EconTalk

Nassim Nicholas Taleb on Black Swans

Apr 30, 2007
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INSIGHT

Mediocristan Versus Extremistan

  • Taleb distinguishes Mediocristan where averages dominate and Extremistan where a few observations dominate totals.
  • Example: human weights (Mediocristan) versus wealth or book sales dominated by handfuls (Extremistan).
ANECDOTE

Traders' Currency Crash Anecdotes

  • Taleb recounts currency crashes he witnessed while trading, including a currency moving from 3 to 4.3 trillion to the dollar.
  • He uses these events to show financial markets often live in Extremistan with massive jumps.
INSIGHT

Law Of Small Numbers Misleads Performance Judgments

  • People fall prey to the law of small numbers, mistaking short runs of good performance for skill.
  • Taleb notes even statisticians misjudge when making trading or hiring decisions from brief records.
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