Thermodynamics vs Kinetics, part two
The previous post was inspired the writings and public statements of Nassim Nicholas Taleb. I've read his books and watched pretty much every interview he's given that's available on the internet. I like to try to express other's ideas in my own way, so that's what I'm trying to do here.
In many interviews he gives, especially on CNBC, the questioner inevitably asks him, "So what's the next Black Swan?" I'm not sure how he holds back his rage every single time, but Taleb politely responds that by definition, a Black Swan is something that is not predictable by most people, and if a lot of people predict it before it comes true, it's not a Black Swan. He usually adds something along the lines of, "I can't predict when and in what form the next Black Swan event will take place. What I can tell you is that financial system is extremely fragile right now."
Tying this into the prior post, the interviewer is asking a question about kinetics--when, and how? Taleb, though, responds with an answer about thermodynamics. The current state of the economy is fragile-- that's probably a better word than "unstable", but means something very similar. The system is extremely susceptible to insults, and by extension, a Black Swan event. If such an event were to occur, the economy would suffer tremendously. Taleb doesn't know when such an event might occur; it could be tomorrow, a year from now, or ten years from now.
He mentions in this interview that he wrote a new section in the 2nd edition of The Black Swan just to explain this point--the relevant part is about four minutes in.
"Fragility" and "robustness"--the latter being the ability to withstand Black Swans--are thermodynamic concepts.