Bob Carter sent me a link to the following interesting article and profile on Nassim Taleb. Taleb is a statistician with practical risk experience. We’ve talked endlessly at Climate Audit about weird and inappropriate statistical methods, with frequent mentions of Mandelbrot, fractals and odd distributions. So does Taleb. In a financial context, but Mandelbrot sought fractals both in finance and nature (even analysing earlier versions of Mann’s tree ring data.)
The introduction to Taleb’s article is as follows:
When Nassim Taleb talks about the limits of statistics, he becomes outraged. “My outrage,” he says, “is aimed at the scientist-charlatan putting society at risk using statistical methods. … As a researcher in probability, he has some credibility. In 2006, using FNMA and bank risk managers as his prime perpetrators, he wrote the following:
“The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events “unlikely.” “
Taleb recently accepted an academic appointment in an engineering department, describing the appointment as follows:
And Professor Bernanke [the present Federal Reserve chairman] indeed found plenty of economic explanations—what I call the narrative fallacy—with graphs, jargon, curves, the kind of facade-of-knowledge that you find in economics textbooks. (This is the kind of glib, snake-oil facade of knowledge—even more dangerous because of the mathematics—that made me, before accepting the new position in NYU’s engineering department, verify that there was not a single economist in the building. I have nothing against economists: you should let them entertain each others with their theories and elegant mathematics, and help keep college students inside buildings. But beware: they can be plain wrong, yet frame things in a way to make you feel stupid arguing with them. So make sure you do not give any of them risk-management responsibilities.)
Taleb has even had to resist demands to provide his own “reconstruction”.
Now you would think that people would buy my arguments about lack of knowledge and accept unpredictability. But many kept asking me “now that you say that our measures are wrong, do you have anything better?”
Here’s another paragraph about “self-published” negative results:
Go to a bookstore, and look at the business shelves: you will find plenty of books telling you how to make your first million, or your first quarter-billion, etc. You will not be likely to find a book on “how I failed in business and in life”—though the second type of advice is vastly more informational, and typically less charlatanic. Indeed, the only popular such finance book I found that was not quacky in nature—on how someone lost his fortune—was both self-published and out of print. Even in academia, there is little room for promotion by publishing negative results—though these are vastly more informational and less marred with statistical biases of the kind we call data snooping. So all I am saying is, “What is it that we don’t know”, and my advice is what to avoid, no more.
“Less marred by statistical biases of the kind we call data snooping.” My, my.