Nassim Nicholas Taleb

Early life and family background

Taleb was born in Amioun, Lebanon, to Minerva Ghosn and Nagib Taleb, an oncologist and a researcher in anthropology. His rich and influential parents were Lebanese Greek Orthodox Christians, and had French citizenship. His maternal grandfather Fouad Nicolas Ghosn and great-grandfather Nicolas Ghosn were both deputy prime ministers of Lebanon in the 1940s through the 1970s, and his four-times great-grandfather was one of the board of directors to the administrator of Mount Lebanon. His paternal grandfather Nassim Taleb was a supreme court judge. Taleb attended a French school in Beirut, the Grand Lycée Franco-Libanais. His family saw its political prominence and wealth reduced by the Lebanese Civil War, which began in 1975. He is a Greek Orthodox Christian.

Education

Taleb received Bachelor and Master of Science degrees from the University of Paris. He holds an MBA from the Wharton School at the University of Pennsylvania (1983), and a PhD in management science from the University of Paris (Dauphine) (1998), under the direction of Hélyette Geman. His dissertation focused on the mathematics of derivatives pricing.

Finance

Taleb has been a practitioner of mathematical finance as a hedge fund manager, and a derivatives trader. He has held the following positions: managing director and proprietary trader at UBS, currency trader at Credit Suisse First Boston, chief currency derivatives trader for Banque Indosuez, managing director and worldwide head of financial option arbitrage at CIBC Wood Gundy, derivatives arbitrage trader at Bankers Trust (now Deutsche Bank), proprietary trader at BNP Paribas, independent option market maker on the Chicago Mercantile Exchange and hedge fund manager for Empirica Capital.

Taleb reportedly became financially independent after the crash of 1987 from his hedged short Eurodollar position while working as a trader for First Boston. Next, Taleb pursued work toward his PhD in Paris, completing the degree program in 1998. He returned to New York City and founded Empirica Capital in 1999. During the market downturn in 2000, at the end of the dot com bubble and burst, Empirica's Empirica Kurtosis LLC fund was reported to have made a 56.86% return. Taleb's investing strategies continued to be highly successful during the Nasdaq dive in 2000. Several consecutive years of low market volatility and less spectacular returns followed, and Empirica closed in 2004.

In 2007, Taleb joined his former Empirica partner, Mark Spitznagel, as an adviser to Universa Investments, an asset management company based on the "black swan" idea, owned and managed by Spitznagel in Miami, Florida.

Taleb attributed the 2008 financial crisis to the mismatch between reality and statistical distributions used in finance. Taleb's investing approach produced significant returns once again, with some Universa funds returning 65% to 115% in October 2008. In a 2007 Wall Street Journal article, Taleb claimed he retired from trading and would be a full-time author. He describes the nature of his involvement as "totally passive" from 2010 on. The Wall Street Journal journalist Scott Patterson wrote that "Taleb's involvement with Universa made him fabulously wealthy, the cash from the fund far outdistancing the substantial profits from his bestsellers".

Taleb considers himself less a businessman than an epistemologist of randomness, and says that he used trading to attain independence and freedom from authority. He advocated for tail risk hedging, which is intended to mitigate investors' exposure to extreme market moves. Tail risk hedging safeguards investors by reaping rewards from rare events, thus Taleb's investment management career has included several jackpots followed by lengthy dry spells.

At the World Economic Forum annual meeting in Davos in 2009, Taleb had harsh words for bankers, suggesting that bankers' recklessness will not be repeated "if you have punishment".

Taleb has had non-smoking-related throat cancer. Taleb married Cynthia Shelton in 1988. He has a son and a daughter.

A polyglot, Taleb is fluent in French, English, and Classical and Lebanese Arabic. He also speaks Italian and Spanish, and reads classical texts in Greek, Latin, Aramaic, Ancient Hebrew, and Canaanite script.

According to the United States Justice Department records, Taleb repeatedly declined meeting Jeffrey Epstein and attending his parties, claiming he "smelled a rat". Epstein confirmed that they "never met".

Aaron Brown, a quantitative analyst and adjunct professor, said regarding The Black Swan that "the book reads as if Taleb has never heard of nonparametric methods, data analysis, visualization tools or robust estimation." Nonetheless, he calls the book "essential reading" and urges statisticians to overlook the insults to get the "important philosophic and mathematical truths." Taleb replied in the second edition of The Black Swan that "One of the most common (but useless) comments I hear is that some solutions can come from 'robust statistics.' I wonder how using these techniques can create information where there is none". In 2007, Westfall and Hilbe complained that Taleb's criticism is "often unfounded and sometimes outrageous." Taleb, writes John Kay, "describes writers and professionals as knaves or fools, mostly fools... Yet beneath his rage and mockery are serious issues. The risk management models in use today exclude the very events against which they claim to protect the businesses that employ them. These models import a veneer of technical sophistication... " Berkeley statistician David Freedman said that efforts by statisticians to refute Taleb's stance have been unconvincing.

Taleb contends that statisticians can be pseudoscientists when it comes to risks of rare events and risks of blowups, and mask their incompetence with complicated equations. This stance has attracted criticism: the American Statistical Association devoted the August 2007 issue of The American Statistician to The Black Swan. The magazine offered a mixture of praise and criticism for Taleb's main points, with a focus on Taleb's writing style and his representation of the statistical literature. Robert Lund, a mathematics professor at Clemson University, writes that in Black Swan, Taleb is "reckless at times and subject to grandiose overstatements; the professional statistician will find the book ubiquitously naive." However, Lund acknowledges that "there are many points where I agree with Taleb," and writes that "the book is a must" for anyone "remotely interested in finance and/or philosophical probability."

Taleb and Nobel laureate Myron Scholes have traded personal attacks, particularly after Taleb's paper with Espen Gaarder Haug, in which Taleb alleged that nobody uses the Black–Scholes–Merton formula. Taleb accused Scholes of being responsible for the 2008 financial crisis, and suggested that "this guy should be in a retirement home doing Sudoku. His funds have blown up twice. He shouldn't be allowed in Washington to lecture anyone on risk." Scholes retorted that Taleb simply "popularises ideas and is making money selling books". Scholes claimed that Taleb does not cite previous literature, and for this reason Taleb is not taken seriously in academia. Haug and Taleb (2011) listed hundreds of research documents showing the Black–Scholes formula was not derived by Scholes, and argued that the economics establishment ignored literature by practitioners and mathematicians such as Ed Thorp, who, many years earlier, had developed a more sophisticated version of the formula.

Taleb's outspoken and directed commentary against parts of the finance industry—e.g., saying at Davos in 2009 that he was "happy" that Lehman Brothers collapsed—was followed by reports of threats and personal attacks.

Taleb is known for his strong, and sometimes personal, criticisms of public figures and institutions. He has referred to former UK prime minister Tony Blair as "a very dishonourable fellow" and Blair's successor, Gordon Brown as "an idiot". He has criticized prominent economists like Larry Summers, Paul Krugman and Joseph Stiglitz, stating that "they cause more crises than they solve". He has also been critical of the World Economic Forum at Davos, calling it the "International Association of Namedroppers" and stating "they think it's their mission to solve a problem they don't understand."