The Shepp Report

Special Edition

Chasing Black Swans, Taking Down Tournaments, and Discovering DFS Antifragility - Fantasy Labs

Graphic Source: FantasyLabs


April 12. 2017



The Black Swan



On Hannity, April 10, 2017, Gingrich Referred To The Black Swan

(Probably 90 percent of the viewing audience had no idea what Gingrich was talking about. But if they want to understand the world around them today, they need to. Hopefully this Shepp Report will help. Please pass around. - Webmaster )

"To me, the essence of this was captured in a very short essay, you can look up, you can Google called, Intellectual, Yet Idiot, or IYI, by Nassim Taleb, who wrote The Black Swan. His thesis is very simple, that at least 40% of the governing elite is made up of people who are very good at taking exams and writing essays. So, they get into elite schools, where they study under professors who are very good at taking exams and writing essays.

Because they’re very good at taking exams and writing essays, they get very good grades, so they then get to the New York Times or the Supreme Court, or senior federal bureaucracy, or TV and they sound really good because they’re really good at being articulate.

Their only weakness is they don’t know anything. They could write an essay on how to change a tire, but if you showed up and said, by the way, my car has a flat, they would have no clue and they would wonder why you wanted them to do something practical. Whereas if you’d like them to write on the theory of tire changing, they could do an entire volume."

Newt Gingrich, Understanding Trump and Trumpism




Review Of The Black Swan, by Nassim Nicholas Taleb

"Nassim Nicholas Taleb first made this argument in Fooled by Randomness, an engaging look at the history and reasons for our predilection for self-deception when it comes to statistics. Now, in The Black Swan: the Impact of the Highly Improbable, he focuses on that most dismal of sciences, predicting the future. Forecasting is not just at the heart of Wall Street, but it’s something each of us does every time we make an insurance payment or strap on a seat belt.

"Bestselling author Nassim Nicholas Taleb continues his exploration of randomness in his fascinating new book, The Black Swan, in which he examines the influence of highly improbable and unpredictable events that have massive impact. " - Amazon
Graphic Source: Amazon

The problem, Nassim explains, is that we place too much weight on the odds that past events will repeat (diligently trying to follow the path of the 'millionaire next door,' when unrepeatable chance is a better explanation). Instead, the really important events are rare and unpredictable. He calls them Black Swans, which is a reference to a 17th century philosophical thought experiment.

In Europe all anyone had ever seen were white swans; indeed, 'all swans are white' had long been used as the standard example of a scientific truth. So what was the chance of seeing a black one? Impossible to calculate, or at least they were until 1697, when explorers found Cygnus atratus in Australia.

Nassim argues that most of the really big events in our world are rare and unpredictable, and thus trying to extract generalizable stories to explain them may be emotionally satisfying, but it's practically useless.

September 11th is one such example, and stock market crashes are another. Or, as he puts it, 'History does not crawl, it jumps.' Our assumptions grow out of the bell-curve predictability of what he calls "Mediocristan," while our world is really shaped by the wild powerlaw swings of 'Extremistan.'"

Guest Reviewer, Chris Anderson, Amazon



A Brief Introduction To Nassim Nicholas Taleb’s The Black Swan

"Black Swan events have three characteristics: they have an enormous impact; they are not predicted; but once they have happened, they can be explained and rationalized. When looking at ordinary trends based on past events, we must be careful not to miss what effect extraordinary events can have. Watch Macat’s short video for a great introduction to Nassim Nicholas Taleb’s The Black Swan, one of the most important books about economic predictions ever written." - Macat

Video Source: Macat



Nassim Nicholas Taleb

"Taleb was born in Amioun, Lebanon to Minerva Ghosn and Najib Taleb, a physician / oncologist and a researcher in anthropology. His parents were Greek Orthodox Lebanese with French citizenship, and he attended a French school there, the Grand Lycée Franco-Libanais. His family saw its political prominence and wealth reduced by the Lebanese Civil War, which began in 1975.

"Taleb believes the power of stress is the source of anti-fragility. He worries that we are making the world more fragile because we think we control things and top-down efforts to reduce volatility actually make things worse (overprotective parents, Alan Greenspan at the Federal Reserve injecting cheap money into the economy, supporting dictators abroad, doctors who overprescribe advanced and invasive procedures, etc.). He thinks this is becoming an even bigger issue with globalisation, inter-connectedness and concentration (99 per cent of Internet traffic comes to 1 per cent of sites, 99 per cent of books sold come from 1 per cent of authors)."  - India Today
Photo Source: IndiaToday

Taleb received his 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.

Taleb has been a practitioner of mathematical finance, a hedge fund manager, and a derivatives trader. He is a scientific adviser at Universa Investments.

Taleb considers himself less a businessman than an epistemologist of randomness, and says that he used trading to attain independence and freedom from authority. Taleb was a pioneer of tail risk hedging (now sometimes called 'black swan protection'), which is intended to mitigate investors' exposure to extreme market moves. His business model has been to safeguard investors against crises while reaping rewards from rare events, and thus his investment management career has included several jackpots followed by lengthy dry spells.

He has also held the following positions:

Managing director and proprietary trader at Credit Suisse UBS, Worldwide chief proprietary arbitrage derivatives trader for currencies, commodities and non-dollar fixed income at 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 founder of Empirica Capital.

Taleb reportedly became financially independent after the crash of 1987 and was successful during the Nasdaq dive in 2000 as well as the financial crisis that began in 2007, a development which he attributed to the mismatch between statistical distributions used in finance and reality. Following this crisis, Taleb became an activist for what he called a 'black swan robust society'.

Since 2007 Taleb has been a Principal/Senior Scientific Adviser at Universa Investments in Santa Monica, California, a fund which is based on the 'black swan' idea, owned and managed by former Empirica partner Mark Spitznagel. Some of its separate funds made returns of 65% to 115% in October 2008.

In a 2007 Wall Street Journal article, Taleb claimed he retired from trading in 2004, and became a full-time author." (Note: Underlines are Webmaster.)


| Official Bio | Facebook |



Nassim Taleb - The Black Swan: The Impact of the Highly Improbable

"Nassim Taleb talked about his book, The Black Swan: The Impact of the Highly Improbable, published by Random House." - History and Politics Hub, August 28, 2007

Video Source: YouTube



Taleb's Example Of Three Black Swans

The Computer, the Internet and the Laser

The Computer

If you read the basic life of Bill Gates in developing his operating system , you will quickly understand where Black Swans come from. With computers using a code of zeros and ones with terms such as OS, GUI, BASIC and DOS, few could ever imagine what impact it would have on the world of the early 70's of typewriters and computer cards filled with holes. Even today's laptop on a 6th grader's desk is much more powerful than what flew the Apollo to the moon and back.

The visual interface Gates was looking for had already been invented by Xerox. But they didn't know what to do with it. Steven Jobs had seen the demo with what would become the "mouse" and went back to work trying to develop a better system. Gates would finally put it all together, calling his squares of visual interface "Windows." It would lead Jobs to go one way and Gates the other. Jobs MAC would become the professional's computer while Windows would become the choice for basic home computing and of course those "games."


The Internet

Computers would need to communicate with each other if one was to transfer personal or researched information, as was already being done by government and professors at universities. The early Internet, as described by Wikipedia, would be sponsored by the U.S. Defense Department:

"The Advanced Research Projects Agency Network (ARPANET) was an early packet switching network and the first network to implement the protocol suite TCP/IP. Both technologies became the technical foundation of the Internet. ARPANET was initially funded by the Advanced Research Projects Agency (ARPA) of the United States Department of Defense."

No one could dream that those early packets of transforming information over a wire would bring us today to what we know as the Internet, another Black Swan being born. Look at the following flow chart for an early system that lead to the concept of the Internet, later decommissioned in 1990, and tell me if you think that one day anyone would believe they could buy a snow plow for their driveway paid for by a secured American Express card and shipped by a company called Amazon using a new shipping company called Federal Express, all from a computer terminal in their home?

"As the project progressed, protocols for internetworking were developed by which multiple separate networks could be joined into a network of networks. Access to the ARPANET was expanded in 1981 when the National Science Foundation (NSF) funded the Computer Science Network (CSNET). In 1982, the Internet protocol suite (TCP/IP) was introduced as the standard networking protocol on the ARPANET. In the early 1980s the NSF funded the establishment for national supercomputing centers at several universities, and provided interconnectivity in 1986 with the NSFNET project, which also created network access to the supercomputer sites in the United States from research and education organizations. ARPANET was decommissioned in 1990." - Wikipedia
Image March 1977, Wikipedia

In fact, look at a chart by clicking here on all the operating systems developed from the 1950's that eventually would lead to where you could order a dinner, using a world-wide web of electronic connections, that would be waiting for you to pick up at Applebees.

That concept, designed for the everyday Joe and not just universities and governments, was developed by Sir Tim Berners-Lee, a British computer scientist, seeing it in 1989 as the World Wide Web. Tim created the three fundamental technologies that remain the foundation of today’s World Wide Web:

HTML: HyperText Markup Language. The markup (formatting) language for the web.
URI: Uniform Resource Identifier. A kind of “address” that is unique and used to identify to each resource on the web. It is also commonly called a URL.
HTTP: Hypertext Transfer Protocol. Allows for the retrieval of linked resources from across the web.


The Laser

But a third Black Swan would be needed to complete it all. And it would be the development of a transportation system that would instantaneously deliver the zeros and ones from a computer terminal to another, no matter where it was located in the world except Antarctica when connected by cable.

And it would come from the development of a laser, leading to an optical transmission system better known as fiber optics. While the system was basically attached from pole to pole on land, connections between countries at the bottom of oceans would be a monumental undertaking that would eventually complete instant communication throughout the globe.

How important is fiber optics vs. satellites?

"As of 2006, overseas satellite links accounted for only 1 percent of international traffic, while the remainder was carried by undersea cable. The reliability of submarine cables is high, especially when multiple paths are available in the event of a cable break. Also, the total carrying capacity of submarine cables is in the terabits per second, while satellites typically offer only megabits per second and display higher latency." - TwistedSifter

"What you see above is a submarine communications cable. With a diameter of 69 millimeter (2.7 inches), it carries 99% of all international traffic (i.e., internet, telephony and private data) and connects every continent on Earth with the exception of Antarctica.  As of 2006, overseas satellite links accounted for only 1 percent of international traffic, while the remainder was carried by undersea cable. The reliability of submarine cables is high, especially when (as noted above) multiple paths are available in the event of a cable break. Also, the total carrying capacity of submarine cables is in the terabits per second, while satellites typically offer only megabits per second and display higher latency." - Twistedsifter
Graphic / Photo - TwistedSifter

And that is how Black Swans are created, easily understood after the fact but never seen coming to their full potential. Even after knowing how a Black Swan comes to be, the next one could be as much a surprise as the three that created electronic communications around the world; the computer, the Internet and the laser. - Webmaster


Warning From Taleb

"Black Swans are highly consequential but unlikely events that are easily explainable - but only in retrospect. Black Swans have shaped the history of technology, science, business and culture. As the world gets more complicated, Black Swans are becoming more consequential." - Nassim Nicholas Taleb



This e-mail is dedicated to Len of Canada, eh?









Thank you for considering to pass along these e-mails.

Did you miss one of our e-mails? Check out the link below.

HTML E-mail Content from Freedom is Knowledge

On Facebook

We are the New Media

Sample Of A Few Archived Links

| Fascism Comes To America | It Doesn't Matter?! | What Privacy? | America Facing Evil | Whistleblower | Historic Biblical Times |

| Obama's 1990 article - “We’re Going To Reshape Mean-Spirited Selfish America.” | Print Page |

| The United States Flag: Federal Law Relating To Display And FAQs | U.S. Flag Code |


It is no measure of health to be well-adjusted to a profoundly sick society - J. Krishnamurti




Freedom is Knowledge








Black newspaper burned down on November 10, 1898. The Democrat Party's machine showed its true colors in the murders of blacks in the Wilmington Massacre of 1898 and then NEVER LOOKED BACK. - Webmaster