The Turkey Problem

Traditional financial analysis models cover 98% of situations, but they fail to signal the risk of “Tail”, or in a metaphorical way, the Turkey Problem as described by Nassim Taleb in his Anti-Fragility book.

“A turkey is fed for a thousand days by a butcher, every day is a confirmation to his team of analysts that butchers love turkeys” with statistical confidence increasing daily. “The butcher will continue to feed the turkey until a few days before Thanksgiving Day. And then comes the time when it’s not really a good idea to be a turkey. Being surprised by the butcher, the turkey reviews his beliefs when his confidence in the assertion that the butcher loves Turkeys is at its peak and the Turkey’s life is “very serene” and mildly predictable. This example is based on the adaptation of a metaphor created by Bertrand Russell. From the Turkey’s story, we can also identify the source of all prejudicial errors: confusing the absence of evidence (damages) with the evidence of its absence “