A little knowledge can be a dangerous thing

On Monday’s Econtalk, Taleb said that knowledge was harmful. Here’s my take.

Formalisms are born in academia, where they establish boundaries within which solutions are sought. Those boundaries make it possible for ideas to engage, by directing people to compete on the same problems. Boundaries are necessary for focus, they make it easier to share and hybridize ideas. The real game (of life) is broken up into sub-games which academics play in for status and respect.

The sub-games of academia have independent  intellectual histories and traditions. Within each sub-game, there is enough competition that solutions are dependable and valid. However, to actually use an academic result in the real world, one has to make sure the sub-game itself is set up correctly. Sub-game incorrectness takes longer to catch Рparadigms have inertia. Assumptions are often accepted by players to make the competition a good game with clear winners, not so much to reflect reality.

Alas, the academic quantification of risk in the finance sub-game has falsely enthralled us all, when in fact it is a weak shadow of real world uncertainty.

One Response to “A little knowledge can be a dangerous thing”

  1. Qin says:

    That’s why all PhD graduates should just stay in academia or a place without internet!