Do you have any assessment of the probability that Nassim Taleb’s hypothesis will be realized?
Question/Comment: When I watched your segment on the NewsHour the other evening I was riveted by Nassim Taleb’s prediction and his wish that he was wrong. I understand that supposedly Kevin Phillips, the economist, and George Soros, the entrepreneur predicted this credit fiasco. So, perhaps Mr. Taleb is not far off base. Do you have any assessment of the probability that Mr. Taleb’s hypothesis will be realized?
Paul Solman: You’ve given me the opportunity to once again quote John Kenneth Galbraith who once said, in my hearing: “There are two kinds of economists; those who don’t know the future, and those who don’t know they don’t know.” (Galbraith’s son James has a new bestseller, ‘The Predator State’, on these issues; John’s ‘The Great Crash’ is also on the bestseller lists once again.)
That said, I’ve long had great respect for Taleb’s insights. After reading his “Fooled by Randomness,” which I heartily recommend (and have given to various friends), I met him and even read his “The Black Swan” in manuscript. We first featured him in a piece on hedge funds two years ago.
Will his doomsday scenario prove accurate? There’s no way to know. As mathematician Benoit Mandelbrot said at the end of the double interview:
BENOIT MANDELBROT: Everything is a possibility. I mean, again, it is not — I try my best to answer questions which are scientific, and which I can respond to and which have scientific evidence and not personal opinion. Everything is imaginable. What’s the joke, that prediction is very easy when you predict the past or something?
PAUL SOLMAN: Well, predictions are — predictions are difficult, particularly about the future.
BENOIT MANDELBROT: That’s what I wanted to remember.