Friday, February 13, 2009

Taleb and (guru) Mandelbrot together on Credit Crunch

THIS ACTUALLY TOOK PLACE AT PBS STUDIOS some five months ago when the $700bn bail-out package aka Troubled Asset Relief Program (TARP) was announced at the U.S. Senate. Nassim Taleb features here with his Guru Benoit Mandelbrot in this joint interview by Paul Solomon titled 'Experts Examine Future of Credit Crunch'.

For anyone new to Mandelbrot and Taleb or the subjects of Chaos theory and randomness that they deal with, this shall provide a good introduction (and a starting point to what could become a very interesting journey. I have been meaning to post these for a few months now. Finally, the cat is out of the draft.).

Below are two excerpts from the talk, followed by the direct PBS podcast:
The increased concentration among banks seems to have the effect of making financial crises less likely. But when they happen, they are more global in scale and hit us very hard. True, we now have fewer failures, but, when they occur, I shiver at the thought. -- Nassim Taleb in his book The Black Swan

Mandelbrot, after talking about the Butterfly-effect, elaborates that:
[The Butterfly-effect creates turbulences] The word "turbulence" is one which actually is common to physics and to social scientists, to economics. Everything which involves turbulence is enormously more complicated --not just a little bit more complicated, not just one year more schooling-- just enormously more complicated. [...] That is not well-understood. In fact, that is misunderstood for which tools have been developed which assume that changes are always very small. If one of them comes, nothing bad happens. If several of them come together, very bad things have happened...
And, so it goes.

  • See also:
  • Go here for the podcast download, and here for the full transcript of the interview.
  • Go here for the video of the show. I didn't embed it directly for I found it rather ominous for an introduction to show Taleb laughing over a grim topic.

1 comment:

  1. Okay.. Back to normal and *functional* comment system of Blogger.