Friday, May 14, 2010

Why I can't stand Nassim Taleb

I am fucking done with Taleb. I read The Black Swan and Fooled by Randomness and I liked them. I didn't necessarily like his tone, but I liked some of his ideas and, while I felt a little bit condescended on, it did get me to think about certain things I hadn't thought about before. Then I read The Aftermath of War, The (Mis)Behavior of Markets and some assorted Karl Popper and realized that Taleb is just a gigantic douche that kind of misses the point of all these great philosophers he claims to be so enamored with. The fact that he is some gigantic show-off that talks his book and brags about his good plays--while never, ever mentioning the bad ones--doesn't really bother me. He used to be a trader, what can you expect from him? What really kills me though, is that he has so much influence on people. It's easy to get caught up in his little stories, but, once you bring them to the real world, they just don't hold. Newcomers like his simple no-nonsense approach that traders are stupid and you can make a ton of money by just being less stupid--it makes them feel empowered--but the reality is there is no easy money.

While his points regarding the failure of statisticians to accept that sometimes markets can't be modeled and trying to do so is futile makes total sense to me, his talk of using OTM options to profit from fat-tail events is nothing new, and completely ignores how options are actually priced. You'd think the author of Dynamic Hedging (a great way to learn options, actually) would understand the volatility frown/smile and skew. If his thesis was really right you could just buy highly levered front and back spreads simultaneously (a "W" shape R/R profile) and let play those forever, hoping to eventually cash in on a tail event. I'll save you the trouble, the back tests (post '87 crash, when fat tails began being priced in) don't exactly show this one to be a big winner. You'd also think a statistician would understand (less than) zero-sum games. Finally, you'd would hope someone with that much education in financial markets to have at least some vague inkling of the concept of value and value creation/extraction/destruction. He could learn a thing or two about that Pettis article I linked yesterday.

Then there is his wanna-be philosopher, Roubini-humping act; it's getting really old. The reality of it is that he's a washed-up trader working in academics and trying to ride Roubini's coat-tails. I may find Roubini insufferable, but he's a smart man that makes great, insightful points, even if I disagree sometimes. Roubini is also trying to, in addition to making money, make a difference and point-out problems, purportedly so we can fix them. What the fuck does Taleb bring to the table? He's just another asshole trying to make a dollar off of your labor. Go on SSRN and search his name and see what you come up with. Look at his twitter, where he tests out his "aphorisms/epigrams." and then try to figure out where he's adding value to the chain. Just look at these examples:
BusinessBookReaders with my prose are like deaf persons in a Puccini opera: they may like a thing or two while wondering "what's the point?"

The characteristic feature of the loser is to bemoan mankind's flaws, biases, & irrationality --without exploiting them for fun and profit.

Stimulus w/ deficit, even if effective, is as immoral as borrowing from your grandchildren (without asking them) to repay your gambling debt

You will be civilized the day you can spend time doing nothing, learning nothing, & improving nothing, without feeling slightest guilt.

Real philosophers require only long walks to figure out what mere people need crises, accidents, serial bailouts, & calamities to understand
Aha! How witty, that philosophical truth! C'mon. Taleb is a philosopher in the same way the drunk sophomore at some college bar trying to diagnose you is a psychologist. The difference being that the drunk girl intents to actually continue her education and will one day probably be a real psychologist. Taleb will never be a philosopher, he's just a philistine looking for money and attention. You know how it's just so-easy to roll your eyes at The Tipping Point and think "congratulations on learning about exponential growth curves"? Nassim Taleb is basically the Malcom Gladwell of his genre--which gets a little circular when you consider Outliers is just a rehash of the same ideas in The Black Swan, which is basically just a really long "Accept the possibility that what you know may be wrong and or incomplete."

Finally, I'm just going to quote Falkenstein, who's risk/return paper should should have read at least three times by now:
Gee, someone should write a book about blow-hard traders who misrepresent their track records and take excessive risk with other-people's money, all due to cognitive biases they are too shallow to notice in themselves. Oh yeah, Taleb has done that! I guess his insider status gives him better insight.
Look, I could go on about how insufferable I find this man for another 500 words, but I'll summarize it: He's a man that doesn't give a fuck about progress; therefore I no longer give a fuck what he has to say.

7 comments:

  1. Indeed! I definitely enjoyed his books, but his pompous fake philosopher routine makes me ill (reminds me of Soros in a lot of ways). His tweets for example are insufferable.

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  2. The best thing I learned from reading his books was "If you can, walk to wherever you are going." It's amazing how good that advice is.

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  3. I'm assuming you saw Janet Tavakoli recent piece on Taleb:

    http://www.huffingtonpost.com/janet-tavakoli/nassim-taleb-kills-20-bil_b_571633.html

    Or on Barry's blog in 2009:

    http://www.ritholtz.com/blog/2009/07/janet-tavakoli-where-were-drama-pundits-whitney-taleb-and-gasparino-when-it-mattered/

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  4. I hadn't seen those, I guess I'm way late to the party. Thanks though, the second link was a great piece.

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  5. Keep up the good work, we're in something of a minority.

    Peter

    ps: you might enjoy this http://www.xtranormal.com/watch/8042337/

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  6. Black Swan should've been a pamphlet instead of a book. Add in that his tone throughout is so condescending and pretentious that it is almost unbearable. It made me want to scream at the book. Watch his debate against Hitchens et al. on religion. Taleb actually argued that modern medicine/science has not prolonged our lives and improved their quality. Seriously. I was awe struck that he could say that.

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  7. I agree with this article. Taleb always saying he's never using black-scholes, but he actually written books about dynamic hedging using black-scholes. What a dumb retard taleb.

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