There is a reason Nassim Taleb hates “Journos“.

Here’s Everything That Could Go Wrong in 2016 ~ Bloomberg

Investors can’t ignore this or other so-called Black Swan scenarios following a year that surprised the world with record refugee flows and brutal terror attacks. In 2016, unexpected events will take on heightened importance as the Fed ends an era of ultra-cheap credit. Markets will lose the cushion that’s shielded them from geopolitical shocks such as the Arab uprisings and the annexation of Crimea.

You gotta appreciate the way the authors tackle QE describing it as a market risk mitigation tool. Such is a fools game but that is not what attracted me to the piece. What did attract me was the authors terming the events they predict as “Black Swan” scenarios linking Taleb’s book where he coined the phrase. Here is what the cover to the book says:

A Black Swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.

So yes, Cortez showing up was certainly a Black Swan type event for the Aztecs but not necessarily for Cortez. The again the Aztecs did not have Bloomberg getting them the news. I just question terming the unlikely predictions for 2016 as Black Swans since the writers predicted them.

Speaking of predictions, Black Swans, Normal Distributions and Fat Tails has anyone seen Karen Clark these days?

Is it possible to create “randomness”?

I know some of you will find today’s question too elementary but for the other 99%, vital concepts are found via Wiki:

Applied usage in science, mathematics and statistics recognizes a lack of predictability when referring to randomness, but admits regularities in the occurrences of events whose outcomes are not certain. For example, when throwing two dice and counting the total, we can say that a sum of 7 will randomly occur twice as often as 4. This view, where randomness simply refers to situations where the certainty of the outcome is at issue, applies to concepts of chance, probability, and information entropy. In these situations, randomness implies a measure of uncertainty, and notions of haphazardness are irrelevant.

The fields of mathematics, probability, and statistics use formal definitions of randomness. In statistics, a random variable is an assignment of a numerical value to each possible outcome of an event space. This association facilitates the identification and the calculation of probabilities of the events. A random process is a sequence of random variables describing a process whose outcomes do not follow a deterministic pattern, but follow an evolution described by probability distributions. These and other constructs are extremely useful in probability theory.

Randomness is often used in statistics to signify well-defined statistical properties. Monte Carlo methods, which rely on random input, are important techniques in science, as, for instance, in computational science.

The multidisciplinary implications are legion including in my considered opinion, the legal profession. Additional background can be found here.


Would there have been a reformation if Luther had been hip to Peppermint oil?

While we can all relate to his pain would there have been a reformation if Luther had taken peppermint oil and spent less time on the throne?

Scientists don’t know what they are talking about when they talk about religion. Religion has nothing to do with belief, and I don’t believe it has any negative impact on people’s lives outside of intolerance. Why do I go to church? It’s like asking, why did you marry that woman? You make up reasons, but it’s probably just smell. I love the smell of candles. It’s an aesthetic thing.

I guess Joe Smith loved the smell of his hat…..


Roubini, Taleb Talk Economic Recovery and Risk on CNBC

I noted the majority of the comments on the Huff Post post which featured this video were driven from a political idealogy standpoint than one of economic common sense which is one of the reasons I opined on the last Taleb CNBC video I posted that:

using history as a guide we’ll go bankrupt before most folks are able to pull their heads out of their asses.

This is simple common sense, not only do we spend far more than we take in, we have also rewarded those who brought us this disaster known as the financial crisis. My own greatest heartburn isn’t derived from the short term measures taken designed to cushion the economic blow, rather we have no long term solution designed to prevent the inevitable.

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more about “Roubini, Taleb Talk Economic Recovery…“, posted with vodpod

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The future of Insurance & Regulatory Reform

The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.

Absent the dog, this future is evident in the present insurance industry – and, in that regard, the various proposals to reform the nation’s financial regulatory system fall short.

Financial Regulation: A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System and the related Testimony of the Acting Comptroller General; Natural Hazard Mitigation and Insurance:  The United States and Selected Countries Have Similar Natural Hazard Mitigation Policies but Different Insurance Approaches; and Blueprint for a Modernized Financial Regulatory Structure collectively offer around 400 well written pages of bureaucratese.

Over the past few days, I’ve read or read over all 400  along with related news articles, blog posts and the like.  Without belaboring the point, I’ll add that I read all with the eyes of someone both trained and experienced in the design/redesign of systems of service.

The “official” publications propose to “modernize the outdated U.S. Financial Regulatory System” with the usual problem-based approach to system development/reform of government that results in the more things change, the more they stay the same. In this case, however, the proposed changes are based on a misunderstanding of the problem.

Among those in government or entities of or linked to the financial system, there appears to be almost universal agreement the problem is the patchwork of state/ federal regulatory oversight over a collection of entities that make up a financial system but that there is no real system.

The graphic below is from the Framework report. Continue reading “The future of Insurance & Regulatory Reform”