June 11, 2011

IN OTHER WORDS...:

The Black Swan of Cairo : How Suppressing Volatility Makes the World Less Predictable and More Dangerous (Nassim Nicholas Taleb and Mark Blyth, May/June 2011, Foreign Affairs)

Why is surprise the permanent condition of the U.S. political and economic elite? In 2007-8, when the global financial system imploded, the cry that no one could have seen this coming was heard everywhere, despite the existence of numerous analyses showing that a crisis was unavoidable. It is no surprise that one hears precisely the same response today regarding the current turmoil in the Middle East. The critical issue in both cases is the artificial suppression of volatility -- the ups and downs of life -- in the name of stability. It is both misguided and dangerous to push unobserved risks further into the statistical tails of the probability distribution of outcomes and allow these high-impact, low-probability "tail risks" to disappear from policymakers' fields of observation. What the world is witnessing in Tunisia, Egypt, and Libya is simply what happens when highly constrained systems explode.

...a black swan is an event that W warned you about and proposed policies to deal with but you didn't listen? It really is just a matter of the blind spots of the elites.


Posted by at June 11, 2011 7:58 AM
  

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