The title and opening paragraph suggest that it is comparing Taleb’s “barbell” strategy with other investment strategies—traditional balanced portfolio, gold in a sock under your bed, highly leveraged penny stocks, etc. -- and finding it wanting.
But none of the actual argumentation that follows really makes any contact with that sort of comparison; rather, it applies uniformly across every asset of the sort Taleb, or your financial advisor, or anyone else interested specifically in your investments, might consider. (With one exception; see below.) And its real point seems to be not to argue for or against any particular investment strategy, but to remind us that there are other things that matter more deeply than the accumulation of wealth. I feel as if I have just read an article entitled “Against the King’s Gambit” that’s devoted to explaining how playing board games like chess is a waste of time. I wonder whether I am missing the point in some spectacular fashion.
Some specifics:
In a scenario where your country’s government collapses disastrously, or where you find yourself on the run from deadly persecution, indeed treasury bonds won’t help you much; neither will any other sort of financial asset; how you deal with the possibility of such scenarios is largely orthogonal to how you optimize your investments. Seeking spiritual enlightenment or good advice on what food to eat won’t be helped much by treasury bonds; nor will they be helped much by any other sort of financial asset; how you manage those aspects of your life is largely orthogonal to how you optimize your investments.
Children and a spouse and belonging to an intergenerational community are (at least for many people) wonderful things, and perhaps (as this article suggests) they provide many of the benefits that we might (perhaps unwisely) look for from our investments. But having decided whether to marry, how many children (if any) to have, etc., the question remains of what to do with whatever wealth one has after all that, and so far as I can see the choice between “barbell”, “conventionally diversified investments”, “money in a sock under the bed”, etc., isn’t affected in any very obvious way by whether one has spouse, children, intergenerational community, etc.
(One thing mentioned in the article that is relevant: “land you are used to occupying and know well”. To whatever extent that is an Important Good Thing, it suggests that one substantial asset you should own is a land and somewhere to live built on that land. But I don’t think that when Taleb proposes a “barbell” strategy he is intending to tell people whether or not to own a house.)
There are indeed no truly risk-free assets, and any asset you hold may become irrelevant. (Incidentally, this applies to houses and spouses and children and intergenerational communities and religions and so forth too: you may suddenly need to move across the country, you and your spouse may cease to make a good couple, your children may turn against you, your community may disapprove of your lifestyle, you may stop believing in your god(s), etc.) But, once again, this has nothing to do with Taleb’s “barbell strategy”: the risks that would destroy the value of treasury bonds, and the end of your natural life, will uniformly wipe out any other investments you might have, and the question of what to do with any money you choose to invest is once again largely orthogonal to that.
And its real point seems to be not to argue for or against any particular investment strategy, but to remind us that there are other things that matter more deeply than the accumulation of wealth. [...] Children and a spouse and belonging to an intergenerational community are (at least for many people) wonderful things, and perhaps (as this article suggests) they provide many of the benefits that we might (perhaps unwisely) look for from our investments.
A definition of “wealth” or “investment” coextensive with financial investment is going to lead to models that extend very poorly if at all to overall life decisions. These get conflated a lot. Most risk is not financial.
But having decided whether to marry, how many children (if any) to have, etc., the question remains of what to do with whatever wealth one has after all that
That first decision—allocating investment of your time between fundamentally different kinds of investment like children, friend networks, and financial savings—is the more important one. It’s also one for which the “barbell strategy” is meaningless if taken literally.
I agree with all that, but this still feels as if I’ve opened up something called “A refutation of the King’s Gambit” and found that it says “Chess is mostly a waste of time. You should probably do something else.”. That might be good advice! But it shouldn’t be titled “Against the King’s Gambit”, and it wouldn’t be helpful to anyone wanting to decide what opening to play if and when they _do_ play chess.
Taleb’s “barbell strategy” is an answer (not necessarily a good one) to the question “What should I do with my financial assets?”. Observing that lots of important assets aren’t financial, and that there are important decisions that aren’t about your finances, has almost nothing to do with that question.
Incidentally, I think “allocating investment of your time between [...] children, friend networks, and financial savings” is a type error. Most people (there are obvious exceptions for hedge fund employees, day traders, etc.) allocate approximately no time to financial savings. Make it “children, friend networks, and paid employment” and it makes more sense.
Most people (there are obvious exceptions for hedge fund employees, day traders, etc.) allocate approximately no time to financial savings.
While it’s likely true that many people in (at least in the US) live paycheck-to-paycheck, financial investment allocation strategies are even more irrelevant to them than to Taleb’s target audience. But for those who work for money and have incomes in excess of expenditures, what are they doing at work, if not allocating time to financial savings?
Neither children, friend networks, nor financial savings are an activity—those are all goods you might acquire and cultivate by means of a mixture of activities.
What they are doing at work is allocating time to _acquiring money_. They may then save that money (acquiring financial savings) but they may also use it in other ways. They may spend it on their children, or on activities they engage in with their children; that would be an indirect way of allocating time to their children. They may give it away to causes they consider valuable. They may spend it on concert tickets or fancy restaurant meals for the sake of sheer pleasure. Etc.
(Just to be explicit: Having income in excess of expenditure doesn’t mean that when you’re at work you’re allocating time to financial savings, because unless your expenditure is _zero_ -- or, more precisely, less than your income from sources other than paid work—some of that time at work is supporting your expenditure.)
And, of course, paid employment isn’t _exclusively_ about acquiring money. A person may value their personal relations with colleagues (so that going to work is partially a matter of allocating time to their friend networks). They may consider their work valuable in its own right (not implausible; at the very least, it’s valuable enough _to someone_ that they get paid for it). They may derive satisfaction from doing difficult things skilfully. And so forth.
I think that if someone wrote a series of books about “how to play games,” and placed a lot of emphasis on the King’s Gambit in a way that implied that it was general advice for game theory rather than advice limited to a very restricted but rightly famous subset of games called chess, and this was the way the King’s Gambit had reached popular consciousness, then it would be OK to title a piece explaining the problem “Against the King’s Gambit”.
But the real reason I used that title here was that I thought that my preferred title (the one I used on my personal blog, “Financial investment is just a symbolic representation of investment projected onto a low-dimensional space inside a control system run by the US government”), would lead to a bunch of annoying and pointless arguments if I used it here on LessWrong, because I expected people to aggressively miss the point. So I replaced a clear description of what I’m arguing for it with a vague pointer to what I’m arguing against, since that seemed more defensible. I think that on the whole this was a good decision.
I’m not sure I understand your hypothetical scenario. Is our author’s message “no matter what you are doing, play the King’s Gambit” or “no matter what you are doing, do something analogous to the King’s Gambit”?
If the former, then I bet you are fighting a straw man. Does Taleb (or anyone) actually claim that we should ignore everything other than financial investment?
If the latter, then I don’t see how your argument actually engages. E.g., Taleb might claim that the things you say we should be doing instead of earning and investing actually fall into one or other of his categories of “as safe as you can manage” and “exposing you to lots of black-swan upside”.
My apologies, by the way, if I am (or seem to be) “aggressively missing the point”. For the avoidance of doubt, that’s not my intention.
Doesn’t seem like anyone’s aggressively missing the point this time, thanks for engaging :)
I’m not sure I understand your hypothetical scenario. Is our author’s message “no matter what you are doing, play the King’s Gambit” or “no matter what you are doing, do something analogous to the King’s Gambit”?
Praise of the king’s gambit as a chess opening, mixed with descriptions of generalized strategies for playing adversarial games, in ways that subtly but pervasively imply that it’s a central case of game-playing. This is likely to cause readers, on the margin, to notice games where something like the King’s Gambit is available and ignore the ones where it’s inapplicable.
I think it’s fairly common for people who agree with an argument but disagree with its conclusions to title that disagreement “Against X,” but I think it would be better to use something like “Taking X Further,” or “Beyond X,” or, for more hostility, “Taking X Seriously.”
This is a strange article.
The title and opening paragraph suggest that it is comparing Taleb’s “barbell” strategy with other investment strategies—traditional balanced portfolio, gold in a sock under your bed, highly leveraged penny stocks, etc. -- and finding it wanting.
But none of the actual argumentation that follows really makes any contact with that sort of comparison; rather, it applies uniformly across every asset of the sort Taleb, or your financial advisor, or anyone else interested specifically in your investments, might consider. (With one exception; see below.) And its real point seems to be not to argue for or against any particular investment strategy, but to remind us that there are other things that matter more deeply than the accumulation of wealth. I feel as if I have just read an article entitled “Against the King’s Gambit” that’s devoted to explaining how playing board games like chess is a waste of time. I wonder whether I am missing the point in some spectacular fashion.
Some specifics:
In a scenario where your country’s government collapses disastrously, or where you find yourself on the run from deadly persecution, indeed treasury bonds won’t help you much; neither will any other sort of financial asset; how you deal with the possibility of such scenarios is largely orthogonal to how you optimize your investments. Seeking spiritual enlightenment or good advice on what food to eat won’t be helped much by treasury bonds; nor will they be helped much by any other sort of financial asset; how you manage those aspects of your life is largely orthogonal to how you optimize your investments.
Children and a spouse and belonging to an intergenerational community are (at least for many people) wonderful things, and perhaps (as this article suggests) they provide many of the benefits that we might (perhaps unwisely) look for from our investments. But having decided whether to marry, how many children (if any) to have, etc., the question remains of what to do with whatever wealth one has after all that, and so far as I can see the choice between “barbell”, “conventionally diversified investments”, “money in a sock under the bed”, etc., isn’t affected in any very obvious way by whether one has spouse, children, intergenerational community, etc.
(One thing mentioned in the article that is relevant: “land you are used to occupying and know well”. To whatever extent that is an Important Good Thing, it suggests that one substantial asset you should own is a land and somewhere to live built on that land. But I don’t think that when Taleb proposes a “barbell” strategy he is intending to tell people whether or not to own a house.)
There are indeed no truly risk-free assets, and any asset you hold may become irrelevant. (Incidentally, this applies to houses and spouses and children and intergenerational communities and religions and so forth too: you may suddenly need to move across the country, you and your spouse may cease to make a good couple, your children may turn against you, your community may disapprove of your lifestyle, you may stop believing in your god(s), etc.) But, once again, this has nothing to do with Taleb’s “barbell strategy”: the risks that would destroy the value of treasury bonds, and the end of your natural life, will uniformly wipe out any other investments you might have, and the question of what to do with any money you choose to invest is once again largely orthogonal to that.
A definition of “wealth” or “investment” coextensive with financial investment is going to lead to models that extend very poorly if at all to overall life decisions. These get conflated a lot. Most risk is not financial.
That first decision—allocating investment of your time between fundamentally different kinds of investment like children, friend networks, and financial savings—is the more important one. It’s also one for which the “barbell strategy” is meaningless if taken literally.
I agree with all that, but this still feels as if I’ve opened up something called “A refutation of the King’s Gambit” and found that it says “Chess is mostly a waste of time. You should probably do something else.”. That might be good advice! But it shouldn’t be titled “Against the King’s Gambit”, and it wouldn’t be helpful to anyone wanting to decide what opening to play if and when they _do_ play chess.
Taleb’s “barbell strategy” is an answer (not necessarily a good one) to the question “What should I do with my financial assets?”. Observing that lots of important assets aren’t financial, and that there are important decisions that aren’t about your finances, has almost nothing to do with that question.
Incidentally, I think “allocating investment of your time between [...] children, friend networks, and financial savings” is a type error. Most people (there are obvious exceptions for hedge fund employees, day traders, etc.) allocate approximately no time to financial savings. Make it “children, friend networks, and paid employment” and it makes more sense.
While it’s likely true that many people in (at least in the US) live paycheck-to-paycheck, financial investment allocation strategies are even more irrelevant to them than to Taleb’s target audience. But for those who work for money and have incomes in excess of expenditures, what are they doing at work, if not allocating time to financial savings?
Neither children, friend networks, nor financial savings are an activity—those are all goods you might acquire and cultivate by means of a mixture of activities.
What they are doing at work is allocating time to _acquiring money_. They may then save that money (acquiring financial savings) but they may also use it in other ways. They may spend it on their children, or on activities they engage in with their children; that would be an indirect way of allocating time to their children. They may give it away to causes they consider valuable. They may spend it on concert tickets or fancy restaurant meals for the sake of sheer pleasure. Etc.
(Just to be explicit: Having income in excess of expenditure doesn’t mean that when you’re at work you’re allocating time to financial savings, because unless your expenditure is _zero_ -- or, more precisely, less than your income from sources other than paid work—some of that time at work is supporting your expenditure.)
And, of course, paid employment isn’t _exclusively_ about acquiring money. A person may value their personal relations with colleagues (so that going to work is partially a matter of allocating time to their friend networks). They may consider their work valuable in its own right (not implausible; at the very least, it’s valuable enough _to someone_ that they get paid for it). They may derive satisfaction from doing difficult things skilfully. And so forth.
I think that if someone wrote a series of books about “how to play games,” and placed a lot of emphasis on the King’s Gambit in a way that implied that it was general advice for game theory rather than advice limited to a very restricted but rightly famous subset of games called chess, and this was the way the King’s Gambit had reached popular consciousness, then it would be OK to title a piece explaining the problem “Against the King’s Gambit”.
But the real reason I used that title here was that I thought that my preferred title (the one I used on my personal blog, “Financial investment is just a symbolic representation of investment projected onto a low-dimensional space inside a control system run by the US government”), would lead to a bunch of annoying and pointless arguments if I used it here on LessWrong, because I expected people to aggressively miss the point. So I replaced a clear description of what I’m arguing for it with a vague pointer to what I’m arguing against, since that seemed more defensible. I think that on the whole this was a good decision.
I’m not sure I understand your hypothetical scenario. Is our author’s message “no matter what you are doing, play the King’s Gambit” or “no matter what you are doing, do something analogous to the King’s Gambit”?
If the former, then I bet you are fighting a straw man. Does Taleb (or anyone) actually claim that we should ignore everything other than financial investment?
If the latter, then I don’t see how your argument actually engages. E.g., Taleb might claim that the things you say we should be doing instead of earning and investing actually fall into one or other of his categories of “as safe as you can manage” and “exposing you to lots of black-swan upside”.
My apologies, by the way, if I am (or seem to be) “aggressively missing the point”. For the avoidance of doubt, that’s not my intention.
Doesn’t seem like anyone’s aggressively missing the point this time, thanks for engaging :)
Praise of the king’s gambit as a chess opening, mixed with descriptions of generalized strategies for playing adversarial games, in ways that subtly but pervasively imply that it’s a central case of game-playing. This is likely to cause readers, on the margin, to notice games where something like the King’s Gambit is available and ignore the ones where it’s inapplicable.
I think it’s fairly common for people who agree with an argument but disagree with its conclusions to title that disagreement “Against X,” but I think it would be better to use something like “Taking X Further,” or “Beyond X,” or, for more hostility, “Taking X Seriously.”