This is called the Bullwhip effect in the supply chain literature - I studied it extensively in my ph.d years. I had lengthy discussions with actual professors who could not wrap their head around this convexity property and just kept saying "well, it all averages out in the end." I wish I had been as insightful and eloquent as Mr Taleb - then I might have been able to defend my position better in those discussions.
@adlos6168
2 жыл бұрын
Amazing how you make difficult concepts simple and clear. Thanks Maestro!
@Michael-qy1jz
2 жыл бұрын
What's he saying?? Everyone is getting in and almost no one will escape the downward cycle? Lol
@noredbull1
2 жыл бұрын
@@Michael-qy1jz you decide :)
@louiehelou7335
2 жыл бұрын
Golden - No BS - Straight to the point - keep them coming!
@jphellip
2 жыл бұрын
Was studying convex sets in geometry and came across this lesson. So cool to find parallels in applied fields such as finance
@tdintell2726
2 жыл бұрын
I totally agree and great succinct way to convey this. In this example you looked at two dimensions price and quantity or volume. The supply chain would have many other dimensions of convexity such as delivery location, transport flexibility, time delivery flexibility, grade or quality flexibility, the list goes on. Twenty years ago I was using your incredible book Dynamic Hedging to price and manage physical grain and energy contracts that had physical embedded options. Today, Having this physical flexibility in contracts would be anti fragile because it would help manage changes in supply logistics. I think what happened in the supply chain is that delivery mechanisms were overly optimized to be “cheaper”, getting rid of this flexibility, resulting in brittle delivery. The problem lies at the top of the corporation not understanding that all these dimensions have convexity and need to be anti fragile, similar how we buy insurance for weather convexity. Education at the top in anti fragile methods would bring needed money and people to the supply chain problem and mend brittle delivery.
@fallinginthed33p
2 жыл бұрын
The focus on short term profits means companies aren't willing to pay more for "insurance", in the form of redundancy in their supply chains. They don't price in the cost of highly inflated prices when a supply chain shock happens.
@tdintell2726
2 жыл бұрын
@@fallinginthed33p Absolutely, the cost of redundancy is like a cheap out of the money option, which a corporation would make money or get more market share when a supply chain shock happens. Not something though that they would focus on if looking at short term profits.
@BG-kj5wb
2 жыл бұрын
Best example of this would be car supply chains during the pandemic
@tylersampson5146
2 жыл бұрын
Learning math from Nassim…priceless, Nassim calling us his friends :) higher then supercubic
@romanogermane
2 жыл бұрын
So badass how he's not caring about google algorithm, liking, following and commenting
@staryczowiekimoze522
2 жыл бұрын
Thank you Maestro! I have a habbit of starting a new year with re-reading The Incerto. Each year i find or grasp something new in it. Greetings from B. Mandelbrot's home country.
@mahadevaniyer2726
2 жыл бұрын
Hi Prof.Taleb, I love this approach of conveying deeper things in small bites! 👍I understand that wherever there is asymmetry, the effects are exponential! Of course, convex or concave again may be random considering ' causal opacity' ! 😎
@cbxxxbc
2 жыл бұрын
Thanks for the shortcut to remember convex with the smiley face!
@Senecamarcus
2 жыл бұрын
It’s great to see your videos. Thank you!
@misterunderbridge2351
2 жыл бұрын
Thank you Maestro.
@RichardKinch
2 жыл бұрын
Fat Tony called. He says he doesn't follow this convexity talk; all he knows is they locked down the mill last year, so don't be moaning that the shelves are empty now. But he has a few pieces around back, if you really need them, cash only.
@jakeragsdale
2 жыл бұрын
Read all of your books about 5-10 yrs ago. Changed my whole perspective on economics, psychology, etc. Also, read Mandelbrot even though some of it was over my head. I understand the basics of fractal geometry though. I recommend your books all the time. Any plans on writing a new book? It would be great to hear your perspectives on geopolitics and economics in our current situation…
@hannesmonaghan8905
2 жыл бұрын
Thank you Nassim!
@VladVexler
2 жыл бұрын
Thank you!
@leswhynin913
2 жыл бұрын
NNT is long shoulder sweaters
@Alex_Plante
2 жыл бұрын
The supply chain problems we've had during this pandemic remind me of what happens during a financial crisis: In normal times, demand varies randomly, but since large numbers are involved, the patterns of variation are fairly predictable, until there is a crisis and everyone decides to stock up on toilet paper, rice and canned beans....
@HispanusHorribilis
2 жыл бұрын
Great explanation, Maestro
@dompatrick8114
2 жыл бұрын
Very straightforward illustration by Nassim _the Goat_ Taleb
@DengueBurger
2 жыл бұрын
Great video. Consider buying an HQ camera or using an iPhone
@baydprit
2 жыл бұрын
He does this on purpose. Explained in his books.
@DengueBurger
2 жыл бұрын
@@baydprit ok I’ll just go read 1000+ pages to find his reasoning or you can tell me if you want
@stefm.5947
2 жыл бұрын
@@DengueBurger The small difficulties such as a low definition camera or a relatively bad sou d quality make us concentrate better because of overcompensation
@edwardkasimir8016
2 жыл бұрын
@@stefm.5947 What is purpose of stains on shirt?
@stefm.5947
2 жыл бұрын
@@edwardkasimir8016 They make him more anti fragile
@farrhanwit7817
2 жыл бұрын
Speed is a natural consequence.
@juanmarcos5990
2 жыл бұрын
Thanks.Mr Taleb.
@maxsmith7483
2 жыл бұрын
the cuts make it better!
@dodgingdurangos924
2 жыл бұрын
I think you should stick with the white board and dark markers. Less noise and more easier to see than the chalkboard.
@dodgingdurangos924
2 жыл бұрын
@@scientificreactions7938 lol hey, we're heading into the metaverse. Better start modernizing by upgrading to hologram quality! You learn better in a better learning atmosphere.
@youtubenomics
2 жыл бұрын
Super Taleb
@rhysjeffery1630
2 жыл бұрын
I understand the idea. But the first example of 0 & 100mph vs 50&50 confuses me. Can someone please explain what that has to do with a movie theatre with a small door?
@hatemymailbox
2 жыл бұрын
from now on i'm bragging that Nasim Nicholas Taleb is my friend)))
@fernandodutra3788
2 жыл бұрын
I seem to miss the point.. so demand is now much bigger than supply and prices grow in a non-linear way. What’s special about it?
@hymansahak181
2 жыл бұрын
Conclusion: volatility always has more impact/effect not only mathematically but it seems human nature is also the same way as we end up behaving the same mathematical way unconsciously.
@jesperandersson889
2 жыл бұрын
convexity plus entanglements (complexity/dependency)
@PastorHomebrew
2 жыл бұрын
This looks like a video from 2006 but it's from 8 hours ago. I guess that's good for the Lindy Effect.
@SnDTips
2 жыл бұрын
FRIENDS!
@noredbull1
2 жыл бұрын
Central banks have a hard problem to solve now.
@fingrar22
2 жыл бұрын
Would you not do better with 1% and 1% than 0% and 2%? 100x1.01=101.0 -- 101x1.01=102.01 --- 100x1.02=102
@achille295
2 жыл бұрын
Yes, but I think Taleb meant in a convex world (such as if you owned Call options), then a 2% gain once would benefit you much more (say +10%) than 2x 1% (where you would get instead 4% and then 4%, for example). Options do not benefit linearly to stock price changes
@fingrar22
2 жыл бұрын
@@achille295 I see, thanks
@achille295
2 жыл бұрын
@@johnanderson2654 Funny, I have. Perhaps you haven't, or you simply do not understand the greeks ;)
@achille295
2 жыл бұрын
@@johnanderson2654 Oh apologies, john anderson, thanks for the clarification!
@HeneStuchi
2 жыл бұрын
Why is the video quality a shit? thanks
@nntalebproba
2 жыл бұрын
It is not for you.
@asdf8asdf8asdf8asdf
2 жыл бұрын
Are index funds like a large movie theater with a single exit door… Or is this problem mitigated by the fact that there are so many of the index funds that the damage is somewhat dissipated
@georgeokello8620
2 жыл бұрын
I would argue yes especially when the fund that implements this indexes even grow to economies of scale where transacting securities start to cause large price swings irrespective of fundamental supply and demand characteristics. Infact there is a paper on the inelastic market hypothesis which shatters the theories of passive index funds being able to contain the "correct prices" of current and future trades of all assets.
@francktati7010
2 жыл бұрын
Simple
@LL-sk3do
2 жыл бұрын
It's all about fuel efficiency
@macrubit
2 жыл бұрын
Not only, all sorts of costs climb nonlinearly: air resistance is quadratic for turbulent flow (such as in a truck going through air); also maintenance costs increase more than linearly when you stress the system: more than proportional increase in mechanical failures, rate of accidents, human errors etc.
@sucim
2 жыл бұрын
This is more about non-linearity than convexity! A linear function is afaik convex as well
@macrubit
2 жыл бұрын
No, because you can be concavily nonlinear. If a linear function is convex by some mathematical convention, it is only in a trivial sense. The convex effects are null in this case. It is like agreeing to call 0 a positive number.
@tommyhegarty97
2 жыл бұрын
How do you show that two 1% moves is worse than 0% followed by 2%? The former has a higher compounding effect no? In terms of returns
@Graemyr
2 жыл бұрын
If you're invested in a linear asset, sure. He's referring to derivatives, which have a convex payoff. A 1% move over two days will hardly move the price, but if there's volatility in the market the derivative's price will swing drastically.
@Feelthefx
2 жыл бұрын
Dear Nassim, camera technology has advanced a lot since the mid 1990s. Please consider upgrading.
@j.r.Bambus
2 жыл бұрын
Grüße aus Deutschland
@rothbardfreedom
2 жыл бұрын
Well, a few trillion of dollars printed in a few months also help to increase prices (aka devalue the currency).
@userhome3601
2 жыл бұрын
By your logic, panting would be more efficient than normal breathing. Scratching in two hours is better than performing the action when needed. Shopping everyday must exert less energy than weekly.
@paupaupaupaupau
2 жыл бұрын
You really need to clean your camera.
@user1100yt
2 жыл бұрын
Is he drunk?
@Janman81
2 жыл бұрын
TLDR: Demand went up so prices went up.
@michaj8835
2 жыл бұрын
The idea here, is that prices will not go linearly up with the demand. So when demand will go up 2% instead of 1%, price will not go up by factor of 2, but more.
@Janman81
2 жыл бұрын
@@michaj8835 Ok but he didn't offer any reason for that to be the case.
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