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Nassim: So I’m gonna finish with a – and then we start the conversation – with one more point, that again is a trader’s story, there’s something I call the Green Lumber Fallacy, is after the following metaphor. There’s a trader who is a fellow who wrote a book on “how I lost a million dollars”, which at the time when he wrote it is very respectable, a million dollars was a lot of money, okay. Now, you know, they didn’t have the Obama years and Greenspan, printing.
Okay, so how did he lose that million dollars. He traded green lumber, and he knew everything about green lumber. He knew the statistics, physics, chemistry, everything, the supply, the demand, the geography, the consumption – he knew everything about green lumber, read every magazine, every book he could find on lumber. And yet, he lost all his money. Turned out there was in the pit a fellow, an old trader, who was very very wealthy, and always made money trading green lumber, he traded nothing else. And one day the narrator discovered that that fellow thought that green lumber was not freshly cut lumber, that it was lumber that they took lumber and painted it green, right, and yet he made a fortune using green lumber.
So what does it tell us, it tells us that from the outside, like an academic approaching a problem, what you need to know it’s not that, what the fellow who made a lot of money his name is I think Siegel, like Jerry Siegel or something like that, was that what he knew was not like it’s not like he didn’t know anything, he knew a lot of stuff, but that stuff you can only detect from the inside, you can never know from the outside what it is, you see.
Naval: You have to play the game to understand it.
Nassim: You have to play the game to know what you need to know. Okay, from the inside not from the outside.
Naval: People are always asking me to recommend a game theory textbook, and the reality is I never read a game theory textbook, when I was young I just played a lot of games.
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