quite arrogant, and therefore doesn't deserve to be handled with kid gloves.
 
Here are some of the more amusing excerpts:
 
"He doesn't identify key attributes of attractive, risky (oops, antifragile!) opportunities, just implies they are the ones that unlike options and lottery tickets, work well. In fact, he's anti-theory, so one supposedly finds them by random sampling (aka 'trial and error'). That's a strategy statistically proven to underperform, catering to the biases most investors have, why both day trading bucket shops thrive and  low volatility investing works. As a self-help book it's like someone saying you should eat more sugar, a strategy many will find highly convenient."
 
 "Another key to understanding Taleb is that he has a French post-modern tendency to write to impress rather than explain. He provides hundreds of loosely related anecdotes, reminding me of the Talmud quote that 'when a debater’s point is not impressive, he brings forth many arguments.'  I actually agree with a lot of Taleb, such as the intractability of risk because it is endogenous, and I think he's vaguely libertarian, but he says so many inconsistent things that doesn't mean much (when he's right it's probably a good example of the Gettier problem)."

"The fund Universa, of which he is affiliated, states that it is no longer merely long volatility or gamma, but timing when to be long volatility or gamma. I'm sure all those investors who jumped in Universa circa 2009 would be surprised to know that's the strategy, but as part of management, he benefits from the gamma resulting from the asset management fees from investors fooled by randomness. He does have an excuse here, as he did write a book on that, so it's not like they weren't warned."
 
Falkenstein goes on to note how well Taleb and his fans react to criticism. It will be interesting to see what type of blowback he gets from his review.

Btw, if you found that review fun, Eric Falkenstein has many previous takes on Taleb that are equally amusing.
 
 
"He inverts the observation that geniuses are often misunderstood to the insight that misunderstood people are geniuses, and critics of such people are imbeciles who don’t even have the taste to appreciate genius."
 
"I suspect that Taleb dreams of someday winning the Nobel Prize in Economics for his popularization of Rietz’s peso problem  (1988), fat tailed distributions (Mandelbroit 1963), or Knightian uncertainty (1921) , at which point he would refuse it and then raise his stature above all those before him. Alas, as defective as the econ Nobel is, it ain't the Peace Prize. He has not added any new significant idea to any of these richly researched threads, rather merely tries to convince readers he and his followers are the only ones in the world who really understand them."
 
 
"For someone advocating doubt and criticizing expert and 'regular' people’s overconfidence and arrogance, Taleb’s writings are filled with certainty, anger, and immodesty, having the Godelian impossibility of someone shouting 'I am the most humble!'"
 
 
"For example, last week in Bloomberg he noted that “Recent events have proved that all risk management was wrong.” Such nuanced insights are usually confined to bigots discussing ethnic rivals."