Interview With Nassim Nicholas Taleb

Image: Gabriela Hasbun/Redux

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Former options trader and hedge fund manager Nassim Nicholas Taleb is "the black swan"—a human incarnation of the sort of highly improbable but overpowering event that he investigates in his bestselling 2007 book of the same name. Like the strangely hued avian that was thought not to exist until 17th-century Dutch explorers discovered its native habitat, Australia, Taleb fits his own definition: 1) He lies outside the realm of normal expectations; 2) He has had an extreme impact, particularly in the world of finance; and 3) Many observers—journalists, admirers, and especially detractors—have been at pains to explain and categorize him after the fact.

On Business Dress:

"The guy in Silicon Valley looks wild, but he's less risky than a banker."

On the Tragedy of Economics:

"The structure of uncertainty in the world is vastly greater than we think."

On His Career:

"My problem is what my mother kept telling me: I'm too messianic in my views."

Taleb’s unlikely existence began 48 years ago in Lebanon, where he was born into a politically prominent, highly educated Greek Orthodox family. When he was 15, catastrophe struck in the form of the Lebanese civil war, an unexpected anomaly after 3,000 years of relative calm. He spent his war years reading in the family basement, hiding from the mayhem on the streets, and eventually received advanced degrees at Wharton and the University of Paris before going to work on Wall Street trading derivatives, currencies, commodities, and other complex instruments.

As a 29-year-old options trader at First Boston, he became rich on a single day—Black Monday, the Dow crash of October 19, 1987—when he had the foresight, or amazing good luck, to make tens of millions of dollars by shorting the market. Then one black swan followed another as Taleb, a lifelong non-smoker, was diagnosed with throat cancer. He beat the disease and in 2001 another black swan appeared when his first attempt at writing a book, Fooled by Randomness, was a cult hit and then a surprise bestseller. Today he is a principal in Universa, a billion-dollar hedge fund based in Santa Monica, California, but he spends most of his time as a much sought-after scholar—thinking, reading, writing, and occasionally giving high-dollar lectures.

In an exclusive interview last Friday with Portfolio.com—conducted as Taleb wandered, almost randomly, from his favorite French restaurant to his yacht club to a sidewalk café in the unnamed New York bedroom community where he lives—he shared his thoughts on the nature of risk, the ignorance of so-called experts, and the perils of boring bankers in suits and ties.

Lloyd Grove: You don't watch videos and you don't read newspapers. Why don't you watch videos?
 
Nassim Nicholas Taleb: The moving image doesn't have the aesthetic appeal of the written word. And I don't like people to watch images to get a representation of the world because it's going to be severely marred. If you see a plane crashing it's going to distort your statistical representation of the world. The press already has a problem in what it represents. They give you what can get your attention, so the press is not going to make you aware of the 40,000 to 50,000 car crashes every year that people die in—you don't hear about that. You hear about a plane crashing, you hear about a soldier dead in a war, because you have some emotional attachment to it. You don't hear of people dying of diabetes. You don't realize that this—this thing on the table, sugar—is killing more people than anything.
 
L.G.: Granted that videos are not an accurate statistical representation of what's going on in the real world, but why aren't you watching them?
 
N.N.T: I don't like it. My world is much, much more serene without audiovisual stimulation. That's too much. I understand the nature of how to cope with uncertainty in a world which is human. I'm a classicist. I live like a classicist. I think like a classicist. I don't like movies. I just read. I like reading. I like music, but I can't listen to music while doing something else.
 
L.G.: I don't want to invade your privacy, but do you allow your kids?
 
N.N.T.: Yeah, I don't influence other people.
 
L.G.: So if they say "We're going to go see Batman" —
 
N.N.T.: I don't tell people "Don't watch movies." There are plenty of good movies. I tell people don't get your representation of the news from television, because it hits you in a part of your brain, and the way it hits you is much more the story than if you'd read it. And if you read it, it's much more distorting if you read words than if you're reading statistics. When did I stop watching news on television? I never really watched television, even as a child, I never liked it. I grew up with a lot of books, and television for me was something that other people did. I never watched sports, so I don't watch sports. I bought a TV set when I was in school here at Wharton [business school at the University of Pennsylvania] and hardly ever turned it on.
 

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