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success in the financial marketplace

For Taleb, then, the question why someone was a success in the financial marketplace was vexing. Taleb could do the arithmetic in his head. Suppose that there were ten thousand investment managers out there ” which is not an outlandish number ” and that every year, entirely by chance, half of them made money and half of them lost money. And suppose that every year the losers were tossed out, and the game re-played with those who remained. At the end of five years, there would be three hundred and thirteen people who had made money in every one of those years, and after ten years there would be nine people who had made money every single year in a row ” all out of pure luck. Niederhoffer; like Buffett and Soros, was a brilliant man. He had a Ph.D. in economics from the University of Chicago. He had pioneered the idea that through proper statistical analysis of patterns in the market an investor could identify profitable anomalies. But who was to say that he was nоt one of those lucky nine? And who was to say that in the eleventh year Niederhoffer would not be one of the unlucky ones, who suddenly lost it all ” who suddenly, as they say on Wall Street, blew up ?

Taleb remembered his childhood in Lebanon and watching his country turn, as he put it, from paradise to hell in six months. His family once owned vast tracts of land in northern Lebanon.

All that was gone. He remembered his grandfather ” the former Deputy Prime Minister of

Lebanon and the son of a Deputy Prime Minister of Lebanon and a man of great personal dignity ” living out his days in a dowdy apartment in Athens. That was the problem with a world in which there was so much uncertainty about why things ended up the way they did: you never knew whether one day your luck would turn and it would all be washed away.

So here is what Taleb took from Niederhoffer. He saw that Niederhoffer was a serious athlete, and he decided that he would be, too. He would bicycle to work and exercise in the gym. Niederhoffer was a staunch empiricist, who had turned to Taleb that day in Connecticut and said to him sternly, Everything that can be tested must be tested ” and so when Taleb started his own hedge fund, a few years later, he called it Empirica. But that is where he stopped. Nassim Taleb decided that he could not pursue an in-vestment strategy that had any chance of blowing up.

Nassim Taleb is a tall, muscular man in his early forties, with a salt-and-pepper beard. His eyebrows are heavy and his nose is long. His skin has the olive hue of the Levant. He is a man of moods, and when his world turns dark his eye-brows come together and his eyes narrow and it is as if he were giving off an electrical charge. Some of his friends say that he looks like Salman Rushdie, although at his office his staff have pinned to the bulletin board a photograph of a mullah they swear is Taleb`s long-lost twin, while Taleb himself maintains, wholly implausibly, that he resembles Sean Connery. He lives in a four-bedroom Tudor with twenty-six Byzantine icons, nineteen Roman heads, and four thousand books, and he rises at dawn each day to spend an hour writing. He has a Ph.D. from the University of Paris-Dauphine and is the author of two books, the first a highly regarded technical work on derivatives, and the second a treatise entitled Fooled by Randomness, which was published last year and is to conventional Wall Street wisdom approximately what Martin Luther`s ninety-five theses were to the Catholic Church. Some afternoons, he drives into the city and attends a philosophy lecture at City University. In the fall, he teaches a course in mathematical finance at New York University, after which he can often be found at the bar at the Odeon restaurant, in Tribeca, holding forth, say, on the finer points of stochastic volatility or the Greek poet C. P. Cavafy.