Tuesday, June 28, 2011

The Black Swan: uncertainty, news media and Greece

In Nassim Nicholas Taleb's Black Swan he argues that journalists will sometimes try to connect unrelated events, explaining economic news in terms of a particular political event for example. This, he claimed, was often foolish as the twists and turns of economies are massively complex and unpredictable, and the cause-and-effect journalists imply may not exist in reality.

Earlier this morning I noticed headlines on economic news pointing to rising share prices across Europe, supposedly because of the upcoming deal between the EU and Greece:

Europe's Markets Gain Ground
Wall Street Journal - Andrea Tryphonides - ‎1 hour ago‎
LONDON—European stocks were trading higher Tuesday, led by banks after a draft proposal by French banks to roll over the majority of their Greek debt exposure eased concerns ahead of Greece's parliamentary austerity vote on ...

Yet just now I see the exact same story flipped on its head:

European shares edge lower on Greece; telecoms down
Reuters - Atul Prakash - ‎25 minutes ago‎
LONDON, June 28 (Reuters) - European equities edged lower on Tuesday ahead of a crucial vote on unpopular austerity measures by Greece's parliament linked to more aid, while a slump in Cable & Wireless Worldwide led telecom shares down. ...

So is the Greek issue sending shares higher or lower? Perhaps this is a perfect example of Taleb's observation, with journalists/editors trying to create simple narratives that explain bafflingly complex events.

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