Nassim Taleb

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Nassim Nicholas Taleb (b. 1960) (alternative spellings of first name: Nessim or Nissim) is an essayist, philosopher of randomness, researcher, and veteran practitioner of financial mathematics. As a pioneer of complex financial derivatives^[1], he had as a "day job" a lengthy senior trading career in New York City's Wall Street firms, before he reduced his financial activities to start a second career as an epistemologist of chance events and focus on the development of his black swan theory of unexpected rare events^[2]. Taleb's literary approach is to provide a modern-day brand of philosophical tale by mixing narrative fiction, often semi-autobiographical, with scientific commentary in a style similar to Milan Kundera, Ismail Kadare, and Alain de Botton.

Contents 1 Biography 2 Research and theories of randomness 3 Major writings 4 Honors 5 External links 6 References

[edit] Biography

Taleb originates from Amioun, Lebanon, whose political Greek Orthodox Levantine family saw its prominence and wealth reduced by the Lebanese Civil War which began in 1975. He is the son of Dr. N. Taleb, an oncologist and researcher in anthropology, and Minerva Ghosn. Both sides of his family were politically prominent in the Lebanese Greek Orthodox community: on his mother's side, his grandfather and his great-grandfather were both deputy prime ministers of Lebanon; on his father's side, his grandfather was a supreme court judge and, in 1861, his great-great-great-great grandfather was a governor of the Ottoman semi-autonomous province of Mount Lebanon.

Taleb holds an MBA from the Wharton School at the University of Pennsylvania, and a Ph.D. in financial mathematics from the University of Paris. He serves as the Dean’s Professor in the Sciences of Uncertainty at the Isenberg School of Management at the University of Massachusetts Amherst, as well as Adjunct Professor of Mathematics at the Courant Institute of New York University.

Empirica LLC, the firm founded by Taleb, owns interests in hedge funds and operates a research laboratory, but the bulk of the business consists in providing portfolio protection strategies for hedge funds.^[3]

As a trader, Taleb has said he took a skeptical and anti-mathematical approach to risk and uncertainty and had a severe distrust of models and statisticians and a contempt for finance academics. He has held at various times the positions of:

• managing director and proprietary trader at Union Bank of Switzerland
• worldwide chief proprietary arbitrage derivatives trader for currencies, commodities and non-dollar fixed income at CS-First Boston
• chief currency derivatives trader for Banque Indosuez
• Managing Director and worldwide head of financial option arbitrage at CIBC-Wood Gundy
• derivatives arbitrage trader at Bankers Trust, proprietary trader at BNP-Paribas, as well as independent option market maker on the Chicago Mercantile Exchange.

Taleb considers himself far less a businessman than an epistemologist of randomness who used trading to attain his independence and freedom from authority, as he writes in his book, Fooled by Randomness, which became a cult book on Wall Street after it was first published in 2001. It was translated into 19 languages. ^[4]

Taleb has a literary fluency in English, French, and classical Arabic, a conversational fluency in Italian and Spanish, and reads classical texts in Greek, Latin, Aramaic, and ancient Hebrew, as well as the Canaanite script.^[5]

[edit] Research and theories of randomness

Taleb calls himself a "skeptical empiricist", and believes that scientists, economists, historians, policymakers, businessmen, and financiers overestimate the value of rational explanations of past data, and underestimate the prevalence of unexplainable randomness in that data. He follows a long lineage of skeptical philosophers, including Sextus Empiricus, Al-Ghazali, Pierre Bayle, Montaigne, David Hume, and Karl Popper in believing that the past cannot be used to predict the future.

Taleb now focuses on being a researcher in the philosophy of randomness and the role of uncertainty in science and society ^[6] , with particular emphasis on the philosophy of history and the role of fortunate or unfortunate high-impact random events, which he calls "black swans", in determining the course of history.

Taleb believes that most people ignore "black swans" because we are more comfortable seeing the world as something structured, ordinary, and comprehensible. Taleb calls this blindness the Platonic fallacy, and argues that it leads to three distortions:

1. Narrative fallacy: creating a story post-hoc so that an event will seem to have a cause.
2. Ludic fallacy: believing that the structured randomness found in games resembles the unstructured randomness found in life. Taleb faults random walk models and other inspirations of modern probability theory for this inadequacy.
3. Statistical regress fallacy: believing that the probability of future events is predictable by examining occurrences of past events.

Also, Taleb is collaborating with Benoit Mandelbrot on a general theory of risk management.

[edit] Major writings

• Dynamic Hedging: Managing Vanilla and Exotic Options. New York : John Wiley & Sons, 1997. ISBN 0-471-15280-3
• Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. 2nd ed. New York : Random House, 2005. ISBN 0-8129-7521-9. Translated to 20 languages so far.
• Le Hasard Sauvage. Paris : Les Belles Lettres, 2005. ISBN 2-251-44297-9. Mostly a translation of "Fooled by Randomness", but has major changes compared to the English version.
• The Black Swan: The Impact of the Highly Improbable. New York : Random House, 2007. ISBN 1-4000-6351-5.

[edit] Honors

• Taleb was inducted into the Derivatives Hall of Fame in February 2001.^[7]

[edit] External links

• Nassim Taleb's home page
• Edge article: The Opiates of the Middle Class
• New Scientist Profile
• New Yorker article by Malcolm Gladwell: "Blowing Up: How Nassim Taleb turned the inevitability of disaster into an investment strategy"

[edit] References