Monday, October 17, 2005

Fooled by Randomness

Nassim Nicholas Taleb's Home & Professional Page

Up on my list of reading. I casually glanced through the book at a local Borders the other day (my casual glance means that I must have read 5% of the book while sipping my latte). What gave me a few chuckles is that Taleb seems to make fun of the MBAs a lot (He himself holds an MBA from Wharton; however he did top it off with a PhD later). He seems to imply that MBAs just dont seem to grasp the finer details of finance - they want a cookie-cutter solution to everything.

This is interesting because another instructor of a class that I am taking (who is also an MBA) has repeatedly pointed out that major publishing houses for MBA books on finance DEMAND from the authors (sometimes at the cost of accuracy) that the books should be devoid of any mathematical proofs or in-depth formulae.

I have no idea what goes on in MBA finance classes (except a bunch of case studies), but is this really true?

Counter argument (on Amazon by a reviewer called Carouser):
Taleb lumps MBA and businessmen types into the "fool" category. This misses the point. 99% of business is not about risk-assessment, dazzling insight, or grand strategic thought, but about successful *execution* of obvious ideas, and hard work. How many eggheads have had great ideas, but never done anything to put them into action? There is no point knowing that a beach bar in the Bahamas might be destroyed every 10 years by a hurricane, if you aren't even capable of raising capital, employing people, or working 16 hour days getting it off the ground. Good MBAs and CEOs will in any case employ people like Taleb to assess risk for them.


Blogger shooGu said...

Interesting coincidence that you posted about Taleb's book and that it's on your reading list. It's recently been gaining priority on my "to-read" list as well...and in fact, I'd been thinking about doing a blog entry about it myself!

First, I came across this column in the Business section of the NYT a few weeks ago, which piqued my interest.

But something seemed vaguely familiar about Taleb and his book. A Google search turned up this Malcolm Gladwell profile of Taleb, which I think I read back when it came out in 2002.

And then just today I was having lunch with a friend, talking about quant stuff...and he thought of two books that he said I really had to read. One was Derman's "My Life as a Quant"--and, yes, the other was "Fooled by Randomness."

(BTW, thanks for the comment--funny that you watched one of my calc lectures! Who knows, if things work out s.t. I'm able to join you on the quest for the MFE next year, we may be doing quite a bit of calc together--the stochastic variety!

12:25 AM, October 18, 2005  
Blogger Quantjock said...

Yes, I also read 5% of Derman's book on another Border's excursion. great read.. both of them.

9:20 AM, October 18, 2005  
Blogger derivativesgeek said...

very interesting comment about mba level execs and phds in financial engineering groups. Generally I do beleive that these individuals (mbas) are better aquainted with the sales aspect of the derivative products. This is generally what is observed at major investment banks and commercial banks. The risk management groups are integrated into the firm either by function (horizontal) or by asset class (vertical). Generally PhDs are layered within either corporate structure, but it is usually Asset Line Managers who oversee these groups and are accountable for their performance, whether great or abysmal. I would imagine it is a necessity that the PhD have a better understanding of the intracacies of the products, while the MBA is primarily responsible for the Products role within the company (i.e. Product Manager).

- deriviatives geek aka quantphd

6:29 PM, October 25, 2005  
Blogger derivativesgeek said...

hahahha so what about the 95% you failed to read while sipping your caffienated drink?

as a quant wouldn't you take the contrarian view, that reading less is improper, while reading more is better?

i'm just teasing here.

- derivatives geek aka quantphd

6:30 PM, October 25, 2005  
Blogger Quantjock said...

hey derivatives geek,

I made a disclaimer in my post that this is based on my 5% read of a book. I have avoided buying a lot of books (which I thought I may not enjoy) by going through my quick-perusal method :)

thanks for all your comments..

3:29 PM, October 26, 2005  
Blogger derivativesgeek said...

this is just a blog, there is not premium placed in defending yourself here. good day.

- derivatives geek

7:15 PM, October 26, 2005  
Blogger Quantjock said...

Deriv geek: thanks for your comments. What is your background? Are you a student or an alum?? What do you do now?

Looking forward to your blog..

5:08 PM, October 27, 2005  
Blogger derivativesgeek said...

pretty much the same as anyone else here: math quant background, relevant work experience, and recently applied to top quantphd programs.

i'm located in USA metro area.

until my other site is up, you may track my study progress for the 2006 FRM exam at

- derivatives geek

10:16 AM, October 29, 2005  

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