Of Black Swans and Worthless Elites

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black-swan

 

 

Faithful readers of this blog know that I am fascinated by Nassim Nicholas Taleb’s 2007 book The Black Swan.  In this book Taleb took a look at the impact of events in history for which our prior experiences give us no inkling, Black Swan events.  Taleb states three requirements for a Black Swan Event:

First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

I think Donald Trump is a Black Swan event in American political history, but he is also a part of a growing global revolt  against a fairly worthless class of governing elites.  Taleb has a look at this in a recent post:

What we have been seeing worldwide, from India to the UK to the US, is the rebellion against the inner circle of no-skin-in-the-game policymaking “clerks” and journalists-insiders, that class of paternalistic semi-intellectual experts with some Ivy league, Oxford-Cambridge, or similar label-driven education who are telling the rest of us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think… and 5) who to vote for.

But the problem is the one-eyed following the blind: these self-described members of the “intelligenzia” can’t find a coconut in Coconut Island, meaning they aren’t intelligent enough to define intelligence hence fall into circularities — but their main skill is capacity to pass exams written by people like them. With psychology papers replicating less than 40%, dietary advice reversing after 30 years of fatphobia, macroeconomic analysis working worse than astrology, the appointment of Bernanke who was less than clueless of the risks, and pharmaceutical trials replicating at best only 1/3 of the time, people are perfectly entitled to rely on their own ancestral instinct and listen to their grandmothers (or Montaigne and such filtered classical knowledge) with a better track record than these policymaking goons.

Indeed one can see that these academico-bureaucrats who feel entitled to run our lives aren’t even rigorous, whether in medical statistics or policymaking. They cant tell science from scientism — in fact in their eyes scientism looks more scientific than real science. (For instance it is trivial to show the following: much of what the Cass-Sunstein-Richard Thaler types — those who want to “nudge” us into some behavior — much of what they would classify as “rational” or “irrational” (or some such categories indicating deviation from a desired or prescribed protocol) comes from their misunderstanding of probability theory and cosmetic use of first-order models.) They are also prone to mistake the ensemble for the linear aggregation of its components as we saw in the chapter extending the minority rule.


The Intellectual Yet Idiot is a production of modernity hence has been accelerating since the mid twentieth century, to reach its local supremum today, along with the broad category of people without skin-in-the-game who have been invading many walks of life. Why? Simply, in most countries, the government’s role is between five and ten times what it was a century ago (expressed in percentage of GDP). The IYI seems ubiquitous in our lives but is still a small minority and is rarely seen outside specialized outlets, think tanks, the media, and universities — most people have proper jobs and there are not many openings for the IYI.

Beware the semi-erudite who thinks he is an erudite. He fails to naturally detect sophistry.

The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited. He thinks people should act according to their best interests and he knows their interests, particularly if they are “red necks” or English non-crisp-vowel class who voted for Brexit. When plebeians do something that makes sense to them, but not to him, the IYI uses the term “uneducated”. What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when the plebeians dare voting in a way that contradicts his preferences. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one-vote, with some equivalence for foreign elite schools and PhDs as these are needed in the club.

Go here to read the rest.  We have raised up a governing class of incompetent mandarins, often only accomplished in their arrogance and their ability to elude responsibility.  Taleb sums up this class:

The IYI has been wrong, historically, on Stalinism, Maoism, GMOs, Iraq, Libya, Syria, lobotomies, urban planning, low carbohydrate diets, gym machines, behaviorism, transfats, freudianism, portfolio theory, linear regression, Gaussianism, Salafism, dynamic stochastic equilibrium modeling, housing projects, selfish gene, Bernie Madoff (pre-blowup) and p-values. But he is convinced that his current position is right.

In both Church and State we are led by fools and worse.  Perhaps the rise of Trump is not a Black Swan event, but a predictable reaction to a leadership class that promises only more of the same of congealed failure as we double down on idiotic policies that are frauds at best, cynical schemes to line pockets at worst.  Trump is a bad attempted solution to a very real problem:  the collapse of leadership.

 

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PopeWatch: Cardenal

  Hattip to commenter Greg Mockeridge.  Pope John Paul II shaking his finger at Ernesto Cardenal, Culture Minister for the Sandinista government

21 Comments

  1. I think Donald Trump is a Black Swan event in American political history…
    –Donald R. McClarey

    What does that make Wendell Willkie?

    The 2012 candidacy of businessman Herman Cain and this cycle’s candidacy of two businesspeople (remember Carly Fiorina?) vying for the GOP nod convincingly point to the possibility of a President who does not come up through the usual political minor leagues system.

    The election of Bill Clinton showed that a vulgarian candidate is also a possibility.

  2. “What does that make Wendell Willkie?”

    A loser? Wilkie ran in no Republican primaries in 1940 but skillfully positioned himself to be chosen by the powers that were at the deadlocked Republican convention in 1940.

  3. “A loser?” Heh. We’ll see if Trump is another Wendell Willkie in about seven weeks.

    I figure the Democrat machine’s Get Out The Vote efforts will be worth about 4 percentage points for Mrs. Clinton’s candidacy. Trump and the Republican Party have nothing comparable. There’s still plenty of time for unenthusiastic Trump voters to decide “Who am I to judge?” and not cast a vote.

  4. Perhaps pope francis can be seen as a black swan also.
    A Venn diagram of American culture and Catholic culture- two black swans in that intersection — u- oh!
    .
    but not flocking together 🙂

  5. Trump when it comes to elections will never be a Wendell Wilkie. Wilkie never won an election other than New Hampshire in 1944. In 1944 his campaign ended after he came in dead last in the Wisconsin primary, doing worse even than Douglas MacArthur.

    In regard to getting out the vote the differing enthusiasm levels I think will negate any advantage that the Democrats have. Hillary is the classic dog food the dogs hate no matter how many hundreds of millions are poured into the advertising campaign. Trump has been so demonized in the media that I suspect that in most polls he is probably showing about three points lower than he will on election day.

  6. The Black Swan is an excellent book worth every minute of the time spent reading it. One thing it demonstrates is how misleading statistics can be which are based on the idea that past is prologue and how our assumptions can mislead us. For example, using percentages to make conclusions can be very dangerous. We need to know the absolutes. For more on this kind of thing check out William Briggs blog: http://wmbriggs.com/

    I agree with Donald that Trump could be a Black Swan event. To me determining black swan events is similar to determining tipping points. Evidence of this election seems to indicate we are at one.

  7. Here on the Tauranga harbour, black swans are everywhere – there are so many of them, that every 3 or 4 years, the Dept. of Conservation organise a swan drive so that shooters on board boats go out and cull these lovely birds to elimnate up to half their population, because they fould the harbour bed in the shallower areas and inhibit or prevent the growth of sea grass and the development of sea snails, crustations, shell fish and the nurseries for a variety of fingerling fish.

    Uh – oh – am I missing something here?? 😉

  8. While “black swans” are of interest, the most valuable points in Mac’s post are about the “intellectual yet idiot” that has been ruining the commonweal since the early 20th century. You need to understand that these people hate you; that they do not have at heart your interest; and that their policies and programs have been consistently wrong and destructive.
    .
    More excerpts concerning the highly confused . . . idiotic intellectuals . . . intellectual imbeciles . . .asinine academics . . . “Indeed one can see that these academico-bureaucrats who feel entitled to run our lives aren’t even rigorous, whether in medical statistics or policymaking. They can’t tell science from scientism — in fact in their eyes scientism looks more scientific than real science…Beware the semi-erudite who thinks he is an erudite. He fails to naturally detect sophistry.”
    .
    Never underestimate the destructive powers of the infallibly ignorant.
    .

  9. I’m not sure why he sideswiped Dr. Bernanke, who wasn’t responsible for the ruin that the world’s casino bankers and regulatory arbitrageurs created.

    The problem we have is a lack of patriotism which the elites attempt to replace with a witless fealty to fashionable ’causes’. The lack of patriotism is, in turn, a function of the indifference of both the elites and the professional-managerial bourgeoisie to the people they live among, who are merely pairs of hands and have no interests or perspectives worth bothering about. The economists associated with the Mercatus Center or (much more subtly) the public writings of Jeb Bush provide the observer with unselfconscious examples of this, as do Mr. Justice Kennedy’s judicial opinions.

    And, of course, the elites and associated professionals practice a corrupt and clientelistic politics which damages everyone but insiders. Political machines also practiced a corrupt and clientelistic politics (‘personalized government service’ in the words of Joseph Sobran), but did so at a time when law codes were novel and fairly brief, regulatory agencies few, tax systems not hopelessly rococo, and public expenditure perhaps 10% of domestic product rather than 30%.

  10. The Black Swan is an excellent book worth every minute of the time

    Nassim Taleb is a business professor of the most modest scholarly accomplishment. He’s also a self-promoting hustler of disaster scenarios, and it doesn’t seem to harm his rapport with his audience that precisely nothing he predicts comes to pass.

  11. The only thing saving America from the ruling class is the system put in place by our Founding Fathers. The checks and balances are sometimes askew, but they at least offer some relief from the dictatorship of the pointy headed.

  12. By definition Art Black Swan events are very difficult to foresee or plan for.

    He was predicting in 2008 and 2009 that financial intermediation would collapse, that the coming Depression would be worse than that during 1929- and that the only future banks had was as cash dispensers. That had nothing to do with black swans. That was surveying the scene. The distinction betwen Taleb and Nouriel Roubini is that Roubini had worked for international agencies during financial crises and was something of a specialist in assessing the signs. (Roubini’s predictions over-estimated the dimensions of the American economic contraction by a factor of 2. He was much more conservative in his scare-mongering than Taleb).

    He also fancies pseudo-epistemological jargon.

  13. Suppose in five or ten years, a nuclear-armed Iran detonates a weapon somewhere. Would that be a “black swan” event?
    .
    Wikipedia entry: black swan “describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.”
    .
    A reason that recent “black swan events”, e.g., the Great Recession of 2008, were massively destructive is that idiotic elites’ exercise far too much power so their misguided central planning and monkeying with markets (concentrate/misallocate) capital and assets create a gigantic, unsustainable asset bubbles that naturally burst. There were numerous warning signs that were universally, willfully ignored because everybody was making big profits. Ergo, the will was lacking to stop the black swan.
    .
    Any fool, such as me, could see that an asset bubble was forming: real estate prices soared (hottest markets by about 20% a year) while disposable incomes and GDP growth were minimal or nonexistent; huge amounts of capital flowed into real estate markets; subprime mortgages rose from 5% of the total market in 2002 to 20% in 2007; etc. (the list goes on).
    .
    Most tragically, the academic and political powers that be have not addressed the systemic causes. They refuse to identify the root causes – many of their oxen will be gored. And, Dodd Frank is a chimera.
    .
    Many banks, having firm grasps of the obvious, restored “safe and sound” loan underwriting standards (which they had utterly abandoned). That will do far more than anything in Dodd Frank to prevent the recurrence of the 2004 to 2007 real estate insanity. The rest is political and professorial theatrics.
    .

  14. I dunno. The IYI post seemed a little too trite. Maybe in context it meant something, but the portion online was little more than an unsupported rant. As a conservative, I endorse the critique against the Elite Class (or whatever you want to call it), but I’m not sure that it holds water when taken beyond the level of a prudential warning. Yes, there have been misleading or misinterpreted health studies. But there have also been important health studies that have yielded tremendous benefit. Immunizations are an Elite Class cause. You name the field, there have been some good and some bad causes backed by the Elite Class. And, of course, the Elite Class doesn’t speak as one, despite the claims of its critics. A reasonable person or society can consider each issue and make a determination on its own.

    The analogy that comes to mind is movie reviews. There are some reviewers who like anything that Entertainment Tonight says will be successful (the populists). There’s another group that criticizes anything in English and/or in color (the elites). I take both with a grain of salt. If they both like a movie, well, that interests me. It still doesn’t prove that the movie will be good, but it interests me.

    There is no single formula for calculating whether something is a good idea, and no infallible authority (without supernatural guidance). Looking down on the nerds is as class-conscious as condemning any other group.

  15. I agree with Pinky. Taleb paints with a very broad brush here, as he is wont to do. Frederic Dard? Seriously? Reading The Black Swan, it’s clear he’s a philosophical skeptic, which doesn’t sit well with my Catholic sense of epistemology.

    How is his rant any different than calling a portion of the population “deplorable”? What are we to take away from his extreme skepticism, that knowledge is folly and anti-intellectualism is the way ahead? I think we’re better served by seeing these supposed IYI people as opportunities for evangelization rather than our own version of “les deplorables.”

  16. Where he is completely accurate is that we have a wretched leadership class. It is no accident, as the Marxists used to say, that thirty years ago as Pope we had John Paul II and as President Ronald Reagan, and today we have Pope Francis and President Obama. The dismaying aspect of the leadership class is their agreement on inane policies, including global warming, ever increasing state control of the economy, open borders, Islam is a religion of peace, etc. The world is in a lot of trouble when its leaders are so ideologically committed to total rubbish.

  17. A reason that recent “black swan events”, e.g., the Great Recession of 2008, were massively destructive is that idiotic elites’ exercise far too much power so their misguided central planning and monkeying with markets (concentrate/misallocate) capital and assets create a gigantic, unsustainable asset bubbles that naturally burst. There were numerous warning signs that were universally, willfully ignored because everybody was making big profits. Ergo, the will was lacking to stop the black swan.

    Central planners did not compel Joseph Cassano and his minions at AIG to write $400 bn of credit default swaps re mortgage backed securities derived from asset pools about the composition of which they had not a clue. Central planners weren’t responsible for building the business empires of Kerry Killinger and Angelo Mozilo. Both men systematically mispriced risk. They were enabled by federal regulators, but the regulators were not responding to any central plan, but to clientelistic politics of a sort gruesomely familiar. Slashing underwriting standards at Freddie Mac in 2003 was also not in response to a plan, but to more clientelistic politics, as was the interference Barney Frank ran for Freddie Mac and Fannie Mae in Congress (Frank’s boy toy worked at Freddie Mac). To the extent public policy was a factor, it was standard-issue Capitol Hill corruption, not neo-GOSPLAN.

  18. Where he is completely accurate is that we have a wretched leadership class.

    They’re drawn from a professional-managerial set who engage in bad behavior (or, more commonly, punish employees who criticise bad behavior) with a frequency my grandparents would have found daunting. A friend of our family is living in a nursing home in South Carolina as we speak (due to Parkinson’s). He was born in 1931, managed to earn a college degree (in engineering), entered the military upon graduating, and, discharged after 3 years, landed a job at Eastman Kodak where he worked for 30 years. He married in 1954 the woman to whom he remains married today, and sired his 3d child at age 29. He’s owned 3 homes: the trailer his wife lived in while he was in the service and to which his first child was brought home, a suburban tract house they owned for 45 years, and an investment property they built in late middle age and where his wife lives now. He was quite particular about one thing all his life: income > expenditures. He’s been a churchgoer all his adult life. None of his sons (all of whom have challenging vocations quite different from their father’s) have ever had trouble with the law or knocked-up anyone to whom they were not married. Sadly, he’s just about the last survivor among the men in my parents’ circle of friends. If he’s ever uttered a snarky word in his life, I’ve never heard it. Among my parent’s contemporaries, this man was perfectly normal. Among mine, you see parts of that assembled in one person, but seldom the whole package.

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