Nassim Taleb, Barney Frank, and George W. Bush

   One last time on one of my favorite themes, before the sun sets forever in the West. That is the absurdity attempting to evaluate all the events of the last eight years without consideration of the alternative histories that might have come to pass.

    A Lebanese currency trader named Nassim Taleb established his reputation in the last four years with two books about decision making and markets, entitled 'The Black Swan' and 'Fooled by Randomness'. Although the second one, 'The Black Swan', is the more colorful and widely noted, the first, 'Fooled by Randomness', is actually the more systematic and accessible. Both books are attacks on over-quantified thinking, emphasizing the significance of unpredictable events and the tendency to confuse random success with scientific skill.

    In Fooled by Randomness, Taleb illustrates his central point with a brutally effective hypothetical. He considers the case of a young man invited to play a game of Russian roulette for stakes of $10,000,00 a round. He notes the absurdity of judging the wisdom of taking this bet by the outcome. Five-sixths of the time, his biographers applaud his cold blooded willingness to risk his life for a grubstake. The sixth?

    Accepting the bet is obviously an appallingly foolish thing to do. Taleb's point is that it is only when the 'unknown histories', the outcomes that by the roll of the dice never came to be, that the actual soundness (or not) of the decision can be determined. He goes on to note that the easily calculable risk of Russian roulette is child's play, compared to the subtle, infinitely varied, and infinitely changeable risk-reward aspects of real life. But the principle is the same - it is not the outcome, but the method of decision generation that determines the wisdom of a decision.

    What occurs to me, taking this process one ply deeper, is that the player in real life who avoids the loaded chambers of the decisional revolver, is doomed to be the most despised of all the prophets without honor. Compare, for example, the situation of Barney Frank and George W. Bush. Franks is certainly not the only member of Congress who failed to respond to the looming danger of Fannie Mae and Freddie Mac mismanagement, but he's visible enough to serve as an example for our purposes.

    Supposing Franks had had the wisdom to recognize the threat, AND the political guts and will to insist on reform. What happens?

    Franks puts himself in the position of recognizing the loaded chamber in the revolver before it discharges. He demands, and gets, timely reform. This, of course, brings the manic mortgage lending of Fannie Mae to a halt, and with it (a man can wish) the whole insane house of leveraged derivative cards built upon its sandy foundation. What is Frank's reward for this prescience? To be roundly damned by everyone who stood to profit from the frenzied market, which is quite a number, and to receive no support whatsoever from those saved from loss, since they don't even know they were ever endangered, let alone who they are. The market was in good shape. These derivatives weren't that dangerous. We knew what we were doing. What needed reform? Why did you do this?

 

    Only a precious few would honor Frank for reacting to the unknown histories - the loaded chamber(s) - as well as the one that came to be. They are so few and so precious, in fact, that Nassim Taleb has just made a career out of pointing out the necessity of thinking in such a manner. In the land of the blind, the one-eyed man is not king; he's in big trouble. (Another aphorism shot out of the saddle.)

 

    George W. Bush is on the other extreme. In all of the eternal rounds of damnation that have been hurled at his administration in the last few years, I have read few if any who consider that a comparison of unknown histories is necessary to assess his actions, that the question is not the evils of the present course per se, but whether they are lesser or greater than the evils that might have been. My own thinking on this point was permanently influenced by the chance acquisition of a book, The New Yorker Book of War Pieces [ISBN 00805209018], a collection of articles that appeared in the New Yorker between 1939 and 1945. Over and over, particularly in the first pieces, the writers agonize - literally - over why the West let it come to war, let Hitler and Germany develop the momentum he did. These are anguished reports. The writers were frightened men and women.

 

    But of course if the West had reacted to Hitler in timely fashion, the world would never have known the wisdom of that course of action. As with Frank, the actual history becomes one of the unknown ones. It is entirely possible that the very same journalists who agonized in the world that came to be in 1940, would have condemned the reaction as an overreaction in the world that never arose. Hitler wasn't so bad. He made they trains run on time. Things were better under Saddam.

    If we were living in a world in which a psychopathic Saddam Hussein, bloated with oil money and emboldened by Western passivity, was racing with Iran to stockpile nuclear weapons, we'd know. Worse - if we were digging out of the radioactive ruins of Manhattan, we might be sharing the agonies of that 1940 world. No one can say for certain (obviously) - the calculation can only be intuitive. But the fact that such a judgment must be made is reason enough to restrain the demonization.

 

    What it comes down to is that Taleb insists that the unknown histories be considered, as well as the one that came to be, in evaluating the soundness of a decision. Otherwise, the winners of Russian roulette games are celebrated for wisdom rather than the simple luck of the survivor. George W. Bush may have saved the world, as horrible as that sentiment sounds to the Demented Left. Barney Frank for sure did not. That for sure does not end the thinking about momentous issues, but it is where it should begin.

Comments

[J Thomas]

The trouble is, George Bush did not prevent Saddam from developing nuclear weapons. Saddam had already given up. And the best evidence available was that he had given up. And there was good evidence that Cheney was demanding cooked data, that it was wrong to accept his sources because he insisted they lie to him.

How do you distinguish the loaded chambers from the unreal fantasies about loaded chambers?

When you're invited to play russian roulette, and you don't know whether any of the chambers are really loaded, or whether maybe it's one chamber loaded or five chambers or all six, how do you decide whether to play the game?

Bush chose to invade iraq on the assumption that no occupation would be needed. The military was forbidden to do any planning for an occupation because... because... well I don't know why, but maybe it was considered certain it wouldn't be needed?

That's a loaded chamber they should have given some thought to. But they were too busy thinking about how to convince americans that Saddam might be about to get a bomb, when they had no evidence supporting that.

[AlexAxe]

Hi,
Can i take a one small picture from your site?

Thank you
AlexAxe

[Genuine Realist]

which picture?