Distributions that are dominated by extremes and tail events require a completely different way of thinking. We provide a classification and show where conventional statistical tools fail, such as the conventional law of large numbers. We show how robust statistics is not robust at all; how frequency-based forecasting fails and how past averages misrepresent future ones. We show implications for decision-making in the real world and what modifications are required. Ironically they are often easier to work with. See http://www.fooledbyrandomness.com/FatTails.html for more details and papers.
Nassim Nicholas Taleb spent 21 years as a risk taker before becoming a researcher in philosophical, mathematical and (mostly) practical problems with probability. Taleb is the author of a multivolume essay, the Incerto (The Black Swan, Fooled by Randomness, and Antifragile) covering broad facets of uncertainty. It has been translated into 36 languages. In addition to his trader life, Taleb has also published, as a backup of the Incerto, more than 45 scholarly papers in statistical physics, statistics, philosophy, ethics, economics, international affairs, and quantitative finance, all around the notion of risk and probability. He spent time as a professional researcher (Distinguished Professor of Risk Engineering at NYU ’s School of Engineering and Dean’s Professor at U. Mass Amherst). His current focus is on the properties of systems that can handle disorder (“antifragile”). Taleb refuses all honors and anything that “turns knowledge into a spectator sport”.