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By Root 6909 0

staring out at the plain brick of the courtyard, reading the medical diplomas on the wall over and over, waiting and waiting for the verdict. The doctor returned and spoke in a low, grave voice: “I got the pathology report. It’s not as bad as it sounds.” But, of course, it was: he had throat cancer. Taleb’s mind shut down. He left the office. It was raining outside. He walked and walked and ended up at a medical library. There he read frantically about his disease, the rainwater forming a puddle under his feet. It made no sense. Throat cancer was the disease of someone who has spent a lifetime smoking heavily. But Taleb was young, and he barely smoked at all. His risk of getting throat cancer was something like one in a hundred thousand, almost unimaginably small. He was a black swan! The cancer is now beaten, but the memory of it is also Taleb’s secret, because once you have been a black swan — not just seen one but lived and faced death as one — it becomes easier to imagine another on the horizon.

As the day came to an end, Taleb and his team turned their attention once again to the problem of the square root of n. Taleb was back at the whiteboard. Spitznagel was looking on. Pallop was idly peeling a banana. Outside, the sun was beginning to settle behind the trees. “You do a conversion to p1 and p2,” Taleb said. His marker was once again squeaking across the whiteboard. “We say we have a Gaussian distribution, and you have the market switching from a low-volume regime to a high-volume. P21. P22. You have your igon value.” He frowned and stared at his handiwork. The markets were now closed. Empirica had lost money, which meant that somewhere off in the woods of Connecticut Niederhoffer had no doubt made money. That hurt, but if you steeled yourself and thought about the problem at hand, and kept in mind that someday the market would do something utterly unexpected because in the world we live in something utterly unexpected always happens, then the hurt was not so bad. Taleb eyed his equations on the whiteboard and arched an eyebrow. It was a very difficult problem. “Where is Dr. Wu? Should we call in Dr. Wu?”

4.

A year after Nassim Taleb came to visit him, Victor Niederhoffer blew up. He sold a very large number of options on the S&P index, taking millions of dollars from other traders in exchange for promising to buy a basket of stocks from them at current prices, if the market ever fell. It was an unhedged bet, or what was called on Wall Street a naked put, meaning that he bet everyone on one outcome: he bet in favor of the large probability of making a small amount of money, and against the small probability of losing a large amount of money — and he lost. On October 27, 1997, the market plummeted 8 percent, and all of the many, many people who had bought those options from Niederhoffer came calling all at once, demanding that he buy back their stocks at pre-crash prices. He ran through $130,000,000 — his cash reserves, his savings, his other stocks — and when his broker came and asked for still more, he didn’t have it. In a day, one of the most successful hedge funds in America was wiped out. Niederhoffer had to shut down his firm. He had to mortgage his house. He had to borrow money from his children. He had to call Sotheby’s and sell his prized silver collection — the massive nineteenth-century Brazilian “sculptural group of victory” made for the Visconde De Figueirdeo, the massive silver bowl designed in 1887 by Tiffany & Co. for the James Gordon Bennett Cup yacht race, and on and on. He stayed away from the auction. He couldn’t bear to watch.

“It was one of the worst things that has ever happened to me in my life, right up there with the death of those closest to me,” Niederhoffer said recently. It was a Saturday in March, and he was in the library of his enormous house. Two weary-looking dogs wandered in and out. He is a tall man, an athlete, thick through the upper body and trunk, with a long, imposing face and baleful, hooded eyes. He was shoeless. One collar on his shirt was twisted inward, and he looked