Wednesday, May 2, 2007

A House Price Crash is, for many, a Black Swan.

Markets will never spot the black swan

Limited human knowledge

Why do people tend to neglect rare events? Partly because humans underestimate their ignorance in most situations - the effect of unexpected events is far more significant than people often imagine. Taleb argues that the proposition "we know" is in many cases an illusion - the human mind tends to think it knows, but does not always have a solid basis for this delusion of "I know". This notion that we do not know is very old, dated as far back at least as Socrates. Some felt[attribution needed] that the advancement of science has rendered the world well-known; Taleb argues that while science added knowledge, the world did not turn into a fictitious world where everything is known. Socrates' dictum "the only thing I know, is that I do not know" is as true

Posted by lvmreader @ 04:17 AM (607 views)
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