Tuesday, August 25, 2009

Being Nassim Nicholas Taleb XI

President Obama reappointed Ben Bernanke chairman of the Federal Reserve today. If you have read this blog, I have not been a great fan on President Obama's economic team, Timothy Geithner and Larry Summers, along with Ben Bernanke, as they are largely the reason that we are currently in this economic mess.

Having written more than a few posts here on the financial crisis, it seems imperative that we hear and employ ideas from outside of the current system. Nassim Nicholas Taleb succintly outlines why he is no fan of "the triplets" as he calls them on a recent appearance on "Morning Meeting with Dylan Ratigan."

Let's look at them. They don't seem to understand risk. They have their models and were blinded by their models. The first person not to understand risk is Larry Summers ... [L]ook at Harvard's finances, all right? He is going to do to us what he did to Harvard?

Second one, look at Geithner. In the rare instance in which you have to look at someone's behavior, the gentleman's house, he couldn't understand the risk of the real estate market? That the house could drop in value? Look at him. He is stuck with his house. Look at the numbers. You can see a lot of jokes on the way with someone with these mortgages.

The third person is Bernanke. We're giving more power to the Fed, who got us here?
These are biting words, but true nonetheless. We need more voices out there like Nassim Nicholas Taleb who speak against the current failed system and ask simple questions that rally the people. The question is...are we listening? In order for our voices to be heard in Washington we have to first understand "what's going on."


zorro said...

My question for Taleb is -
Why haven't you read your own book?
He is 'in' now because he predicted the market problems we have.
But, due to the nature of opinions -
even expert opinions - of the economy, someone was bound to be right - one of these people happened to be him.
Also, if the state of the economy is at all important to him, why didn't he make career choices that would have put him in a place that he could actually do something about it?

Judith Ellis said...

That is a question that you will have to ask him. But one thing that is for certain is that he acted wisely and prudently with regards to his finances and those who trusted in "expert opinion" and they benefited.

The position about which you spoke means nothing if not adhered to. He spoke and wrote extensively BEFORE the crisis about VaR in papers and in his book, The Black Swan. Others can speak but still others have to listen and act. The more important question as I see it is who is benefiting from these risk cycles? Not the average American.

Here is an article written by Pablo Triana on Taleb that you might find interesting.

septembermom said...

Instead of the "triplets", I think we can call them the Three Stooges. We live in the greatest country in the world, but I do wonder why voices of dissent when it comes to political appointments are so often ignored. America, it's time to exercise our right to question, deliberate and brainstorm. I echo your words, Judith, let's figure out "what's going on".

Judith Ellis said...

LOL, Kelly. The mere thought of the Three Stooges is a riot. I only wish the situation here was comedic. But it's not. I appreciate your call to Americans. It's needed.

zorro said...

Taleb has never been in any position that is anywhere near as complex or important as the one as the one Benake has. In fact,(based on my reading of his book) Taleb seems to express contempt for people who would put themselves in a typical 40 hour work week.
I'm sure Taleb could understand what is going on at the Fed if he was in the mix - but he isn't and therefore really does not know what he is talking about. He is a professor, a successfull investor (of which there are quite a few even in this environment) and a best selling author (which I personally put in the same category as any celebrity).
Also, I find it a bit ironic that people like Arianna Huffington have such high praise for Ted Kennedy (and rip into the Treasurary Secretary and the Fed Chairman) when Kennedy's money was generated by his father who manipulated the stock market up until it crashed in 1929 and also made a fortune bring whiskey from Canada during Prohibition. The Mafia (connects Joe Kennedy made in his bootleg days) played a part in JFK winning the Presidency. And this same man became the first head of the SEC precicely because he knew how the game was played (from playing it) and would know how to shut it down. He also did a great job.
I do not trust the Talebs and the Huffingtons (although I like the huffingtonpost). To me, they are self serving. Arianna pops on cable now and then to keep her name in the news to drive web traffic. She has to say something provocative in order to please her fans. Her brand is to be a progressive, but does she really believe it? Its just a product to her (I believe) - when being a conservative didn't suit her, she converted to liberalism - maybe she just liked the parties better. It remoneds be a bit of the Sienfeld episode where one of Jerry's friends converted to Judism just so he could tell Jewish jokes.
None of these people are in positions where they are truly accountable for anything - at least not at the same level as Obama, Bernake or the Treasury Sectretary.
Its not perfect - but upon reflection, it sure will look that way if we get the likes of Sarah Palin in 2012. (far from impossible not matter how funny is sounds today)
Is it possibe to have an informed opinion about the economy when we don't have enough information? I doubt most of of would understand the information if it was avaialable. We need to start trusting the people we voted for -we need to trust thier judgment. And before we take a pundits opinion as gospel, we need to think about what thier agenda might be. What do they get out of 'being an expert'. Why are they pure while others are not. We know nothing of these people other than what they have revealed through thier writings - which are in one way or another, a manipulation.

Like they say, question authority - that doesn't just apply to people in governement, it applies to anyone who writes a 'highly praised book' (aren't the people doing the praising 'authorities') or TV talkers (anyone who is presented as an expert) etc. They are as much 'authorities' as anyone. But they seem to get a free ride.

Judith Ellis said...

Zorro - The one thing that is for certain is that everyone has their own opinion. But I happen to disagree with your depiction of Taleb and Huffington here.

Did you by chance catch Arianna on the Ed Show yesterday? She is not merely a progressive talking head as you have said here. Reagan, of course, changed party affiliations as do a great many others. Does this mean that the new direction is purely political? Well, Senator Spector and Lieberman's examples do smack of this to me. But I could be wrong, though I doubt it. I'm not even sure if Huffington calls herself a progressive and I am certain that Taleb does not. They are both discerning.

Mere provocateurs Huffington and Taleb are not. Now, are their words provocative at times, most certainly. You seem in your comments here and elsewhere to draw definite lines of all kind and speak in various voices, progressive and conservative, provoking and prodding of which I am not altogether opposed. What you accuse Huffington and Taleb of could perhaps be said of you, save your voices are heard on blogs. Are you serious about any position that you take? I'm not hating, just saying.

With regards to the Fed and other "important" and "complex" positions, at some point they were not even in existence. We have created them and can probably do without many of them. There is, of course, an argument as to whether the Fed is even necessary. Anything that we create can be done away with or adjusted and it often does take an inside voice to change. I reject your notion that because Taleb is not in the Fed that he could not see where it or any others need change. You seem to elevate the complexity of these systems that seem to have been designed by statistians and quants, easily manipulated as you have said by others.

Regarding Taleb's contempt for a 40-hour week, I have read his works and there is nothing there to my memory that has contempt for workers. Please give chapter and verse. That would be appreciated. Otherwise, your statement itself shows a kind of contempt. I know well that you are not a fan of successful authors. I have read many of your comments that rip into them. Here you seem to demean Taleb because he is a successful author, trader and thinker. By the way, should he not have an opinion? You and I do. You seem to by and large only respect scientists. I think this is a very limited view.

With regards to purity, Taleb and Huffington are not elected or appointed officials. I suppose that if any of our backgrounds are looked into there may be times that are not as you have suggested here "pure." I, for one, have never felt that the private lives of others should be out there for public scrutiny unless it is illegal or affect the lives of constituents. I also thoroughly believe in outing self-righteous holier-than-thou types such as Senator Ensign and Governor Sanford.

With regards to your comment about Joe Kennedy, which really has nothing to do with Edward Kennedy's record in the Senate, should we now require that all of the money that was made by Joe Kennedy be somehow confiscated and not passed down to his children? How many generations do we go back? Should the wealth of those who benefited from years of free labor in America now be confiscated as the beneficiaries of such largess? Even the forefathers engaged in unjust and unethical acts.

Your linkage to the unethical actions of Joe Kennedy to that of Edward Kennedy cannot be justly made. Huffington's praise for Senator Kennedy is for HIS voice on behalf of the "least of these" for nearly a half of century. Her voice is appreciated. Taleb's empirical writing and successful trading speak for themselves.