The passing of my father

Two weeks ago tomorrow our family laid my father to rest. He was buried with full military honors in Logan, Utah. He was 86 years old, a good age and had lived a good life. I have spent the last two weeks thinking about and reviewing his life and my own. It will be some time before the heartache of his loss subsides. I suspect it will never go away but will fade and will, in time, become just a dull pain. I am grateful for him, his teachings, his life and his example. I know many are also feeling his loss acutely. We can take comfort in knowing that God loves us and that families are in fact eternal. Life is good. My father knew this and I know it too.

My regular blogs will continue tomorrow. Thank you.

The Black Swan’s Mask (problems in induction) Part II

           The marvels (for me anyway) of technology and the benefits of a good internet connection make it possible for me to be in Arizona visiting my grandchildren and their parents. We spent the afternoon at Pima Air Museum where I listened to a marvelous docent, Mr. Miller, tell stories and share experiences from his time in the air service and relating stories of others from earlier times. I marvel again at the willingness of our service people to lay their lives on the line for our great country. I am grateful for their service and sacrifice. I was thinking how it must have felt to live during 1937 – 1939 and watch the world unfold. From our standpoint now in history we know that Germany was going to war, Italy and Japan were gearing up for war and the world was set for an awful time to come. I remember reading that the correspondent William L. Shirer who wrote what is considered by many to be one of the definitive works on Germany’s Third Reich, The Rise and Fall of the Third Reich, was living in Germany during much of the 1930s. If I remember correctly he said that even for those living during that time in Germany and who had a grasp of world events such as a print journalist like himself, didn’t fully grasp what was happening. He and his associates didn’t predict war any better than the others in government, economics or any other branch of science or social science. History tends to look back and say, how could you have missed that. All the signs were there?

           I experienced the lead up and the effects of the recession of 2007 – 2009 from a unique standpoint. I am directly involved in investment banking and many feel that this industry is a big part of the problems that caused that recession. I think the sentiment has some validity. However, most of the leaders or men of knowledge in economics and investment banking never saw it coming. Again, there are some who did see something and made a lot of money on the fact that they felt something was out of alignment in the economy. Again, if one looks at much of the literature on this recession we see individuals drawing conclusions and wondering how we could have missed it. I was in the thick of the information so to speak and I didn’t see it coming. Government leaders, economists, most investment bankers and Wall Street types didn’t see it. We now have Frank-Dodd legislation which runs into hundreds of thousands of words and is so convoluted that we as a people will never fully understand what it does nor do the writers of the legislation really understand its workings or impact. This is supposed to guarantee that we won’t have another financial situation like this happen again. Trust me on this one, it will happen again

           Let’s look at how we rationalize our incorrect prediction (or missed predictions). This is how we protect our self-esteem according to Taleb in his book The Black Swan, where he suggests four methods of rationalization. (1) Tell yourself that you were playing a different game. It is not your skills that are to blame. There is some hidden information or element that if you had known you would have been right. (2) You invoke the outlier. (This is what is generally used by the economists and math guys to explain the recession of 2007 – 2009.) Something happened that was outside the system. Given that it was not predictable you are not responsible. Hey, it was a 1,000 year flood, of course I couldn’t predict it. (3) The “almost right” defense. By looking backwards we assign values after the fact to ideas or events thus applying more or less importance to things, activities, happenings or events. After the fact we say this piece of information is important and this is not. (4) The hedgehog and the fox from Isaiah Berlin and Aesop’s Fables. The hedgehog knows only one thing and tends to exclude all other thoughts and ideas. It may be a single consequential but improbable event. This helps make us susceptible to Black Swans. The fox knows many things and is not married to one idea or course of action. The fox has an open mind (not empty but open) and tends not to get married to one idea. The fox knows history will be full of improbable events but just don’t know what the events will be.

           So, be a fox with an open mind.