Nassim Nicholas Taleb - Finance Career

Finance Career

Taleb considers himself less a businessman than an epistemologist of randomness, and says that he used trading to attain independence and freedom from authority. As a trader, his strategy has been to safeguard investors against crises while reaping rewards from rare events, and thus his trading career has included several jackpots followed by lengthy dry spells. Taleb was a pioneer of tail risk hedging (now sometimes called "black swan protection"), whereby investors are insured against extreme market moves. He says that reaping dividends the way he has means dwelling in the land of "Mediocristan" instead of "Extremistan", the latter being an environment where huge things (black swans) can happen to you, whereas Mediocristan is the land of dentists who earn an above average income but with less extreme variations.

He has held the following positions: managing director and proprietary trader at UBS; worldwide chief proprietary arbitrage derivatives trader for currencies, commodities and non-dollar fixed income at CS 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, proprietary trader at BNP Paribas, as well as independent option market maker on the Chicago Mercantile Exchange; and founder of Empirica Capital, after which Taleb retired from trading and became a full-time author and scholar in 2004. Taleb is currently Principal/Senior Scientific Adviser at Universa Investments in Santa Monica, California, a tail protection firm owned and managed by former Empirica partner Mark Spitznagel.

Taleb reportedly became financially independent after the crash of 1987 and made a multi-million dollar fortune during the financial crisis that began in 2007, a development which he attributed to the mismatch between statistical distributions used in finance and reality. Universa is a fund which is based on the "black swan" idea and to which Taleb is a principal adviser. Separate funds belonging to Universa made returns of 65% to 115% in October 2008. In the wake of the economic crisis that started in 2008, Taleb has become an activist for a "black swan robust society" and as of July 2011, Taleb is working with the International Monetary Fund on identifying and mitigating tail risks in financial markets.