November Bend Tech Book Club

We had a good turnout at our first Bend Tech Book Club meeting discussing Ray Kurzweil's "Law of Accelerating Returns." So, we're going to continue our book discussions on the first Tuesdays of each month at Dudley's Book Store.

The book for November 3rd is Nassim Taleb's bestselling The Black Swan. Thanks to Lloyd Fassett of azteria.com for suggesting the book and leading the discussion.

Before we get to Lloyd's notes about the book, there are a couple administrative matters to mention.

Terri Cumbie has shown significant generosity in allowing various groups to use her bookstore as a meeting place. She must staff Dudley's during the time we're meeting and, of course, this is an expense that we need to cover. We won't impose a fee on meeting attendees, but we need each member attending to throw a few dollars Terry's way, either by buying a book, buying a drink, or making a few dollars donation. 'nuff said? Thanks.

Second, I will have pizza on hand for those attendees who indicate they would like a couple slices during the meeting and are willing to chip in proportionately to pay for it.

With these matters handled, let's get down to the next book itself.

Notes from Lloyd...

The Black Swan is one of my favorite business books because it’s 400 pages about ‘you don’t know what you don’t know’, which is a catch-22 that has always intrigued me. A few of my favorite quotes are:

• It is not just knowledge, but information that can be of dubious value.” page 14.

• Categorizing is necessary for humans, but it becomes pathological when the category is seen as definitive, preventing people from considering the fuzziness of boundaries.” page 15.

• What we call “talent” generally comes from success, rather than its opposite. page 30.

• Our intuitions are not cut out for nonlinearities. page 87.

• Many people accepted my Black Swan idea but could not take it to its logical conclusion, which is that you cannot use one single measure for randomness called standard deviation (and call it “risk”); you cannot expect a simple answer to characterize uncertainty. page 252.
  

The book is worth the media attention it has received mostly. However, it is a more detailed explanation of something I learned in statistics class and really isn’t so unknown or new. That is that you cannot apply Gaussian Bell Curve’s to phenomena events fall far from the average. Unfortunately for us, most of financial analysis, primarily Efficient Market Theory, is a mis-application of the Gaussian Bell Curve, which led to derivatives and financial collapse. Oddly enough, a finance professor in business school told me the potential for this after explaining Efficient Market Theory making me scratch my head and wonder how much I was paying for this kind advice. Basically, the book says we can’t predict what will happen most of the time and to proverbially get back to the grindstone of figuring out how to better predict, and in the meantime, just admit that we don’t know what is going to happen.

There are some online videos that you can take a look at to "cheat" and still talk intelligently about the book at the meeting.

2007 Charlie Rose Interview about the book – 16 minutes

2008 - Charlie Rose - A conversation about economics with Nassim Taleb – 20 minutes (starts with the ‘story of the turkey’ I mentioned at the last meeting)

4 minute video Nassim Nicholas Taleb - What is a "Black Swan?"

160 more Google video results for “Nassim Taleb Black Swan”

Let’s play 7 degrees from Kevin Bacon:

One of the people Nassim Taleb speaks highly of in the book is a Yale mathematician named Benoit Mandelbrot. This interview from the Financial Times was posted to Paul Kendrosky’s blog on October 1. Paul Kendrosky is giving the key note address at the Bend Venture Conference on Friday October 16 at the Tower Theater. Benoit talks about how he was not well liked in 1962 for saying that the Efficient Market Theory wouldn’t work.

Video: Benoit Mandelbrot on Risk, Efficient Markets, and Bachelier