Taleb-Asness Black Swan Spat Is a Teaching Moment
Investors should recognize where the “Black Swan” author and a quant fund pioneer tend to agree rather than differ.
Markets can come undone by black swans.
Photographer: Dan Kitwood/Getty Images
The recent Twitter spat between “Black Swan” author Nassim Nicholas Taleb and quant investing pioneer Cliff Asness over hedging against highly remote events reminded me why Luke Skywalker needed two droids: R2-D2 to ignore chaos and calmly proceed with the long-term plan, and C-3PO to point out all the exotic dangers that make everything hopeless.
The comparison, though, is not fair to Taleb. In the comic-book universe of Star Wars, we know the good guys prevail. But in real life, the small number of Taleb’s warnings that prove accurate can have more influence on long-term outcomes than the far more numerous times when things go as expected. Yes, C-3PO is annoying, but he has to be; no one wants to hear all the ways things might go wrong. (I’ve known Taleb for 35 years and I worked for Asness for 10 years and consider them both friends.)