The Black Wave Lurking in the Tail - Financial Collapse Caused by Statistical Blind Spots [2000s, Taleb, "Anti-Fragility"].

The Black Wave Lurking in the Tail - Financial Collapse Caused by Statistical Blind Spots [2000s, Taleb, "Anti-Fragility"].

Before the collapse of Lehman Brothers, many financial institutions and policy makers believed in "average behavior" and disregarded the "extreme events" (tail risk) that lurked on the edges of statistics. But what actually happened was precisely that statistically rare catastrophic event. As Nassim Nicholas Taleb notes in "The Anti-Fragility," these "never events" are not exceptions that should be ignored, but rather can be the main cause of a fundamental shake-up of the system. In particular, the subprime loan problem was spread in the market as a "safe financial product" because the risk was underestimated by credit models based on average recovery rates. The Obama administration and the financial authorities of the time were also criticized for confusing the "triggers" and "structural causes" of the risk, and were forced to respond, further exacerbating the situation. Taleb explains that the essence of complex systems is unpredictability and imbalance, and that the instit
utions humans build, however sophisticated they may appear, are often "vulnerable to unknown risks. In other words, a truly robust society should be designed on the premise that anomalies are not the exception.