IT IS EASIER TO DISPROVE THAN TO PROVE. The “Black Swan” figure of speech comes from a famous example which is used to illustrate inference. Take the proposition: “All swans are white.” Any number of white swans won’t prove the proposition; a single black swan will disprove it. For Taleb, the Long Term Capital Management crisis disproves the belief that risks can be confidently estimated by traditional techniques. He also points out that we can be a lot more certain about what isn’t true than we can be about what is true.
Archive for September, 2007
IT IS EASIER TO DISPROVE THAN TO PROVE.
Sunday, September 30th, 2007HOW TO NEED A THREE AND A HALF BILLION DOLLAR RESCUE.
Saturday, September 29th, 2007HOW TO NEED A THREE AND A HALF BILLION DOLLAR RESCUE. Taleb regards what happened to Long Term Capital Management in 1998 as a vindication of his views on risk. The principals of Long Term Capital Management included winners of the Nobel Prize in Economics for work on the evaluation of risky options. When risks went the wrong way, the Federal Reserve put together a $3.5 billion dollar bailout of Long Term Capital Management in order to reduce risks to the United States economy and other economies. Very smart people don’t risk loss on the scale of Long Term Capital Management or for that matter risk the loss of an entire $130 million dollar fund unless they think that the risk of loss is so small that it can be ignored.
TWO WAYS OF THINKING ABOUT SHAKESPEARE AS A BLACK SWAN (COMMENT).
Friday, September 28th, 2007TWO WAYS OF THINKING ABOUT SHAKESPEARE AS A BLACK SWAN (COMMENT). Nick commented here that even if Shakespeare was a one in a billion occurrence, there have been more than a billion people in human history so that the a one in a billion event is not that surprising. Nick expressed his thought in terms of standard deviations because of the statistics courses he has taken (an event that is five standard deviations from the average will still take place once in a billion random events.) Taleb’s argument is different. He believes that the probability of a Black Swan (Shakespeare) is much higher than we think. He would go further and say that we don’t know enough about the probability distribution even to use a single measure like “standard deviation.”
BLACK SWANS ARE MORE COMMON THAN WE THINK.
Thursday, September 27th, 2007BLACK SWANS ARE MORE COMMON THAN WE THINK. In THE BLACK SWAN, Taleb’s main contention is that we greatly underestimate both the probability of outliers and their consequences. He rejects the applicability of the “normal” bell curve outside of gambling casinos and similar environments. Taleb believes that the bell curve is unrealistic for rare events: the probability curve for rare events in real life as opposed to gambling casinos has a “fat tail” with rare events having a much higher probability than a bell curve would predict. Taleb believes that financial crises (of the kind that we are having now) will be much more frequent than is commonly supposed.
DOUGLAS MACARTHUR’S RETURN TO CHICAGO.
Wednesday, September 26th, 2007DOUGLAS MACARTHUR’S RETURN TO CHICAGO. David Halberstam’s last book, THE COLDEST WINTER, is about the Korean War and adds to his vivid portrayal of the last half of the twentieth century. This review by Peter Kann describes the bitter divisions in the country: “The fabled ‘wise men’ who peopled the Truman administration — and indeed the gutsy president himself — became largely paralyzed by this “China Lobby” and by the domestic political clout of an increasingly disdainful and defiant Gen. MacArthur. In April 1951, President Truman finally fired the general, who returned home to a hero’s welcome while the president’s popularity sank to new lows….” The most important historical event of my childhood or at least the event that had the most fuss made about it was the return of General Douglas MacArthur to Chicago. I was almost nine. All the schools in Elmhurst, Illinois were closed for the occasion. Our schools were almost never closed. I can recall only one time that they were closed for weather (when I used to point out the large number of snow days in Connecticut, Nick would mutter that when I walked to school, it was uphill both coming and going). With the attention that was paid to the moment, I believed that when I watched General MacArthur setting foot on the ground at the airport, I was watching history being made.
WEIGHT-BEARING WALLS.
Tuesday, September 25th, 2007WEIGHT-BEARING WALLS. Today’s Wall Street Journal has an article by Catesby Leigh on Princeton’s new Whitman College, which will be dedicated Thursday. I had noticed below the suggestion that Harvard should preserve its brand by keeping Georgian style for its buildings. Princeton’s new college will retain the Collegiate Gothic style, which, I guess, is Princeton’s brand. Leigh’s article also points out that the new buildings will use “traditional load-bearing construction” with walls that are about one foot and a half thick, much less than the six foot walls of the Monadnock Building from 1891.
BEAVERS AND REGULATIONS.
Tuesday, September 25th, 2007BEAVERS AND REGULATIONS. This seems to relate to the post below on the encroachment of regulations on architects and builders. The incident is confirmed by Snopes. Thanks to Howard Johnson for calling this to my attention.
IS HARVARD’S ARCHITECTURE IN DECLINE?
Tuesday, September 25th, 2007IS HARVARD’S ARCHITECTURE IN DECLINE? This article in Harvard Magazine thinks that it is. The article laments the inability of Harvard to build new designs by Renzo Piano and Hans Hollein and describes the obstacles that are presented by neighborhood groups and the Cambridge Historical Commission. Apparently, neighbors are still bitter about Peabody Terrace designed by Josep Lluis Sert, where some of my graduate student friends lived forty years ago. My friends liked the efforts to make the building tenant-friendly. The neighbors hated that it was scaled too big for the neighborhood. I was struck that Robert A. M. Stern thinks that Harvard should adopt a neo-Georgian style because that is now Harvard’s brand. I was told years ago that the neo-Georgian buildings for the Harvard houses were unusual because they were the only Harvard buildings that were not built in a contemporary style (contemporary to the date of their construction).
LOOKING AT WHERE WRITERS WRITE.
Monday, September 24th, 2007LOOKING AT WHERE WRITERS WRITE. I can hazard some generalizations about the work places of the writers in the study I linked to yesterday. The most obvious one is that they could all answer the question (where do you write?). They all have a fixed place where they write. Jacqueline Wilson says she does most of her writing away from her office, but her office is special for her. Hillary Mantel says, “All the world’s a desk,” but she writes in her office. Most have have very personal places where they write, often surrounded by favorite objects. Jonathan Safran Foer is an exception; he writes in a public library, and has even switched from one library to another. It looks as if the clean, uncluttered environment favored by some designers is uncommon. Will Self works with a wall full of post-its. Hillary Mantel seems to have the simplest office, with only one ornament. Most of the offices are crammed with books.
WHERE WRITERS WRITE.
Sunday, September 23rd, 2007WHERE WRITERS WRITE. I remember seeing a complaint by a writer that the questions people asked him were usually directed at how he wrote and where–did he use a typewriter or a pencil? I think people ask this kind of question because readers often feel that they are in a conversation with the writer, and imagining the writer in the process of writing makes the conversation more vivid. Here is the link to a survey of where some three dozen contemporary writers do their writing. (the wonderful link is from Howard Johnson).
