*Skin in the Game*, the new Nassim Taleb book

By some mysterious mechanism, people fail to realize that the principal thing you can learn from a professor is how to be a professor…


…the deep message of this book is the danger of universalism taken two or three steps too far — conflating the micro and the macro.

This is Taleb’s deepest and most Straussian book, quickly you will notice that the Levant and the ancient world haunt the pages.  It may mystify some of his more casual fans, but I am happy to recommend it — it is the manly book Taleb wanted to write and it is full of ideas.  After all, he had skin in the game.

His closing advice is this:

  1. Never engage in virtue signaling;
  2. Never engage in rent-seeking;
  3. You must start a business. Put yourself on the line, start a business.

You can pre-order it here.


I've been watching Taleb write this book over the last few years via his periodic social media and other Internet postings. I would agree with the view that it is his deepest and most Straussian work. That said for non Taleb readers the three closing bullet points and the additional of how your perspective changes if you have skin in the game is the elevator pitch version, but those four are worthwhile as something to live by.

Also your mother was right about wearing clean underwear.

Coincidentally, Russ Roberts has interviewed him on Econtalk. Self-recommending: NNT wouldn’t have it any other way.

#1: people working on banks is freed from wearing ties everyday.

#2: I know what rent-seeking means, but as landlord I don't like this term. Could economists invent another one?

#3: The phrase should finish with "at least once". Similar to traveling to other country, it's good to do it one time for the sake of the experience but traveling to 180 countries is almost meaningless.

"I know what rent-seeking means, but as landlord I don’t like this term."

FWIW my father preferred to be called a property owner, not landlord.

I have owned many apartments across the street from rent-seekers. My expertise was finance and managing properties and tenants. His expertise was rent seeking. Despite my neighbors poor management skill, guess whose life was easier? Guess whose cost was much lower? Not only was I at a financial disadvantage, I also suffered from the bad management of people whose expertise was not owning and managing property, but coddling politicians. For example their poor maintenance and tenant selections reduced my property values for being near them.

I would be careful advising a young person in business in this era to not rent-seek. From the biggest companies to the smallest and from Washington D.C. to any town in America, sadly, the new game in town is rent seeking whether it be subsidies or licensing restrictions or something else. Given the intelligence of the average American and the sad state of education, especially economic education, I can't see it ever changing back to a free market. I love Taleb, but following his advice in American today on rent seeking for the average business person is a path to poverty.

I think we are heading to third world status, where like in say Mexico or the Phillipines where the rent seekers are rich, everyone else is poor and there is a very small or no middle class.

P.S. I have high respect for Professor Cowen for admitting this: "...the principal thing you can learn from a professor is how to be a professor…"

Might be harder to admit though without the comfortable salary, good retirement and most importantly - the fought for, guarded and cherished tenure.

that appears to be a quote from Taleb. change admitting (which he does not do) to, perhaps,"highlighting"...

This was also a point made by Caplan.

Most of us are property owners. Few of us have people paying us rent.

#2 Is it rent seeking if my 401k is invested in the S&P 500?

#3 Does my short-lived deck building business count?

#2 no
#3 did you try to make a go of it or just give up? If the former, of course it counts.

'people fail to realize that the principal thing you can learn from a professor is how to be a professor'

Strangely, those who pass the bar or become CPAs or have a civil engineering license or earn a MD or DDS probably fail to realize that because in their case, it is not true.

And does Taleb give any suggestions how to possess a virtue (say thriftiness or modesty or honesty) without signalling it? One recognizes honesty, for example, by a lack of lying and falsehood - does this mean that someone who tells the truth regularly is also 'signalling' that they are honest?

By "signalers" are meant those who target the signal rather than the virtue itself.

Sure, but that would seem to either be a meaningless distinction, or instead of 'signalling,' the term hypocrisy would fit.

An honest person is clearly someone who does not tell lies or falsehoods. How one would signal honesty by telling lies about being honest would seem to defeat the point of such 'signalling.'

One of my bad habits is volunteering needless admissions or self-criticisms. I catch myself doing this and I think I am signaling honesty and eccentricity. This is not one of those occasions: I stand by the quality of this example :)

But what if you are seeking to attract people of similar temperament, or indicating a desire to deepen the relationship to include such disclosures? There are lots of useful reasons to virtue-signal, yet the meme critique seems to view signaling as being inherently wrong.

Aid to Haiti is a strong virtue-signal, but it still hasn't gotten them potable water or sewage treatment.

Actually that is a good example of how bad the "virtue signalling" meme has become. Aid to Haiti is aid to Haiti. Run a cost benefit analysis if you want to find out how good it was. But don't blame people who talk, or even become enthused about it.

Haiti has regular outbreaks of cholera, frequently cited as justification for aid. Potable water and sewage treatments seems like pretty low-hanging fruit for the place. What are all those aid workers doing down there?

While I support the effective giving movement, I am not sure ineffective giving is bad. It is just less good.



Am I honest if I never speak or write a falsehood but routinely mislead people to their own financial or emotional or physical harm? So, even when we restrict the context to communication (rather than physical acts), not lying is only part of being honest, and I'd argue the easiest part. I'm walking down the street and the person in front of me drops their wallet but doesn't notice. I pick it up. Is it dishonest to keep it? Yeah, your "clearly" was clearly inappropriate.

As someone who passed two bar exams, I would disagree entirely. Almost everything I learned in law school was worthless for the practice of law. The bar exam courses I took in order to pass the bar exam was much more useful for the practice of law than anything I learned in law school. Of course, self-study and learning-by-doing were even more useful.

That being said, I went to one of the elite law schools; I've heard that other law schools may do things differently.

I sort of agree about law school, although it does give you an intellectual framework into which to fit all the things you learn later. But biglaw practice is so narrow that it has nothing to do with the bar exam. There wasn't a single question on our bar exam about structured finance, and I have never had the slightest for New York civil procedure, criminal law, trusts and estates etc., i.e., most of what is on the bar exam.

'As someone who passed two bar exams'

Which means that you learned how to pass the bar exam, and did not become a professor.

The point about law school not preparing a student to practice law is another point, separate from law school being the place you learned to pass the bar exam - which one assumes was your goal in paying tuition and sitting in classes taught by professors. That other strategies helped is beyond question, of course - but that would apply to any human endeavor.

This is why the examples mainly apply to passing an independent exam after attending classes taught by professors. Admittedly, medical/dental school is a bit different, as those institutions actually have several extremely practical components that one would expect to find in a trade school for a skill like welding. Nonetheless, in all examples, the goal of the student was explicit, and it did not involve becoming a professor.

You must have misread the comment: "The bar exam courses I took in order to pass the bar exam was much more useful for the practice of law than anything I learned in law school."

You don't learn to pass the bar in law school. You learn to pass the bar outside of law school. In courses designed to teach you how to pass it.

It is certainly possible I misread his comment, though it seemed directed towards the practice of law, including what you cite. However, assuming that he meant that the bar exam preparation courses were the only thing that allowed him to pass the bar, at least in Virginia, this has to happen first - 'Now that you have a J.D. degree from an ABA-accredited law school, you are ready to take the Virginia Bar Exam. It is offered over a two-day period in February and July each year in Roanoke and Norfolk.' https://www.lawyeredu.org/virginia.html

You go to law school to become a lawyer, if only because that is the only way to be able to take the bar exam, at least in Virginia. Very few law students ever attend law school and learn to become a professor.

The practice of law is not the point - being able to take the bar exam is.

You mean you don't use the Rule Against Perpetuities and the Rule in Shelley's Case in your daily practice?

Bonus trivia: the law is written by lawyers for lawyers. As soon as the law becomes understandable and easy to apply, the lawyers jump in to muck it up with exceptions, to perpetuate their hold on the same.

Its hard to tell through a computer screen, but I'm guessing that your "Bonus trivia" is not *purely* in jest.

It seems to me that punishing criminals, applying contracts, and protecting rights (this is not an exhaustive list, clearly) aren't particularly simple or easy tasks. On the face of it, shouldn't we anticipate that such things will be difficult to do correctly or even well? And don't we want a tool/institution capable of doing them well? I think nuance (call it complication or exception if you want) is necessary to solve these difficult problems, and I think you should reduce your scorn for lawyers and their muck.

Dude Ja Rule, as a law school dropout, and a successful one at that, I can tell you, law is not rocket science. And my comment is directed about making law more difficult, not at the necessity of law. The trend towards 'no-fault' and mechanical rules like 'the driver that rear-ends somebody is at fault' are attempts to get around this needless lawyer complexity. Further, why do we need a bar or law school? You should allow anybody to be a legal representative. Let the market sort out whether you want somebody with formal training or not. I even favor an open-registration system, no examination, for the USA, as they have in Japan and Germany in many cases, for inventions for patent, and as they already have in the USA for copyright.

> I went to one of the elite law schools; I’ve heard that other law schools may do things differently.

Well hey, as long as you're not engaging in virtue-signalling.

For people who don't know: elite law schools are known for a higher ratio of teaching legal theory to legal practicalities than lower-tier schools. So I wouldn't assume any particular attempt at signaling here.

This is not true for medical school either. The first two years of medical school are often taught by non-MDs. Many of the MDs who do teach are researchers who specialize in obscure diseases with low incidence. Worse the first two years focus entirely on passing the USMLE Step 1 with a high score (that being the single most important factor for winning a good residency). This means med students are rewarded for playing buzzword bingo and not rewarded for real world clinical reasoning (i.e. in the real world a perfect match for the symptoms of Rotor Syndrome is not actually likely to be Rotor Syndrome but something more common like drug abuse presenting atypically).

The second two years of medical school are better. Here you actually are in the wards with clinicians. On the other hand, the 4th year is basically a blow-off because you interview in the fall and everyone cuts slack for people running around for 10 to 20 interviews. Once students are past the match they basically coast - they just need to pass and they gain nothing from doing better. Even in the third year the shelf exams focus far too heavily on memorization and encourage bad practices (i.e. if you don't see it once a month you really should look it up).

In contrast, being a med school professor (e.g. a MD/PhD) is all about research, jumping through paperwork, and teaching to the tests. These skills are the ones taught best and most commonly by med school profs.

'Worse the first two years focus entirely on passing the USMLE Step 1 with a high score (that being the single most important factor for winning a good residency).'


'In contrast, being a med school professor (e.g. a MD/PhD) is all about research, jumping through paperwork, and teaching to the tests. These skills are the ones taught best and most commonly by med school profs.'

would seem to rely on the idea that some teachers at a med school are not actually teachers, and those teachers who help medical students become doctors are not real professors.

Further, there also seems to be a strange mixture of teaching and research, where it would be just as accurate to say that the skills taught by med school researchers are the ones taught best and most commonly by med school researchers.

But again, as in the case of the lawyers, how many of the students are in med school to become professors? And how many of them actually learn what is necessary to get the proper credentials to be allowed to legally practice their profession?

In med school most of the worthwhile teaching is done by residents/fellows. Residents/fellows are typically not trying to become med school profs and are focused on the skillsets actually needed for success in their specialty. They are actually considered to be trainees, but the bulk of the teaching load falls there due to time constraints on the attendings. Attendings are not trainees; some are professors who practice clinical medicine on the side and some are clinicians who teach on the side. All of this tends to be non-didactic teaching and where you learn the vast bulk of the skills needed for practicing medicine.

The professors who do the bulk of didactic teaching tend to be "medical school profs" who are most likely not MDs (instead being PhDs who specialize in anatomy, nephrology, or mycology). Of those who are MDs, they are almost always more on the research than the clinical side of things. Their teaching is mostly geared towards passing Step 1 with good scores. By necessity, this means that they teach a whole range of idiotic things that will be counterproductive when practicing real medicine because that is what Step 1 tests. Of course, not to let them off the hook too much, a subset of them are also the ones writing the Step 1 questions. These researchers are also the ones that medical students typically spend summers "off" working on research projects with as resume padding.

In general, yes, the didactic faculty teach research (because they take on students for research projects), Step 1 hacking (because they get judged on how well students do on Step 1), and paperwork (because they man most of the committees with which med students interface for paperwork).

So what gets you a position as a regular med school prof?

A high MCAT/GRE. Getting into a top tier school is a massive leg up when trying to become regular tenured faculty.

A high Step 1 score (if MD). This gets you a good residency and again is a great signal.

Strong research publications.

Navigating the committees processes for hiring and evaluation.

By and large, a lot of medical school does not teach the actual skills needed to practice medicine. It does do a not half bad at teaching the skills needed to be a med school professor.

Yeah, TC (and Taleb) implies that he believes that what most students see of professors (which is watching them lecturing in front of a group of somewhat disengaged kids) is what got professors their jobs. This is a blatant lie. That is, it is so misleading and potentially harmful that it is simply not honest.

Taleb might benefit from going to indeed.com and actually searching for job listings for assistant professors in some field he's interested in. He'll find that there is very strong emphasis on research area and ability to attract external funding, and almost no mention of teaching.

Places that do mention teaching tend to emphasize nontraditional or diverse student backgrounds -- ie, that the classes you will be teaching will not be similar to the classes you took at your elite college / grad school. (I've read a couple of ads that emphasize the opposite -- they talk up their student bodies and suggest that your emphasis be teaching, not research. But these are the exception.)

The part of a professor's job which is visible to undergraduates is very small, and is not the part that gets them hired or promoted. And the schools which are hiring tend to not be very similar to the schools where successful applicants went.

Read Matthew 23. As Tyler says, the Levant and antique world have something to say to us.

Essentially someone who takes on a quality for virtue signalling does it on the cheap. It costs to be honest, for example. It is cheap to look honest.

Strangely, those who pass the bar or become CPAs or have a civil engineering license or earn a MD or DDS probably fail to realize that because in their case, it is not true.

You don't truly need a professor for any of those professions- you don't even truly need the degree they give you. All you "need" them for is to get the paperwork (the BS, JD, MD degree on the wall) that allows you to take the bar exam or the medical licensing exam etc. Taleb is right- all you really learn from the professor is that the licensing system provides his reason for being.

'Taleb is right- all you really learn from the professor is that the licensing system provides his reason for being.'

Yet that is not what Taleb wrote, and though your observation may be accurate enough, it is different from Taleb's.

You often make some pretty absurd critiques. You seem to be intelligent, but it's also clear you read everything here with the sole intent of responding with snide remarks.
I'm fairly certain you know that in that sentence "principal" meant "main" or "primary", not "without exception".

And I'm disappointed that you were willing to publicly try to conflate being virtuous with virtue signaling, as if they are the same thing.

The thought came to my mind that it would be nice to have a "conversations with Tyler" featuring Taleb. But I see that interviewing Taleb may not be pleasant. See this link:


After dinner, we talked fitness, and he asked me how I became familiar with Art de Vany. I told him it was through the
blogger and econ prof Tyler Cowen, which immediately set Taleb off.

"That guy's a bullshitter," noting that Cowen admits to writing about books he only reads parts of.

"How can you write a review of a book you haven't read?" presumably referring to this Slate review.

His advice to Cowen: "Read much fewer books, read them slowly, turn off your internet connection, and then come back."

+1 (sorry Tyler)

I remember reading that post a few years back when Tyler admitted not completely reading books he reviewed. Since then I disregard any of his book reviews.

See Mortimer Adler and Charles van Doren on this point: a great many works merit only an 'inspectional' reading. See the system they recommend.

There is an enormous difference between the way you may read a book for your own purposes and the way you should read a book for a (public) book review. I think TC has been upfront about what is implied when he recommends a book, and I'm quite willing to give him a pass on it - given this is his blog. The problem is the old question of how many times do you repeat the same qualifications? While an earnestly honest person would include a link or a footnote to indicate that s/he often does not finish a book - or even read most of it - prior to making a recommendation - it's not a secret that TC opines without the full facts here.

Your loss. His admission might raise a red flag regarding many reviewers, but how many times have you read a book where you get the message 1/4th of the way in, while the final 3/4ths is just repetitive filler to make it thicker? I suspect Tyler is better than most at knowing when to call it quits.

i am old school. I prefer a reviewer that has actually read a book all the way through before commenting on it. Over the years I have read more than a few books that were difficult or I didn’t get at first. But after making an effort to work my way through I was glad I did.

You forget that Tyler explains he doesn't read the whole book, because HE ALREADY KNOWS MOST OF WHAT IS IN THE BOOK! He skims the books for the few things he might not already know. This is not as arrogant as it sounds. Many books are mostly "filler," as the business model for many public intellectuals is to give away of lot of their time and work for free (podcasts, interviews, lectures) and hope to get paid by selling their books. Yes, Tyler is sometimes an as****e, but he is a legitimate polymath, and I can believe that he has to pass over the bulk of most books, because he already knows the material. Face it, a lot of the even good books are there are quite derivative.

Here is the quote - 'I told him it was through the blogger and econ prof Tyler Cowen, which immediately set Taleb off.

"That guy's a bullshitter," noting that Cowen admits to writing about books he only reads parts of.

"How can you write a review of a book you haven't read?" presumably referring to this Slate review.

His advice to Cowen: "Read much fewer books, read them slowly, turn off your internet connection, and then come back."

As the night ended, Taleb gave me a brief ride in his White Lexus Hybrid towards a better place to pick up a cab. As we left the parking garage, a couple walked in the direction of the car, and he made a comment about not wanting to run them over.

Unless the guy was an economist, in which case, that would be a "benefit to society."' http://www.businessinsider.com/interview-with-nassim-taleb-2010-4?IR=T

*Prior chortles, and makes a mental note to buy a White Lexus hybrid*

If reviewers "read fewer books and read them slowly" reviews could be published 1 or 2 weeks after the book is available to readers. If reviews are not fast enough, the book could be taken off the shelves before consumers notice. There's value in a fast, even if not perfect, book review because it increases book sales / information spread.

I think the problem is Taleb wants ALL: a) high book sales that come from superficial but fast reviews, and b) status recognition that comes from conscious but slow reviews of intellectual peers. If the guy only wants type b) kind of reviews, he should forget about "best-sellers". But, he's lucky, he has both types of reviews. He should be grateful. If Tyler does superficial reviews, there will be someone that does slow ones. End of problem.

It's amazing that Taleb still has such a massive fanbase, given that the original hypothesis that made him famous has proven spectacularly wrong.

NNT came up through the options trading woodwork and made a public name for himself by loudly proclaiming 1) financial asset returns follow a Cauchy distribution, 2) widespread option pricing models are fundamentally wrong, and 3) volatility is systematically *underpriced*. Strip out the "life lessons" from the Black Swan, and this is pretty much the point of the book. Taleb's hypothesis is not even wrong. It's simply unfalsifiable. Cauchy distributions are inherently pathological and can't ever be rejected by empirical evidence. No matter how many points you sample you can always just claim that you haven't seen observed the very far-out massive tails. But the notion is prima facie absurd, virtually nothing outside abstract mathematics actually falls inside this insane framework.

Points 2 and 3 fall out of feasibility unless you subscribe to 1. We now have four decades worth of options prices from a huge variety of markets. We know with very high evidence that B/S pricing is basically correct. (Subject to some vol surface adjustments which are already widely used in practice. Certainly don't credit Taleb with this, because he definitely didn't invent this concept.) We also know with very high evidence that while volatility is subject to occasionally serious drawdowns, that it's mean long-run return is positive. Yes, people lose their shirts selling vol, but that's because they're over leveraged relative to long-run Kelly criterion, not because they're going in the wrong direction. Systematically buying volatility is just as much a dumb strategy as selling too much vol relative to your wealth.

Now you see why point 1 is so important. Nobody really cares about the esoteric of financial asset probability distributions. On this subject, Taleb is simply parroting what Mandelbrot was saying in 1965. But make a salacious claim about the unseen risk of financial derivatives and every financial journalist in the world wants to talk to you. But the ridiculous Cauchy idea is necessary to make his point about options and volatility not totally ridiculous. Cauchy allows him to ignore any amount of evidence, because once again Cauchy is pathological. Expected return isn't even defined. So it doesn't matter how much accumulated proof showing that Taleb's proscribed trading strategies lose money year in and year out. It's Cauchy, man, I'm totally right, but we just haven't seen the big one yet.

People project a type of mood affiliation onto Taleb, and turn the debate into a straw man. 95% of his fans think that the debate is about normal vs fat-tailed distributions. As if actual Wall Street quants are building models ignoring the fact that financial returns have fat tails. But it allows laymen to feel smarter than some imaginary high-paid, but street-dumb, physics PhD. Again I can't emphasize enough, "Taleb vs Wall Street" has absolutely zero to do with fat-tails. Taleb plays this conman game, where he doesn't say it, but feeds into people's belief that he was some sort of visionary that first realized circa 1997 that the normal distribution might not be exactly correct. In reality pure normal models hadn't been in widespread use anywhere since 1987.

+1 super insightful


Also Taleb's 'Black Swan' idea is simple enough that it can be misunderstood faster than understood. Anything surprising can be recast as a Black Swan and any policy can be defended on the grounds that randomly deviating from general opinion is building 'anti-fragility'.

In English, Taleb's argument is that off model risks are large enough and frequent enough to make the models of questionable value. He combined that with the observation (Fooled by Randomness) that apparent success in prediction (model based or otherwise) can be misleading. His work seemed to do a pretty good job of explaining some of the issues with the Long-Term Capital Management collapse.

He would say that your models don't work. You say he can't prove it. Both of you could be correct.

It is my understanding that he has done very well using his ideas as an investment strategy. That strategy involves lots of small losses toward eventually obtaining a very large gain. You would have as hard of a time proving his methods are ineffective as he would yours.

I think I am on board with this. Fooled by Randomness was a book of its time. And in its time many were maintaining that "off model risk" type black swans were crazy talk.

So now we get to where off model risks are a recent experience (Great Recession) and Taleb is boring because he hasn't startled us lately.

Maybe Taleb is frustrated for the same reason.

LTCM is a phenomenal example of nerds not understanding the game.

They knew the math and models, and never fully understood the suit aspect. They were always going to get burned.

We can short or bid up your trades....and they did not have friends.

Everyone knew their game and how to crush them. Probably the textbook example of book smarts without business knowledge leading to massive failure. Other than the USSR.

+1 from me, too.

Mostly his books are about bragging, designed to convince the reader that he has greater insight and more humility than anyone else. But then why does he need to write a book convincing us of this?


You mean virtue signaling?

Because Taleb is 'minding the moron market' and writing for the lucrative 80-100 IQ crowd. He did not get rich or famous writing a scholarly book. The only way to get rich writing a scholarly book is to write a Samuelson type textbook, though one could argue that given such freshman textbooks are cardboard caricatures of real life complexity, in a sense all successful textbook writers are doing a "Taleb" when writing a popular textbook (again, minding the moron market).

The only non-fiction consumed by people in that range would be appliance manuals and sports pages.

@Doug - "No matter how many points you sample you can always just claim that you haven’t seen observed the very far-out massive tails. But the notion is prima facie absurd, virtually nothing outside abstract mathematics actually falls inside this insane framework" - except pretty much all of nature... and later in your post you contradict yourself by correctly pointing out that Wall Street quants do in fact model in fat tails. And you are no doubt aware that a standard normal distribution is in fact a Cauchy distribution with x0 and gamma having particular values? So who's the con man now Doug?

I assume @Doug can't be bothered to engage you (don't blame him) but...

> and later in your post you contradict yourself by correctly pointing out that Wall Street quants do in fact model in fat tails

... that's ridiculous. Doug is clearly in this context criticizing a Cauchy model of long tails, referring to issues specific
to Cauchy (e.g. inference from finite samples doesn't really work), but there are ton of other more
distributions with long tails (relative to the normal.) Many of which Wall Street quants regularly use, and which aren't
as crazy/intractible as Cauchy, and which work well enough for them.

> "And you are no doubt aware that a standard normal distribution is in fact a Cauchy distribution with x0 and gamma having particular values?"

This is complete nonsense. There's no sense in which it even 'close' to being true. You only saying it because you like making up stuff that
makes you sound smart, and here it is technical enough to seem plausible to most readers. You wouldn't write it that accusatively,
that arrogantly, if you didn't know you were simply bullshitting.

> So who’s the con man now Doug?

I'd be willing to bet that both Doug and you both know the answer to this perfectly well.

I have read all of Taleb's books, and must agree about your (@Doug) points. The books are quite short on actionable strategies, other than "invest the majority in something safe, and a buy a lottery ticket that might pay off big". Also don't pick up pennies in front of steam rollers: Shorting the VIX?

What I consider the biggest irony with Taleb, is that he seems to disregard the tail risk of USG defaulting, which would be a major black swan event!

Super insightful. Btw, this is only the second time I've felt compelled to post a comment giving phrase to a comment on MR (though MR comments are often great). The first was a lengthy comment that clarified a lot of my confusion surrounding crypto currencies. Im just now noticing that that one was by someone named Doug too.

In the same way that he thinks Taleb is basically the same as Mandelbrot, Doug probably thinks proscribed is basically the same as prescribed.

"It’s amazing that Taleb still has such a massive fanbase..."
It's almost as if it's a Black Swan.

Maybe later. I’m going to read this instead: https://press.princeton.edu/titles/11082.html

Enrique, thank you for this link!

Looks good, I'll have to pick it up. Here's another that I enjoyed: https://www.amazon.com/Chances-Are-Adventures-Probability/dp/0143038346/ref=sr_1_6?ie=UTF8&qid=1519155057&sr=8-6&keywords=chances+are+book

Is your endorsement of the book a form of academic virtue-signaling?

No, it's a form of obsessive contrarianism. Tyler knows that almost every intellectual considers Taleb a dunce - perfect time to recommend a Taleb book. I am not taking the bait.

Cowen always couches his contrarian recommendations as "Straussian" as a way of defending himself in the event that they're later seen as stupid. At least he didn't dredge up "Tyrone" here to do it.

No, it’s a form of obsessive contrarianism.

Which would never extend to critiquing the admissions office or the student affairs apparat at Mason or anywhere else.

Is it true that the name of the book originates from an unfortunate pants zipper mishap that Taleb experienced?

I feel like this post is making fun of Taleb more than recommending the book: "After all, he had skin in the game", "manly book", "You 'must' start a business".

Seriously. What exactly is a manly book anyway? Tips on killing a grizzly bear with your bare hands?

A manly econ book. Typo or a joke.

"Seriously. What exactly is a manly book anyway?"

If you can keep your head when all about you

Are losing theirs and blaming it on you,

If you can trust yourself when all men doubt you,

But make allowance for their doubting too.

If you can wait and not be tired by waiting,

Or being lied about, don't deal in lies,

Or being hated, don't give way to hating,

And yet don't look too good, nor talk too wise:

If you can dream—and not make dreams your master;

If you can think—and not make thoughts your aim;

If you can meet with Triumph and Disaster,

And treat those two impostors just the same

If you can bear to hear the truth you've spoken

Twisted by knaves to make a trap for fools,

Or watch the things you gave your life to, broken,

And stoop and build 'em up with worn-out tools:

If you can make a heap of all your winnings

And risk it on one turn of pitch-and-toss,

And lose, and start again at your beginnings

And never breathe a word about your loss;

If you can force your heart and nerve and sinew

To serve your turn long after they are gone,

And so hold on when there is nothing in you

Except the Will which says to them: "Hold on!"

If you can talk with crowds and keep your virtue,

Or walk with Kings—nor lose the common touch,

If neither foes nor loving friends can hurt you,

If all men count with you, but none too much;

If you can fill the unforgiving minute

With sixty seconds' worth of distance run,

Yours is the Earth and everything that's in it,

And—which is more—you'll be a manly book, my son!

That was cool

Isn't it? Words to live by.

Paraphrasing Kipling

Kipling can teach everyone to be a manly book.

My respect for Taleb took a hit one day when I discovered he had blocked me on Twitter. Strange since I almost never respond to anyone on twitter, I tend to read and follow. But then after searching around I found where he claims to not just block people who offend him in response but to block all of those who follow the offensive responder. Yawn, I'm tired of these sensitive snowflakes.

Maybe you are the snowflake. Do you want safe spaces innTwitter?

Collecting a bunch of fanboys and then methodically punishing those who disagree with you and going after their followers strikes me as a very unhinged way to spend one's time. Taleb's a b-level intellectual who overhypes a handful of good ideas he's come up with. He is the type who needs more feedback and less ego validation.

"Taleb’s a b-level intellectual who overhypes a handful of good ideas he’s come up with. He is the type who needs more feedback and less ego validation."

Says you.

If you feel his work will best improve by more stroking of his ego, well you decide what the best use of your time is.

I do not even have a Twitter account. I do not follow celebrities around and then act hurt when they do not want to be my best friends.

I'm not really sure I get your tone. Taleb's an intellectual, how is one supposed to read what an intellectual writes but by 'following him around'. Unlike Facebook blocking someone on Twitter means they can't normally read what you write (of course you can bypass that). I find the idea of an intellectually taking the time to block readers simply because of who they follow remarkably petty.

Imagine if Tyler, for his next book, instructed Amazon to refuse to sell it to anyone who criticized him in these comments AND also to refuse to sell to anyone who had ever purchased a book from authors on his personal 'enemies list'? Even assuming Amazon would allow an author to demand this....

"Imagine if Tyler, for his next book, instructed Amazon to refuse to sell it to anyone who criticized him in these comments AND also to refuse to sell to anyone who had ever purchased a book from authors on his personal ‘enemies lis'?"
So what? His book, his rules. I have been banned uncountable times from his site, and you do not see me complaining. You make a choiece and should accept the consequences. That is what freedom means, and freedom is the air we breathe.

"I’m not really sure I get your tone. Taleb’s an intellectual, how is one supposed to read what an intellectual writes"
I hear he writes books.


You're not really arguing with anything I said. If Taleb wants to ply tyrant king over his Twitter or Facebook page, I'm fine with it. I think, however, it's remarkably petty and unserious for him to choose to spend his time there. And pretty pathetic, especially since I recall reading in Black Swan that he made a point of trying to avoid public debates, media and other distractions.

This has nothing to do with whether he should 'let me back' into his Twitter feed. It has to do with me making a judgment about him and my judgement is B-level intellectual who let a bit of fame over some moderately interesting ideas go to his head and right now the odds of him having more worthwhile things to listen too are going down quickly. My judgment could be wrong and perhaps his best work is yet to come, if so that would be a black swan IMO.

As far as I understand, he is not debating or getting distract. He is writing and getting rid of his Twitter enemies.

Sounds to me as if you are looking in a mirror.

Then where's my posse of fanboys and ego stroking followers? I demand to speak to the head of social media

He blocked me too, but I was half critical. Apparently that was enough.

Hopefully his work will be even better now that he doesn't have to worry about being contaminated by your half critical ideas. I await his society shattering insights.

"Never engage in virtue signaling": he just has.
"Never engage in rent-seeking": he owns the copyright.
"You must start a business": y'all really ought to make starting a business in the US as easy as it is in Britain.

"This is Taleb’s deepest and most Straussian book, quickly you will notice that the Levant and the antique world haunt the pages." Aesthetically you will notice that that's a bad sentence.

Yes I noticed "antique" should read 'ancient' perhaps.

I also thought that if he wanted to write the second part of the sentence in a self-consciously antique style by putting the adverb at the front, he should have reversed the verb and pronoun for antique verisimilitude: 'quickly will you notice that the Levant and the antique world haunt the pages.' But even better, leave the lame joke out.

Virtue signaling has come under a lot of fire lately particularly from conservatives. The PC culture is usually regarded as an egregious form of virtue signaling

But I argue that there can actually be a conservative case for virtue signaling. And back in the old days, one used to associate virtue signaling with conservatives, not liberals.

Very often the way up the social ladder is to signal one's virtues with certain short-hands and signatures in behavior, as opposed to hoping that the other party will delve deep inside your soul and evaluate your true worth. And the signal may set such strong expectations from you that you are eventually forced to "live" the underlying virtues associated with the signal, and not merely be a hypocrite and engage in pure signaling. So it's not such a bad thing.

Some e.g. of useful virtue signaling : Wearing formal wear, abstaining from alcohol, not using cuss words, visiting the church every week, among other things.

I am from India, a country that is very good at virtue signaling. One reason for the stability of Indian marriages is the low premium placed on love / affection and very high premium placed on virtue signals. On matrimonial match-making sites, filters like "no smoking", "no drinking", "vegetarians only" make one's search for the right person much more manageable as the signals are very strongly correlated with the underlying virtues one is looking for.

"I am from India, a country that is very good at virtue signaling."
But very bad at actually having real virtues, such as not preying on one's brothers.

From Nationalism to Religious Ceremony, the fabric of civilizations are essentially built around "virtue signaling". Most people don't mind virtue signaling as long as it's their preferred virtues being signaled.

shrikanthk perhaps Taleb is critical of virtue hypocritical signalling. In India there are individuals who are what we Indians call "strict vegetarians" , teetotalers , nonsmokers and devout people who start their day at the temple, even donate huge sums for the temple , but who are terrible human beings . But in India being a nonsmoker and a publicly pious person who pays for renovating temple are deemed virtues. Perhaps Taleb is talking about virtue signalling of this variety which is a cover for being corrupt and cruel to others

There are hypocrisies everywhere.

But even in India, the signals correlate very well with other virtues, including temperance, hard work, enterprise, single-mindedness among other things.

If the signals lose their correlation with other traits, then the signals will cease to matter.

"But even in India, the signals correlate very well with other virtues, including temperance, hard work, enterprise, single-mindedness among other things."
If they did, to put it in a blunt way, India would not be India. Demon-worshipping can not bring anything but disgrace and excuses for the sin of oppression. A country where cows are assigned more importance than people and the populace lives in fear is a case in point.

Charbes, you can see form my comments that I strongly disagree with shrikanthk about what he deems virtues. Moreover, I am blind no admirer of all Indian cultural traditions. I also oppose the Hindu fanatics who think the life of a cow is higher than that of a human. However you are being unfair when you talk of Indians worshipping demons. ANd most hindus are opposed to killing people in the name of cow protection

First of all, there is no Hindu "fanatic" who values cows ahead of humans. Not sure where you get that from.

And you shouldn't be responding to Charbes.A. You should know that he is a troll of the first order by now, who earlier went under the names of Thiago, and Truth Seeker.

shrikanthk , first, I never said hypocrites are only in India. I am simply reacting to your observations about proclaiming one's food habits etc as signals of virtue. I have lived in India all my life and I know from personal experience that what are deemed virtues in India .. vegetarianism, display of religious devotion by, for example , smearing the forehead with ash like devout Hindu South indians do etc ... simply do not indicate anything about their personalities. As a south indian friend told me after reading your post, almost every crook in the south, whether a small-time pickpocket, someone who swindles millions from banks, even a rapist and a murderer, often are people who go to temple, may be nonsmokers, and have ash on their forehead. Taleb is perhaps questioning this kind of hypocritical virtue signalling.

Well, I would disagree there.

Abstinence from alcohol is very very very strongly correlated with public virtue and adherence to law ACROSS the world. And India is no exception.

Even vegetarianism has a very strong correlation (not causation I understand) with law adherence, in societies where it is a norm. Ofcourse I wouldn't use this to infer anything in a state like Nagaland or even Kerala where everyone is a meat eater.

"First of all, there is no Hindu “fanatic” who values cows ahead of humans. Not sure where you get that from."
shrikanthk if you have not heard of Hindu fanatics having a free run bashing up and in some cases even killing people on the mere suspicion of eating beef, you are either out of touch with what's happening in India or in your vocabulary there are no Hindu fanatics and by definition only muslims can be fanatics . And perhaps beating and killing in the name of the cow is not rowdyism but acts of devotion. There is more outrage among the Hindu fundamentalists when a cow gets killed than when minor girls are brutally gang raped.

Taleb I don't think is discussing the conservative virtue signals we are discussing.

I think he is concerned with liberal PC virtue signals like the use of gender neutral words, desisting from voicing any opinion that is critical of gay marriage, resisting any attempt to grade cultures, voicing clichéd views like "all religions teach the same things", resist from talking about gender differences and always publicly denounce gender roles....etc.

Taleb is mainly referring to these Left wing virtue signals. Not those of the RW variety

In other words, he doesn't have a problem with "virtue signaling", he has a problem with anyone openly voicing left of center politics.

Why do the higher ups in the Catholic Hierarchy dress in ornate robes if not to signal that they are the closest to God, and therefore dress as the most ornate and prettiest peacocks?

Is the soccer mom with umpteen American Flags and yellow ribbon bumper stickers on her minivan actually volunteering an inordinate amount of her time and money towards veteran oriented charities, or is she merely signaling which cultural tribe she belongs to?

What you describe is signaling, not virtue signaling.

Here's a definition of virtue signaling from a Google search: "the action or practice of publicly expressing opinions or sentiments intended to demonstrate one's good character or the moral correctness of one's position on a particular issue."

I'd like to do an experiment in which Taleb stops weightlifting and starts bicycle-riding and Pinker stops bicycle-riding and starts weightlifting and then measure how much their political views change.

Haha, that would be interesting

Or, have Pinker go bald, and give Taleb a fine, full head of thick, wavy hair!

You mean it's not a wig?

Nope. Run your fingers through it some time.

Taleb didn't start deadlifting until after he got famous. He rode a bike to work previously. Unless you're implying his politics/views have changed since then -- maybe they have, I don't follow him much. He changed his mind on psychology studies, that's for sure.

It's likely occurred to Cowen that Taleb and Steven Pinker are very much alike even though they may appear superficially as very different. Taleb believes we cannot accurately predict future events no matter how complex and impressive looking the mathematical models, while Pinker believes we focus too much on the future (and the fear of it) when we should focus more on the here and now. Jesus taught his followers not to worry or be anxious about tomorrow, for tomorrow will have worries and anxieties of its own. Yet economics, and finance in particular, is obsessed about the future, mainly in predicting whether prices of asset will go up or down and devising strategies to profit from it. One might conclude that economics and finance are very much pagan occupations. In another blog post this morning Cowen considers why U.S. firms are holding more cash rather than investing it. Maybe if firms would stop worrying about the future and whether the prices of assets will go up or down and invest in assets today we'd all be the richer for it tomorrow.

> You must start a business. Put yourself on the line, start a business.

Starting a business is easy. I know this from experience.

What's difficult is generating revenue from the business.

In an optimal arrangement, people who are good at running businesses would run businesses and people who are good at statistical analysis would focus on statistical analysis.

So why recommend starting a business? Evidently Taleb understands that in the 21st century, almost all skills are commoditized, and all except the entrepreneurs will be exploited and thrown away by the managerial class.

While I'd not go anywhere near as far as Taleb there, there are good arguments for it: The skillset, difficulties and worries that a business owner has are far enough removed from most people's daily worries that they lack any context regarding a pretty important segment of the population. It's not that they need success in business, but that spending some time in that mindset, in practice, is very valuable. The problem of course is that a world where everyone starts a business has plenty of negatives too, as the capital has to come from somewhere. Business with almost zero capital aren't just risky, but they offer almost no insight of what a company designed to grow, and often VC funded, does.

I believe that a more sensible version of this is just to ask college graduates to spend at least 1 year working on their field before going into academia tracks. Teaching is an overly popular career, mainly because so many children and college students get to interact with teachers, so they think they understand the job, how desirable it is, and whether it's the right choice for them, although they never have stepped foot anywhere else on the economy. Only tasting one option before committing to a career is like immediately marrying the first person you date.

The "boss" whomever that is always running a business. If you have some understanding what the boss worries about you can use your actual skill set to help the boss with these worries as appropriate.

In large enough organizations, this is not so applicable as only the very top managers actually care about price signals and "profit", but even there it is a highly effective tactic to take petty issues up to the organizational level to advocate for things that you want or are necessary for the health of the organization.

And not even just large organizations. A large subset of small business owners and private equity is built around acquiring small businesses and flipping them to larger companies for arbitrage. I think we've largely bought into a very small narrative of what being an entrepreneur is in modern America.

Hi, business owner here. I remember reading The Black Swan about the time I was considering whether the idea I had for a business was good enough to take the risk or not. The passage Ben Casnocha cites warns emphatically against starting a business:

"A scalable profession is good only if you are successful; they are more competitive, produce monstrous inequalities, and are far more random with huge disparities between efforts and rewards — a few can take a large share of the pie, leaving others out entirely at no fault of their own."
- http://casnocha.com/2009/03/scalable-vs-non-scalable-careers.html

Maybe the world has changed so much in the last ten years that Taleb recognizes what I was wrestling with four or five years ago; labor is dead, long live capital. As I watched my business school classmates march off to the consulting and banking salt mines, I couldn't help but think that they were fools to give up so many hours in return for so little (expected value) equity. Consulting firms are fat at the top and the big banks/PE firms all already IPO'd. Do you think Taleb would be willing to reconsider his position? Has the risk/reward tradeoff changed?

Amusing to me that given that only the ownership could specifically have "skin in the game". Particularly in America where healthcare is tied to employment.

Taleb's long-standing claim that misunderstanding VAR models is what caused Wall street to collapse is simply false. The limitations of those models was understood that but they were easy to calculate. Fat tails and correlations were added in in various ways. The models wasn't perfect but were still useful for daily risk estimation,
- if the output changed a lot it might point out a new or unknown position had been taken. In addition to some type of VAR banks also used scenario analysis which was better at estimating risk of any particular large move you cared about. In any case the Wall Street crash was more about option like payoffs and excessive balance sheet leverage not quant models, although some managers scapegoated them on their way down.

Weren't the models used to justify the balance sheets?

Justify or Justify?

Why are we holding $5B of these subprime CDO bonds no one understands?

"Well Sir, the model says they are as safe as Treasuries but earn 500 basis points more!"

or is the truth:

"I can flip this crap for $8B and that will get me a huge bonus. The boss has to ask me to justify this so he can tell the ninnies in compliance that he's keeping good controls here. I'll tell him what he needs to hear so he keeps them off his case and by year end we'll both be happy".

Was the decision based on emotion or the model? I suspect emotion and the model was sought out to justify the emotion. If it wasn't there they would have invented one. Why else would anyone hire a bunch of math phds?

NB, in 2007, this man was a finance professor who'd produced a set of peer-reviewed articles numbering about two and a couple of monographs on financial topics. Then he re-invented himself as an oracle. Now review his pronouncements in 2008 and 2009 about the future course of events and then review what did actually happen. That should cure you of an inclination to pay him the slightest heed.

But that's a tall order Art Deco, since nobody can predict the future very well. In fact, the best predictors of the future simply extrapolate the immediate past (i.e., driving with the rear view mirror).

But that’s a tall order Art Deco, since nobody can predict the future very well. I

Some people are more careful than others about this sort of thing, Ray. Of course, if he actually had been precise, careful, and circumspect, no one outside a narrow professional set would have read anything he said.

Stepping back, Fooled by Randomness was published in 2001. People argued about black swans for a few years. Most wrote off Taleb and highly unpredictable futures. Then we were hit by the Great Recession.

I say Taleb critics of 2003 have adjusted their priors.

Now they claim Taleb didn't tell them anything they didn't already know.

I predict that there will be a black swam in the economy due to the defective models used in it. Now, I can wait for years, even after my dead. If that happens, I will claim that I was right and my fanboys will claim that we were right and my critics where dumb. So, basically doing a nebulous sloppy prediction transforms a guy into a genius?

That's all rather weak and nebulous. Especially the "wait for years, even after my dead"

It only took 5 years for "AAA rated" bonds to blow up across the board.

5 years and the bonds blow up. Yes, but the point is that some economists (and physicists and maths) were already saying that and they made money out of it. Taleb? Never heard of that. He only said: "unpredictable things happens and nobody understand it but me". Did he predicted the bonds crisis? Did he propose a way to model the economy better? No. He did a crappy prediction that could or could not happen. But because he did not say "in less than X years" or so, anything could be claimed by him as his prediction coming true no matter when it happened. So I don't know what you don't understand about my comment, but I will try to explain better:

Taleb just said what everyone already knew, that there are unpredictable events that can change everything. Yes, but what's the point? We know that normal distributions are just approximations to reality: humans have a typical height, but time to time happens to appear a giant. So... what? What's the new concept in that? How is it applied to the general economy? How does it changes the way we understand physical and economic processes? I don't see that Taleb's ideas in Black Swan changes anything at all. Just explains it to general public (with a dramatic tone).

Read the bullet points of this 2013 USA Today recap. It is very "Fooled by Randomness"


Well...we do live in a nebulous sloppy world.

Also, if Taleb wants to be better understood, he shouldn't act so crazy.

That might include writing texts from which Cowen can extract any Straussian message he wants to find.

How many Fortune 500 companies do not engage in rent-seeking?
How many Fortune 500 companies do NOT pay people to engage in virtue signaling?
How many companies has Taleb started? (I don't know, but I'd guess between zero and one or two - certainly not enough for a valid statistical sample, not that the difference between anecdote and statistically strong sample would mean anything to him...)

what? you're the clown talking about the statistical significance of one person's business activities.

Tyler, did it ever occur to you that calling something or someone "Straussian" is merely to engage in obscurantism?

I am an associative professor. I am not sure I have much useful advice to teach on how to be an associate professor.

But if you care about mathematics, I can teach you quite a lot. Some of it would be useful, other parts merely beautiful. But certainly it would be the principal thing I think you can learn from me, not how to be a professor.

Taleb doesn't come off as too bright when it comes to GMOs. I'm guessing he has come to regret his hasty and acerbic disapproval of them but is too egotistical to retract his position against them. But, I have enjoyed his books.

FWIW, I have owned apartments. Middle class average apartments with a bit of a view,or perhaps a nice fireplace; nothing special in the standards of the Pacific Northwest. However, I have NEVER had a problem with tenants. For one reason and one reason only: I treat them as I would want to be treated. If something breaks it gets fixed immediately. If they break something unnecessarily the deduction is taken from their deposit as previously agreed upon and then the relationship of equals continues. I treat them with respect and in return I have been treated the same. I do not think less of them because they are "just renters". I treat my apartments as a pleasant place for them to stay for awhile on their journey through this life. In return they help by taking care of the little things, and if asked, as is sometimes the case they help take care of the big things to (i.e. clean up fallen debris from a storm, or help with the building maintenance in a once or twice way. While making it a home for them, they treat it as their own home. The relationship of respectful equals has worked well for me for 20 years. I don't need a management company.

I feel like this is one of those logic puzzles.

The primary thing you can learn from a professor is how to be a professor.

Then a professor gives a book recommendation.

But the professor just said that you shouldn't pay attention to professors when they are talking about things other than how to be a professor.

So....does that mean this is really an anti-recommendation and no one should read the book?

But then if it is an anti-recommendation then the first claim -- about professors -- doesn't hold. Which means you should read the book.

Wonderful book. It shows the reader just how far s/he has to go and how little s/he knows. I love the way that Taleb uses the lessons in Herodotus to make points that people should have learned when they were young and recommend that anyone interested in learning look at all of Taleb's books.

This product is really good but i found it much cheaper here: amzn.to/2oRtYcE

Comments for this post are closed