mandelbrotian randomness in finance, examples of practical uses?

[RedManPlus]

[ QUOTE ]
I was trying to make more of a philosophical point, but failed, I think. You brought up Taleb, which allows me to restate my point, maybe more clearly.

The problem I have with Taleb's writing, albeit based only on Fooled by Randomness - I haven't read Black Swan, is that he seems to pound the table to point out that:
1. People are overconfident about their ability to understand statistics and don't have the ability to estimate or appreciate the true distribution/probability of events. Alternatively, people fail to appreciate the degree to which unexplainable "randomness" exists in data.

2. People underestimate the likelihood of rare events.



[/ QUOTE ]

I've managed a hedge fund for 15 years...
Using classic quant analysis.

Non-professionals are dazzled by Taleb...
And view him as an uber-Guru.

Actually...
Taleb is a promoter...
And simply repackaged well-known phenomenon...
Stuff that the Top 10,000 traders have known for decades.

For example...
The world's best selling option trading book by McMillan...
In the 1986 edition...
Devotes a lot of space to "fat tail" distributions...
Because market prices are not Normally Distributed at the tails...
And "rare events" happen more often than the Normal Distribution would imply.

So Taleb comes up with the cool "Black Swan" metaphor...
And laughs all the way to the bank.

There is NO evidence that Taleb has ever made a dime for anyone...
There is zero info on this on the web...
So he must get all clients to sign iron-clad non-disclosure agreements...
And then he must threaten/sue ex-clients to enforce these agreements.
Must be a real stand-up guy.

In fact...
His silly core strategy on buying waaaaay out of the money options...
Would have been a disaster the last 3-4 years...
(Because we have had the lowest market volatility EVER).
Even if on could actually find Option Pros willing to sell you such options...
Which is highly doubtful.

Being a promoter is all about telling a "good story"...
And that is Taleb's primary talent.

He is really saying that Top Option Pros are idiots...
Which is like selling a book that reveals that Top Poker Pros are idiots.
How credible would that be at 2+2?