Asperger's and the Financial Crisis

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A while ago there were a couple of threads which featured Nicholas Nassim Taleb's claim that a deficit of "theory of mind," and hence people with Asperger's Syndrome, caused the financial crisis. The first part of this 60 Minutes piece
http://www.cbsnews.com/stories/2010/03/ ... bsCarousel
includes an interview with Michael Burry, a guy who foresaw the financial problems, and he has AS!
(If that url does not work, try http://www.ritholtz.com/blog/2010/03/60 ... big-short/ )

Also see the brief "web-extra" interviews with Burry
http://www.cbsnews.com/video/watch/?id=6298040n
http://www.cbsnews.com/video/watch/?id=6298038n


Edit: Ooops, duplicate thread http://www.wrongplanet.net/postt121775.html

I don't exactly think Taleb said the "theory of the mind" caused the financial crisis, but he did imply that AS was problematic in risk management roles. I think he was either being metaphorical or took mind-blindness way too seriously as a way to understand AS.

I have been trying to get people here interested in Burry for the past week or so...No one seems to care. Even more than the report on US TV, the long-form article by Michael Lewis in Vanity Fair highlighted a lot of how AS works, at least how my AS does! Additionally, it told Burry's story with much more sympathy and understanding than I have usually seen. I kind of felt understood when I read it. In fact, Lewis didn't mention AS until well into the piece, but I could tell that was where it was going. That alone impressed me.

Here is the VF article: Betting on the Blind Side

And here are my other threads on the subject: AS financial market savant in Vanity Fair
AS financial market savant on 60 Mintues

That being said, if this thread is the one where people to discuss this, I am 100% good with that. To me, this story highlights why AS people should be treated with much more respect. While personally profit was a motive for Burry, I take great pride at thinking that one of us Aspies was in the forefront of not drinking the Kool-Aid.

A simple rule. If anyone is trying to generate hate or discontent against another group of people there is often an underlying economic or social reason. Lawyers always make the money when neighbors fall out over hedges. Arms dealers profit when social conflict gets out of hand and people start killing each other , often for reasons they don't even understand. Sometimes people like this need a metaphorical mammal to scape , when their nudge-economy theory of money generation stops working due the collective bullshitting and deception upon which most of it is based.

I did like betting on the blind side. Mostly for the self discovery part, mine came late, it was a shock.

Others have tried to use the Asperger's Defense, but it was simple mindless greed.

I am glad he could act on it, retire rich. Many saw that housing, which went up 3% a year over time was going up 10%, and that could not be supported, but most of them bought a house, and banks, realtors, builders, all wanted another year at any cost, they got it.

The key point of the article was, he was the only person who read the CDS papers, where millions bought and sold them.

In a follow up, Morgan Stanly has refused to pay $245 million to Bank of America, on CDS. Their defense, BAC wrote the mortgages, sold the securities, and knowing they were bad, bought CDS on them. Defense two, since they did not hold the securities, they had no right to insure them.

Paying off on insurance, usually brings the salvage value of the insured property. This was like buying fire insurance on houses you do not own. In southern California where the last fire was years ago, and the brush has now grown thick. It is only a matter of time.

The Treasury paid off the CDS windfall through AIG, and got nothing, then the Federal Reserve bought the underlieing securities, so we paid for them twice.

None of them want to talk about it, or list what they bought.

Blaming Aspergers is a weak dodge.

This was only the tool, the goal was to disrupt the Social Security payouts they faced, being unemployed people will qualify for less, many will be forced to retire early, and that reduces the government payout. Only the government had a motive to crash the economy.

longNstrong, many thanks for the link to the VF article. Sorry I missed your original threads.

Here is another interview with Michael Lewis, along with an excerpt from his new book:
"How A Few Made Millions Betting Against The Market"
Fresh Air (NPR)
http://www.npr.org/templates/story/stor ... =124690424

Loosely related, an interview with Ed Thorp and Scott Patterson:
" 'The Quants': It Pays To Know Your Wall Street Math"
Fresh Air (NPR)
http://www.npr.org/templates/story/stor ... =123209339

I feel another Holocaust coming on, and we're going to be the first ones, slaughtered and burned.

I disagree with all this.

I cannot remember his name, but an aspie studying the sub-prime thingamajig predicted the financial crisis would occur - and his prediction was +90% accurate. Also he placed bets relative to this prediction and made a financial killing.

I think it was just the debt asset ratio. Everyone had just taken on too much debt and when one person or institution declares bankruptcy it weakens the people and institutions financial strength too. If a company had a weak financial strength (high debt) it can fall MUCH FASTER than a conservative stable dividend paying stock (they did well).

Business goes in cycles, it build up then falls down, then builds up again and will probably keep on building and falling.

Another interesting figure was if you take the WORLD's WEALTH from 0-1000 Asia owned 90% of it.
The Europeans and Americans did the same thing from about 1000-2000.
But Asia and the Emerging markets have started to take back a significant portion of the worlds wealth (mainly from Europe and Asia).

No one knows if this will be a temporary or lasting trend but historically and my predicition is the American and European Economies have lost a significant competitive advantage with the Internet and fall of trade barriers.

A person in Inner Mongolia, Vietnam, Indonesia, Phillipines are born the same way Europeans but have lacked Western Education for a long time.

Internet decreases the need for Brick (Real) schools, businesses, institutions and generally decreases the importance of USA being the financial capital of the world.

Click increases people ability to go where ever they want to (businesses go where the costs are cheapest)! And ultimately bring the wealth back to the masses (Indonesia, Peru, Vietnam, India, China and BANGLADESH)


But that is just my hypothesis based on my little knowledge of recent financial history and the Economist's article about the history of the world's wealth. (Historically concentrated in Asia)

I saw an interview with John Nash in Adam Adam Curtis' 2007 BBC documentary "The Trap: What Happened to Our Dream of Freedom ". Nash said his "Equilibrium Theory" was wrong (he was given a Nobel Prize in Economics for this).

Nash sad that "Nash's Equilibrium Theory" failed to take into account - human emotions. He said his mistake was caused by his mental illness, Schizophrenia, that left him with a very poor understanding of emotions and made him very paranoid & suspicious of people.

It is interesting to note that Nobel Laureate in Economics - Vernon L. Smith who has Aspergers - researches the effects of empathy, trust, reciprocity and ToM in collective bargaining situations. So on the contrary, an Aspie is researching the effects of empathy in economics.

KA McCabe, SJ Rassenti, VL Smith. Reciprocity, Trust, and Payoff Privacy in Extensive Form Bargaining - Games and Economic Behavior, 1998"

"The Trap: What Happened to Our Dream of Freedom " is on Youtube.
[youtube]http://www.youtube.com/watch?v=T_zk2X92kxY[/youtube]

So the financial disaster was caused in part, by Nash's schizophrenia.