Failure to think forward

Nevertheless, the article lets some of these so-called "philistines" speak out on the merits of the kind of risk management that Taleb attacks and they end up agreeing with him to some extent, although in a more analytical and less hyperbolic manner. The favorite whipping boy of Taleb, the so-called Value-at-risk assessment model, is portrayed as flaw but for a long time, it was the lowest common denominator as far as risk measurement went and therefore ubiquitous for any financial company. As a risk analyst puts it in the Times article:

"'If you say that all risk is unknowable...you don’t have the basis of any sort of a bet or a trade. You cannot buy and sell anything unless you have some idea of the expectation of how it will move.' In other words, if you spend all your time thinking about black swans, you’ll be so risk averse you’ll never do a trade. 'Taleb says that 1 percent will dominate your outcomes. I think the other 99 percent does matter. There are things you can do to control your risk'"

If you approach the world with only "Black Swans" - 1% risk cases - in mind, you'll have a very hard time doing business since doing business is basically about taking a leap of faith. You never know exactly how a certain deal will turn out. Or if you can really trust the person sitting across from you. Or if what you're preparing will really work. Taleb's financial strategy - betting on rare events that few others believe in - works but only three times in the past three decades as the article attests. In the crash of 1987, in the dot-com meltdown and in the current climate. In the past year, Taleb's hedge fund was up "65 to 115 percent" in the past year. Big deal! In the stock market of the 1980's, the the so-called dot.com bubble and in the past decade, asset prices have been known to double five, six even ten times over. Sell at the right moment and you can keep on betting on the 99% and let Taleb and the likes of him have his days in the sun once every decade.