Nassim Taleb: current crisis was a White Swan, not a Black Swan event

Black Swan author Nassim Taleb says that the current crisis was actually a white swan event rather than a black swan event since he saw it coming and it was bound to happen. A Bloomberg article by Stephanie Baker entitled "Taleb's 'Black Swan' Investors Post Gains as Markets Take Dive" tells us that:

... Taleb said he saw the banking crisis coming.

"The financial ecology is swelling into gigantic, incestuous, bureaucratic banks -- when one fails, they all fall," Taleb wrote in "The Black Swan: The Impact of the Highly Improbable," which was published in 2007. "The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup."

Taleb said the current crisis is a "White Swan", not a Black Swan, because it was something bound to happen.

"I was expecting the crisis, I was worried about it," Taleb said. "I put my neck and money on the line seeking protection from it."

The article goes on to tell us how unhappy Taleb is with Wall Street's approach to risk management:

Taleb is angry that Wall Street is continuing to use traditional tools such as value at risk, which banks use to decide how much to wager in the markets.

"We would like society to lock up quantitative risk managers before they cause more damage," Taleb said.

-- Jack Krupansky