Risk Ventures

Wall Street Journal reporter Scott Patterson, in a July 13 article “Mr. Volatility and the Swan,” profiles Nassim Nicholas Taleb, with his book “The Black Swan: The Impact of the Highly Improbable” and his new investment fund, Universa Investments LP: 

“Mr. Taleb believes most investors underestimate the likelihood of seeing a black swan — which he defines as extreme, highly disruptive events that send shockwaves through financial markets — and that there are huge profits to be made in such conditions. (The title alludes to the belief in the West, widely held until European explorers discovered the black swans that are native to Australia, that all swans are white. To call something a black swan was to imply it didn’t exist.)”  “In it he argues that most investors don’t properly understand the risks they are taking and overlook ways to survive a steep market decline. Many investors plan for rainy days, he says, but not for tornadoes.  In part that is because the use of common measures of risk on Wall Street trick investors into thinking the past is predictive, he says. In particular he cites reliance on the bell curve — a chart plotting the distribution of data like stock prices or the heights of all people in a room. In normal distribution, the chart resembles a bell, with rare events being plotted at the bottom edge of the bell. His black swan events, however, fall so far on the outer edges of the bell that investors underestimate the odds that such events will occur. Thus, bets on market-rattling events can be made on the cheap.”

“The Sentinel CEO: Perspectives on Security, Risk, and Leadership in a Post-9/11 World” 

William G. Parrett is the former chief executive officer of Deloitte Touche Tohmatsu. 

From the Inside Flap: “Terrorism is hardly a contemporary phenomenon. But it is ever present today, and its manifestations more diverse than ever before. U.S. companies conducting business abroad have an obligation to their stakeholders to be more attuned to local customs and standards if they expect to be effective—and to mitigate risk—in the global business arena. The Sentinel CEO shares the insights of various CEOs on changes they have adopted to sustain their leadership while providing security to their employees and companies in turbulent times.  For many corporations, a new and increased focus on security has become an indisputable necessity in order to compete globally. Day-to-day operations now incorporate more security personnel, more frequent communication with employees, and more security briefings for people traveling abroad.

In this candid book, author William Parrett—CEO of Deloitte Touche Tohmatsu—draws on interviews with America’s leading CEOs, security experts, public officials, and academics to explore the subtle and profound ways American businesses have changed since 9/11, with special attention to issues of risk in a global environment.  Underscoring how core values can help companies address and recover from unforeseen threats, The Sentinel CEO examines a variety of risks facing business of all sizes that operate in a global environment, including the implications of China and India’s increasing economic might, growing anti-American sentiments abroad, pandemics such as the avian flu, and the impact of tougher immigration laws on the talent pool in the United States.  

Examining our post-9/11 world from the perspective of senior executives, William Parrett delves deep within today’s leading corporations to discover:  1. The kinds of new strategic decisions they are making 2. Who they are relying on to identify threats, assess security, and protect their company’s human and physical assets 3. What their take is on the new challenges the global war on terror is creating for today’s business leaders 4. If U.S. business can continue to prosper abroad against the backdrop of highly confrontational foreign policy 5. Whether U.S. business leadership is sustainable, given immigration and education concerns, or if China and India will take the lead 6. Rich with personal insights, The Sentinel CEO helps today’s corporate executives anticipate and confront unexpected risks so they can remain leaders in the global market.”

“The Risk Library” is an excellent collection of books offered by Bill Luby at Vix and More. 

His first pick: “Against the Gods” (Peter Bernstein) – A high level survey of the history of risk from the perspective of the advance of civilization. A relatively quick read that should inspire the desire to take a closer look at risk vis-à-vis investments.”