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Nassim Taleb speaks to NBK audience on the Black Swan and the impacts of the global financial crisis

Kuwait: Tuesday, May 26 - 2009 @ 16:16

The seminar was inaugurated by a welcoming speech delivered by NBK Group CEO Mr. Ibrahim Shukri Dabdoub, in which he explained that based on the importance of Dr. Taleb’s internationally acclaimed ideas, particularly his multidisciplinary approach to analyzing model errors and the role of high-impact, rare and unpredictable events or “Black Swans”, NBK had invited Dr. Taleb to share his perspectives with the bank’s senior management, valuable clients and guests and shed light on his current project of designing ways to live in a world we don’t quite understand.

Dabdoub also indicated that the latest economic events have vindicated NBK’s conservative strategy geared towards protecting the assets of the bank’s depositors and investors against Black-Swan events.

Taking the stage, Dr. Taleb started by outlining the basic components on which his Black Swan theory has been built indicating that the main idea of his theory and book is centered on a small number of unpredictable events – Black Swans- that explain many of the upheavals that hit the world markets today. He went on to say that in addition to the repeated day-to-day events that help us in understanding both the present and the future, there are always that sort of unexpected events. Hence, to understand the future, we cannot rely only upon past experiences.

Dr. Taleb went on to say that major historical events take place unexpectedly and the worst hidden future is unpredictable, adding that abundant examples of such events are clearly seen in invention or discovery of computer and internet in addition to the First World War, the attacks of September 11, 2001 and recently the subprime mortgage crisis in the U.S

The presentation made by Dr. Nassim Taleb was followed by a session of questions and answers.

Answering an audience question on real estate, Dr. Taleb said that debt-equity ratio should be spilt. By borrowing from the bank for individual purpose of buying a house is fine; however borrowing money from the bank for speculative purposes is not right. The long term borrowing may not be a good idea “neither for the borrower nor for the bank”.

Dr. Taleb explained to the audience his personal investment strategy and stated that an investor should ideally follow a dual strategy, be extremely conservative and also have the ability to risk-taking and called upon interested individuals to follow the 80-20 investment strategy. 80 percent of the cash is not taken for risks but the remaining 20 percent is invested with a maximum of risk in them.

Asked when the current crisis will come to an end, Dr. Taleb answered with an Arabic saying, “He who says he knows nothing, is actually providing you with an answer… the recipe here is lower your exposure to rare events.”

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Tuesday, May 26- 2009 @ 16:16 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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