Archive for October 13th, 2008

Ride a Black Swan

What the Black Swan dude is saying here is quite compelling, though I know nothing of the tools used by banks to calculate risk.

Where you have institutions whose foundational imperative is the generation of profit, any activities within those institutions, no matter how exquisitely objective their methodologies appear, are beholden to this imperative. Generation and interpretation of data, and resultant decisions, are conducted not as part of a disinterested endeavour, but as part of efforts to generate profit. In this dynamic, no-one is employed to say ‘I don’t know’ for any length of time.

I think the point with Taleb, though, if I get him right, is that even if this data interpretation were a matter of consciously disinterested endeavour (and not, say, class war), it wouldn’t make a damn bit of difference since people in their analysis would still fall prey to all sorts of ex post facto rationalisations of prior events that affect their subsequent decision making processes, and the sheer amount of data available on any matter you can think of renders people highly susceptible to all sorts of confirmation bias.

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