19 November 2007

If you are interested.... Nassim Taleb

Visit Tom Keen's Bloomberg November 16th podcast for a fast paced tour of 20th century banking and finance by Nassim Taleb. Author of Black Swan: The impact of the highly improbable, Taleb ruminates on why financial risk estimation remains such an imprecise science.

"Physicists do prediction very well," Taleb explains. "Let's say, to 10 decimal places. Whereas Economists? Well they can't predict better than cab drivers".

Why? Physics is empirical, or "bottom up". It pays, argues Taleb.

Risk methods give a false sense of security. In Taleb's words: "Instead of teaching people 'This is what we don't know'. They teach 'what we think we know'. The illusion of understanding uncertainty"...