Taleb

July 13, 2009 at 7:49 am | Posted in Uncategorized | Leave a comment

One of my favorite academics that likes to comment on today’s economy is Nassim Nicholas Taleb. I’ll summarize “Fooled by Randomness” in this posting. Incredibly oversimplified, I know, but I’ll give you the gist.

Let’s say you engage in a gambling strategy that has 999 chances in 1000 of making $1 and a 1 in 1000 chance of losing $10,000. Your expected loss is about $9 – it’s a stupid bet. The FREQUENCY of the win is irrelevant. You have to judge it in connection with the potential MAGNITUDE of the loss. This is the problem with wall street and why Ronald Reagan, George Bush, Obama, and Bernanke are full of shit.

Ahhh, when will Republicans realize that you can’t indebt your way to prosperity?

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