Taleb on risk (PDF).
Your money is at risk. No matter what you’ve put it in–stocks, bonds, derivatives, hedge funds, houses, annuities, even mattresses–there’s always the chance that you could lose it or miss out on a bigger opportunity somewhere else. Anyone who would tell you otherwise is either a fool or a huckster. Then there are those who do warn of risk but package it into a simple numerical measure that seems to put it within manageable bounds. They’re even more dangerous.
The economic world is driven primarily by random jumps. Yet the common tools of finance were designed for random walks in which the market always moves in baby steps. Despite increasing empirical evidence that concentration and jumps better characterize market reality, the reliance on the random walk, the bell-shaped curve, and their spawn of alphas and betas is accelerating, widening a tragic gap between reality and the standard tools of financial measurement.
Those words were 2005 and now in 2012…J.P. Morgan is at the punch bowl again playing the same game.
Note: Taleb might be my favorite trend following inspiration–even if his intention surely is not to explain/promote trend following.