“If you must panic, panic early.”— Nassim Nicholas Taleb
“Uncertainty is actually a reason for precaution rather than just throwing caution to the wind and just saying, ‘Well, we don’t know, so what the hell? Let’s just keep going.'”— Scott Patterson
Nassim Nicholas Taleb (@nntaleb) spent 21 years as a risk-taker (quantitative trader) before becoming a researcher in philosophical, mathematical, and (mostly) practical problems with probability.
Taleb is the author of a multivolume essay, the Incerto (The Black Swan, Fooled by Randomness, Antifragile, The Bed of Procrustes, and Skin in the Game), covering broad facets of uncertainty. His work has been published into 49 languages.
In addition to his trader life, Taleb has also written, as a backup of the Incerto, more than 70 technical and scholarly papers in mathematical statistics, genetics, quantitative finance, statistical physics, medicine, philosophy, ethics, economics, and international affairs around the notion of risk and probability (grouped in the Technical Incerto).
Taleb is currently Distinguished Professor of Risk Engineering at NYU’s Tandon School of Engineering (retired). His current focus is on the properties of systems that can handle disorder (“antifragile”).
Scott Patterson (@pattersonscott) is an investigative reporter for The Wall Street Journal, currently based in Washington DC, working on climate and energy policy. His new book is Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis, a profile of the rise of “black-swan traders,” such as Nassim Taleb and Mark Spitznagel, as well as a survey of the many perils the world faces today—and how we might fix them.
Scott has covered everything from Berkshire Hathaway to stock exchanges to high-speed traders to the financial regulators. His first book, The Quants, describes the rise of mathematical finance and delves into its role in the 2008 financial blowup. Dark Pools, his second book, tells how computer traders took control of the US stock market, starting from the birth of computer trading in the 1980s to the explosion of high-frequency trading in the late 2000s.
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Want to hear an interview with someone else who history will remember as much more than a successful hedge fund manager? Listen to my most recent conversation with Ed Thorp in which we discussed music as stress reduction, avoiding unnecessary risks, how to become more numeracy literate, the value of long-term thinking, the price of short-term thinking, making the best financial decisions with unknown variables, how to have fun learning about probability and statistics, and much more.
What was your favorite quote or lesson from this episode? Please let me know in the comments.
SCROLL BELOW FOR LINKS AND SHOW NOTES…
SELECTED LINKS FROM THE EPISODE
- Connect with Nassim Nicholas Taleb:
- Connect with Scott Patterson:
- Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis by Scott Patterson | Amazon
- The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It by Scott Patterson | Amazon
- Dark Pools: The Rise of the Machine Traders and the Rigging of the US Stock Market by Scott Patterson | Amazon
- Incerto by Nassim Nicholas Taleb | Amazon
- The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb | Amazon
- Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb | Amazon
- Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb | Amazon
- The Bed of Procrustes: Philosophical and Practical Aphorisms by Nassim Nicholas Taleb | Amazon
- Skin in the Game: Hidden Asymmetries in Daily Life by Nassim Nicholas Taleb | Amazon
- Statistical Consequences of Fat Tails: Real World Preasymptotics, Epistemology, and Applications (Technical Incerto) by Nassim Nicholas Taleb | Amazon
- Hoagie Haven
- The Wall Street Journal
- Empirica Capital | Wikipedia
- Universa Investments LP
- The Collapse of Lehman Brothers: A Case Study | Investopedia
- Understanding Tail Risk and the Odds of Portfolio Losses | Investopedia
- Silent Risk: Lectures on Fat Tails, (Anti)Fragility, Precaution, and Asymmetric Exposures by Nassim Nicholas Taleb
- Black Monday: Definition in Stocks, What Caused It, and Losses | Investopedia
- S&P 500 Returns since 2007 | Official Data Foundation
- Did Bruce Lee Say This About the Value of Practice? | Snopes
- What Is a Put Option?: A Guide to Buying and Selling | Bankrate
- Systemic Risk of Pandemic via Novel Pathogens – Coronavirus: A Note | New England Complex Systems Institute
- The Pandemic Isn’t a Black Swan but a Portent of a More Fragile Global System | The New Yorker
- Did Justinian Create the First Pandemic? | Montana State University
- Biological Warfare at the 1346 Siege of Caffa | Emerging Infectious Diseases
- Great Plague of 1665-1666 | The National Archives
- How Five of History’s Worst Pandemics Finally Ended | History
- Tail Risk of Contagious Diseases | Nature Physics
- Don’t Look Up | Netflix
- Emperor Joseph’s Solution to Coronavirus | University of Minnesota
- The Lazarettos | Experience Dubrovnik
- Revealed: Singapore’s Strategic Secrets for Staying Ahead | GovInsider
- Managing the Crisis: Chronological Overview — Chapter Five: 1982 | FDIC
- A Bob Rubin Trade | Fundamental Finance Playbook
- Robert Rubin, Former Exec at Citigroup, Apologizes over Financial Crisis | The Seattle Times
- Nassim Taleb: My Rules for Life | The Guardian
- Eight Terrific Tactics for Dealing with Haters, According to Tim Ferriss | Maxim
- A Dozen Things I’ve Learned from Charlie Munger about Ethics | 25iq
- Identifying the Highest and Best Uses of Capital | Citadel
- Taleb-Asness Black Swan Spat Is a Teaching Moment | Yahoo!
- Existentialism | Stanford Encyclopedia of Philosophy
- Irrational Man: A Study in Existential Philosophy by William Barrett | Amazon
- Catch-22 by Joseph Heller | Amazon
- Kurt Vonnegut’s Remembrance of Joseph Heller in The New Yorker | Scripting News
- What Is Stoicism? A Definition & 9 Stoic Exercises To Get You Started | Daily Stoic
- The Opiates of the Middle Classes by Nassim Taleb | Edge
- Skepticism | Stanford Encyclopedia of Philosophy
- We’re in a ‘Polycrisis’ — A Historian Explains What That Means | World Economic Forum
- Precautionary Principle | Wikipedia
- The Precautionary Principle | New England Complex Systems Institute
- The Precautionary Principle Explained by Nassim Taleb | Atlas Geographica
- Is Nassim Taleb Right About Monsanto Company and GMOs? | The Motley Fool
- Mediocristan and Extremistan: The Two Categories of Random Events | Coffee and Junk
- Fat Tails | American Scientist
- Where Do Thin Tails Come From? by Nassim N. Taleb | arXiv: Risk Management
- On Fox News, Dr. Phil Said 360,000 Americans Die in Swimming Pools Every Year. He’s Wrong by Magnitudes. | Poynter
- RE: Drowning in Swimming Pools | Nassim Nicholas Taleb, Twitter
- Mini Lecture 12: How to Look at the Risks of COVID Vaccines | N.N. Taleb’s Probability Moocs
- After The Bomb: Survivors of Hiroshima and Nagasaki Share Their Stories | Time
- Kuru: Causes, Symptoms, and Diagnosis | Healthline
- The Monsanto Saga and Launch of “Toxic Exposure” with Nassim Nicholas Taleb | Healthcare Unfiltered
- Another ‘Too Big to Fail’ System in GMOs | The New York Times
- The Regulation of GMOs in Europe and the United States | Council on Foreign Relations
- Analysis: Mixed Message on Weed-Killer Reflects Reality of Scientific Uncertainty | Reuters
- David Cameron in Conversation with Nassim Taleb | RSA
- Karl Popper Debate | BC Forensic League Society
- What Did Richelieu Mean by His “Six Lines” Quote? | History Stack Exchange
- “The Dose Makes the Poison.” | Chemical Safety Facts
- Understanding is a Poor Substitute for Convexity (Antifragility) by Nassim Nicholas Taleb | Edge
- Seven Things You Need to Know About Fannie Mae and Freddie Mac | Center for American Progress
- Plaza Accord: Definition, History, Purpose, and Its Replacement | Investopedia
- Profit and Loss Statement (P&L) | Investopedia
- The Blow-Up Artist | The New Yorker
- How Did George Soros Break the Bank of England? | Investopedia
- Fat Tails, Ellipticality, and Diversification | Bloomberg Professional Services
- Is Globalization a Black Swan? | Mr. Globalization
- How Lee Kuan Yew Engineered Singapore’s Economic Miracle | BBC News
- Soviet Influence on the Peace Movement | Wikipedia
- The History behind Germany’s Nuclear Phase-Out | Clean Energy Wire
- The Source of Germany’s Nuclear Aversion | The Breakthrough Institute
- Lessons and Doubts from the Chernobyl Disaster | IFRF
- Hedge Funds Since the Financial Crisis: From Boom to Bust | Investopedia
- US Regulator Calls for Greater Scrutiny of Hedge Funds after Bond Turmoil | Financial Times
- The Tale of the Fed and Long-Term Capital Management | Barron’s
- How Tech Startups Have Behaved as New Age Ponzi Schemes by Kirti Dixit | LinkedIn
- Working with Convex Responses: Antifragility from Finance to Oncology | Entropy
- Heart Rate Variability: A New Way to Track Well-Being | Harvard Health
- Intermittent Fasting 101 — The Ultimate Beginner’s Guide | Healthline
- Principia Politica Third Draft | Nassim Nicholas Taleb
- Does ‘Black Swan’ Author Taleb Think ChatGPT Is An Idiot? | Benzinga
- What Is the Talmud? | My Jewish Learning
- Ancient Jewish History: Aramaic | Jewish Virtual Library
- The Summa Theologiæ of St. Thomas Aquinas | New Advent
- The Professor Helping Guide Billions in Climate Spending | WSJ
- 12 Ways the Inflation Reduction Act Will Benefit Birds and People | Audubon
- Republicans in the US ‘Battery Belt’ Embrace Biden’s Climate Spending | The Guardian
- [09:44] How Scott and Nassim first connected.
- [12:02] Why Nassim would rather be remembered as a scholar than a trader.
- [14:01] You can’t forge a new friendship without breaking a few eggs.
- [16:22] Silent risk, tail events, and one-trick ponies.
- [25:56] What prompted Scott to write Chaos Kings?
- [33:41] Pseudo-efficiency, pseudo-optimization, and pseudo-sorries.
- [36:49] The joy of writing a preemptive resignation letter.
- [37:39] Developing resilience against criticism.
- [40:33] Recurring patterns in successful investors.
- [44:15] Nassim: contrarian, or simply independent?
- [46:44] Jiving with skeptical turkeys.
- [51:53] Living in the polycrisis.
- [53:54] The precautionary principle.
- [1:00:07] Fat tails, thin tails, and the COVID vaccine.
- [1:11:03] GMO risks and Monsanto intimidation tactics.
- [1:14:45] Implementing the precautionary principle at a large scale.
- [1:16:49] Uncertainty and the climate crisis.
- [1:19:45] Convexity in the face of financial crisis.
- [1:27:12] Are investors overpowered in an interconnected world?
- [1:31:36] Utilizing the precaution principle in the real world (for better and worse).
- [1:36:53] The flow-on effect of having skin in the game.
- [1:39:37] The ponzification of startups and an overdue reckoning.
- [1:42:51] What convexity at the center of all things conveys.
- [1:49:27] Where to find Scott and Nassim.
- [1:50:44] What Nassim is working on now.
- [1:53:37] New insights from ancient words.
- [1:57:26] Parting thoughts.
MORE QUOTES FROM THE INTERVIEW
“On my grave, I don’t want to be known as a trader, but as a scholar.”
— Nassim Nicholas Taleb
“If you must panic, panic early.”
— Nassim Nicholas Taleb
“Uncertainty is actually a reason for precaution rather than just throwing caution to the wind and just saying, ‘Well, we don’t know, so what the hell? Let’s just keep going.'”
— Scott Patterson
“It’s what I call pseudo-optimization: If you drive a Ferrari 500 kilometers per hour, you’re not going to get there faster than if you ride a bicycle, because obviously you’re never going to get there.”
— Nassim Nicholas Taleb
“I came into Wall Street and started reading about how there’s this belief that people are irrational and the markets are rational and they are predictable because of this. And I thought that is just crazy. To me, I look at financial markets and I see black swans, I see fear and greed. That to me is what drives markets, not rational behavior, rational expectations.”
— Scott Patterson
- Neil Chriss
- Mark Spitznagel
- Seth Roberts
- Bruce Lee
- Justinian I
- Yaneer Bar-Yam
- Joseph W. Norman
- Peter Ho
- Pasquale Cirillo
- Robert Rubin
- Charlie Munger
- Ronald Reagan
- Kenneth C. Griffin
- Ed Thorp
- Cliff Asness
- Fyodor Dostoevsky
- Joseph Heller
- Kurt Vonnegut
- Seneca the Younger
- Pierre Daniel Huet
- Joseph Justus Scaliger
- Pierre Bayle
- David Hume
- Baruch Spinoza
- Adam Tooze
- George Soros
- Karl Popper
- Warren Buffett
- Elon Musk
- Rupert Read
- Phil McGraw
- David Cameron
- Victor Niederhoffer
- Lee Kuan Yew
- Vladimir Putin
- John Meriwether
- Adam Smith
- Thomas Aquinas
- Joe Biden
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