Taleb covers this in one of his books: Fooled by Randomness https://www.amazon.com/Fooled-Randomness-Hidden-Markets-Ince...
The just-world fallacy [1] is enormously pernicious. I find myself falling for it all the time, and on both sides of it. My successes are clearly a sign of my genius; my failures are obvious proof of my permanent cretinism. It was Nassim Nicholas Taleb's "Fooled by Randomness" [2] that finally got me to buy fewer tickets for what Kent Beck calls the "genius-shithead rollercoaster". Perhaps one day I can stop riding it altogether.
[1] https://en.wikipedia.org/wiki/Just-world_hypothesis
[2] https://www.amazon.com/Fooled-Randomness-Hidden-Markets-Ince...
[1]: https://www.amazon.com/Fooled-Randomness-Hidden-Markets-Ince...
A couple other good quotes to remember by one of my favorite investors, Ray Dalio. "Just because something hasn't happened recently doesn't mean it's implausible." "Always ensure that the improbable outcome is still acceptable."
[1] http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incer...
Fooled by Randomness[1] was very good. It's more of a set of cautionary tales, mostly pulled from Wall Street, about how to think about chance and making sure you're judging all events against what is expected by chance.
The thing about Taleb is that all of his success hinges on a single, long-ago tail event that few people even remember. It defines his entire outlook and he often assumes that people who interview him or read his articles know this. The article in question not withstanding, if you mentally insert "when discussing tail events" before his claims, many of them make much more sense :)
[1] http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Market...
"What an assertion! It also proved to be very useful for hordes of scientists... what about some examples of confused scientists?"
How about every single economist and financial analyst who failed to predict the financial crashes of the last 50 years? Did you realize how much money was lost over the last 50 years by the financial industry's reliance on models that improperly use the standard Gaussian bell curve? Taleb pointed out why the Gaussian is not usually an appropriate model for financial analysis and suggested a return to more conservative models. Yet today Modern Portfolio Theory and the Black-Scholes models (which use the Gaussian) dominate in financial schools and institutions despite the fact that they absolutely utterly failed, not badly, but catastrophically in every financial crisis when they were most needed.
You state that "Standard deviation tells you how volatile measurements are". But Taleb shows how financial markets are non-Gaussian and have "fat tails" and gives the data and the supporting arguments.
bluecalm says:
"As someone who uses it daily I am eagerly awaiting his argument."
You're late! Taleb began publishing his arguments years ago and continues to publish. You're way behind. Read his papers and read his books in the following order:
Fooled by Randomness http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Market...
The Black Swan http://www.amazon.com/The-Black-Swan-Improbable-Robustness/d...
Antifragile, http://www.amazon.com/Antifragile-Things-That-Gain-Disorder/...
BTW simply because someone's writing style is different does not mean that he is wrong. To me, complaining about a writing style is a form of ad hominem argument. People are different and Taleb is one-of-a-kind. Initially I didn't see where he was going, but once I realized that he was presenting ideas that were absolutely, utterly novel and had real explanatory power I sat up and paid attention. If you read for the facts and the valid arguments you will see that Taleb delivers the goods.
I used to work for financial traders. I even used to have a brightly colored coat and a trading floor badge, back when that mattered. I've read The Economist for 20 years. Despite understanding the financial markets better than most, I never trade individual stocks. Everything's in low-load funds; I look at the allocations every year or two.
Why? Because I know what I'm up against. I have friends who are still in the industry, deploying vast computational and financial resources to make money. For any given stock, there are people who follow the company and its markets more closely than I ever will. And all of those people regularly fuck up, losing millions. I'm not interested in stepping to that.
And there's another big reason: it's a giant minefield of cognitive biases and emotional weirdness. For example, you can think of the market as a random walk with an upward bias. Year on year, you're generally up. But day by day, you're can be down nearly as often as up. Because of loss aversion [1], you'll feel the losses more strongly than the gains. Looking at your stocks every day will at least add to your stress levels, and maybe your decisions will get thrown off. (This example is taken from the excellent Fooled by Randomness [2], which I recommend to anybody who wants to trade, or even understand the financial markets.)
I focus my energies on areas where I have a an actual advantage, and I encourage others to do the same.
[1] http://en.wikipedia.org/wiki/Loss_aversion
[2] http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Market...
Daniel Kahneman & Amos Tversky have shown this in numerous studies, but here's an easily relatable example of theirs: Financial advisors.[1]
Predicting markets is an inherently random game. We often point to those who have been successful for a long period of time as an example that it is possible to beat the system, but that analysis fails to account for the other end of the probability distribution: those who have failed for a long period of time (or failed so hard early that they had to get out of the game).
In other words, for every big winner, there is a big loser. The fact that some people win or lose can (mostly) be explained by randomness (or cheating).
But Kahneman & Tversky's stunning finding with Financial Advisors, and humans in general, is that those who are successful attribute their success mostly to skill, hard work, etc, while failing to adequately acknowledge how large a role chance played. For the humble, this is not a problem, but for the arrogant or uninformed, this can easily turn into entitlement.
(BTW I definitely believe that, in most fields, a person needs to meet certain thresholds of hard work, energy, intelligence, etc. to be successful, but the level of success after reaching those thresholds is largely a function of chance.)
We humans are very good at drawing false conclusions from random data. Have you watched a basketball game recently? If a good shooter misses a couple free throws, commentators seem obligated to explain that the reason for this is fatigue, or poor form, or this, or that. How about the fact that it just randomly happens sometimes?
Applying this thinking to Indian elites: they have a lot of money, probably through their families or their own success. They believe their status is well deserved and earned, either because of superior genetics or superior skills (or any other number of reasons), and as a result, the uninformed feel entitled (and act accordingly). The author's anecdotal examples aside, this is no different than how many (but not all!) people behave on Wall Street, in athletics, at the high levels of corporations, etc. This is not an Indian problem, or an elite problem; it's a human problem.
Fooled by Randomness[2]. Again.
[1]http://www.businessinsider.com/daniel-kahneman-on-wealth-man... [2]http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Market...
Fooled by Randomness by Nassim Taleb
https://www.amazon.com/Fooled-Randomness-Hidden-Markets-Ince...
It's literally about how options traders and the like can be lucky for 10 or 20 years, but they are actually idiots who destroy the economy.
They think they are skilled, and others think they are skilled, but it's luck. You can also call it "anti-luck" because their short-term actions can cause the long-term crisis.
This book was a #1 best seller, as were most of Taleb's books, but for some reason whenever I mention it to anybody, I get blank stares.
I think it's just really hard for people to understand phenomena that occur at time scales of say more than a decade.
(BTW Another good book about recurring economic cycles is Dalio's 2022 The Changing World Order. All of this stuff has happened before. This is separate from crypto, and relates to the global economic environment.)