I rarely link to or discuss articles from newspapers, but I must make an exception. The Times Online has an outstanding profile titled Nassim Nicholas Taleb: the prophet of boom and doom. Read it.
Taleb wrote the books Fooled by Randomness and The Black Swan, which I reviewed on this site. Both are outstanding and will change the way you view the world.
Although I recommend reading all 5 pages of the profile (3 if you send to the printer), here are some of the highlights from the profile.
On dealing with unexpected losses:
Every year he (Taleb) puts a few thousand dollars aside for contingencies parking tickets, tea spills and at the end of the year he gives whats left to charity. The money is gone from day one, so unexpected losses cause no pain.
Banks should be more like New York restaurants. They come and go but the restaurant business as a whole survives and thrives and the food gets better. Banks fail but bankers still get millions in bonuses for applying their useless models. Restaurants tinker, they work by trial and error and watch real results in the real world.
…the good investment strategy is to put 90% of your money in the safest possible government securities and the remaining 10% in a large number of high-risk ventures. This insulates you from bad black swans and exposes you to the possibility of good ones. Your smallest investment could go convex explode and make you rich.
The last page of the profile includes Taleb’s top life tips. Read it. Read it twice.
Jun 3, 2008 — 6:16 pm
I definitely agree with his comments on banking and definitely disagree with his comments on investing.