JessicaRulestheUniverse.com

In the light of the cataclysmic collapse of financial institutions, Nassim Nicolas Taleb, Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute, author of Fooled by Randomness and the bestseller The Black Swan, asks: Are we using models of uncertainty to produce certainties?

“Black swans” are highly improbable and unpredictable events that have massive impact. Taleb argues that the banking system, betting against black swans, just wiped out one TRILLION dollars, more money than was ever made in the history of banking.

“It appears that financial institutions earn money on transactions (say fees on your mother-in-law’s checking account) and lose everything taking risks they don’t understand. I want this to stop, and stop now— the current patching by the banking establishment worldwide is akin to using the same doctor to cure the patient when the doctor has a track record of systematically killing them. And this is not limited to banking—I generalize to an entire class of random variables that do not have the structure we thing they have, in which we can be suckers.

“And we are beyond suckers: not only, for socio-economic and other nonlinear, complicated variables, we are riding in a bus driven a blindfolded driver, but we refuse to acknowledge it in spite of the evidence, which to me is a pathological problem with academia. . .”

The Fourth Quadrant: A Map of the Limits of Statistics, in Edge. Makes stats riveting!