Nassim Nicholas Taleb (@nntaleb), the author of “The Black Swan” and “Antifragile," joins episode 83 of The Julia La Roche show alongside veteran Wall Street Journal reporter Scott Patterson (@pattersonscott), author of “Chaos Kings: How Wall Street Traders Make Billions In the New Age of Crisis.”
“Chaos Kings,” which features Taleb, recounts the story of Universa Investments, a Miami-based investment firm specializing in risk mitigation, deploying a tail-risk hedging strategy to limit losses from an outsized market event, like a Black Swan. Taleb is the Distinguished Scientific Advisor at Universa.
Led by Mark Spitznagel, Universa is among the best-performing investment managers of the last 15 years, reaping massive gains from market crashes. During the depths of the COVID-19 pandemic in early 2020, Universa delivered a stunning 4,000% return during the first quarter when markets sharply sold off. The firm has posted a 15-year average annual return on capital north of 100%.
0:00 Show open
1:00 Chaos Kings story
6:40 A problem with infrequent but large losses
9:45 Precautionary Principle
12:29 Tail risk hedging
15:30 Flaws of modern finance
17:17 Mark Spitznagel learning to “love to lose”
19:00 Fragilities, hidden risks, big picture macro environment
23:43 Addressing misconceptions around Black Swans
25:30 Optionality
30:16 Experience and execution of the strategy
31:49 Black Swans v. Dragon Kings
34:30 Predicting an event is one thing; benefitting is another thing
36:00 Sornette’s Dragon Kings
38:50 Universa’s 4,000% gain
41:45 Getting to know Nassim Taleb
46:01 Rethinking investing
49:01 New age of crisis
54:40 Parting thoughts
