Welcome to the Journey to Science of Complexity, Chaos Theory & Non Linear System Dynamics:
Here is to the crazy ones, the misfits, the rebels, the trouble makers the round pegs in a square hole, the ones who see things differently. They are not fond of rules and they have no respect for the status quo.You can quote them, disagree with them, glorify or vilify them. About the only thing that you can't do is ignore them, because they change things. They push the human race forward, and while some may see them a s crazy ones, we see genius, because the people who are crazy enough to think they can change the world, are the ones who'll do it.
Apple Computer Advertising 1997
Follow the links they will take you to the Land of Smart and Ultra Genius
I was never interested in Fashion Magazines and perhaps never would be. But this month I had to buy GQ as it features the most infulential Finance and Risk person of our Times; Nassim Taleb. It has a wonderful portrait of Nassim photographed in Davos World Economic Forum and captioned as " THE MAN WHO SAW TOMORROW: NASSIM TALEB, WALKING ALONE PATH AS EVER". Nassim is standing there in the snow underneath a pole light. And there is this line at the bottom of the picture" I am not interestedin money, I wanted to teach the Banks a lesson."
complexity cannot tolerate leverage, since no room for error. Since 1980, tripling in leverage, in U.S. and in Europe, ratio of leverage to GDP. High exposure to errors. Commodity prices, similar argument: can have rise in wheat prices in response to very small imbalance in demand, followed by rapid collapse. Not long ago talking about inflation, now talking about deflation. Speculative issue in commodity prices: how much comes from similar mistakes to Greenspan. Globalization has side effects; produces fat tails. In competition, consider two banks, one robust and one not. With globalization, everybody pushed to do outsourcing; concentration of U.S. and German firms outsourcing to, say, Bangalore. Probability of failure low because only one source of randomness. But suppose there is a problem in Bangalore--political, storms--that disrupts communication there? What happens to all these firms? French bank, lost money on a rogue trader. If you had 10 small banks each with 5 billion, wouldn't have a problem because easy to liquidate. With one bank, should a rogue trader happen, his position will be 10 times the size. Assume no linearities in execution cost. Liquidating $50 billion is more costly than 10 times liquidating $5 billion. Lumping makes you more vulnerable to large events. One large error is a lot worse than 10 smaller errors.
I came across this great site http://www.theblackswanreport.com . The site is full of great stuff related to Nassim Taleb's work and is updated regularly with latest material. It has lots of Videos, Interviews, articles and links. A wonderful one stop free shop for Taleb's Fans