Wednesday, October 22, 2008

Taleb and Mandelbrot on the Credit Crunch

Ok, so maybe I'm not the most pessimistic person out there. My husband found this interesting NewsHour interview with Taleb and Mandelbrot which I highly recommend for anyone seeking a good dose of realism.

My favorite quote:

Taleb: Never in the history of the world have we faced so much complexity combined with so much incompetence and understanding of its properties ... I think that we may be experiencing something that is vastly worse than we think it is.

...

BENOIT MANDELBROT: Everything is a possibility ... Everything is imaginable. What's the joke, that prediction is very easy when you predict the past or something.

As I sat in an interview in Monday giving my predictions about the future state of the world, I felt rather silly. I know as money managers we're not allowed to be uncertain - but what I'm really thinking is 'I have absolutely no bloody idea what will happen and neither do you'. None of us do. Ever. Which is partly why I think I might like to get out of the prediction industry and into the doing something industry.

And I found this Reuters article (just one of many on the topic) absolutely galling. I don't have a stitch of pity for all the homeowners who overbought and overspent over the past 4 years. They all deserve bankruptcy but unfortunately they may take us all down with them.

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