Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis

by Scott Patterson

For fans of The Black Swan and written by a veteran Wall Street Journal reporter, this is a fascinating deep dive into the world of billion-dollar traders and high-stakes crisis predictors who strive to turn extreme events into financial windfalls.

There’s no doubt that our world has gotten more extreme. Pandemics, climate change, superpower rivalries, technological disruption, political radicalization, religious fundamentalism—all threaten chaos that put trillions in assets at risk. But around the world, across a wide variety of disciplines, would-be super-forecasters are trying to take the guesswork out of what formerly seemed like random chance. Some put their faith in “black swans”— unpredictable, catastrophic events that can’t be foreseen but send exotic financial instruments screaming in high-profit directions—while others cling to the hope that paying close attention to the data will foreclose any true surprises from happening. Most famous among the former group of big-bet traders are those who run the Universa fund, helmed by manager Mark Spitznagel and built on the strategy of one of its chief investors Black Swan author Nicholas Taleb. On days of extreme upheaval, Universa has made as much as $1 billion.

In researching Chaos Kings, author Scott Patterson not only gained exclusive access to Universa strategists, but he also combed Wall Street to find market players with similar models. Additionally, he met with savvy seers in a variety of fields, from earthquake prediction to counterterrorism to climatology, to see if it’s actually possible to bet on disaster—and win. Riveting, relevant, and revelatory, this is a must-read for anyone curious about how some of today’s investors alchemize catastrophe into profit.

Genres: Finance, Business, Economics, Nonfiction, History, Audiobook, Money

336 pages, Paperback

Published July 4, 2023

About the author

I'm the author of a new book called Dark Pools, as well as a New York Times best-seller called The Quants. I'm a reporter for The Wall Street Journal, covering financial regulation from Washington, D.C. I've also written for the New York Times, Rolling Stone and Mother Earth News. I have a masters of arts degree from James Madison University and currently live in Alexandria, Virginia.

Reviews

[Basili · Rating 3 out of 5]

Started out a captivating tale about the traders who made money on betting against uncertain events. However, the book swayed outside of finance and into climate change. While an important topic, it wasn’t the ending that I was expecting.

[Rick Wilson · Rating 3 out of 5]

Half look at volatility trading over the last decade or so, and half meandering storytelling about climate change, COVID, political instability and similar such news items.

The first half is entertaining as a narrative, but I wish there was some actual detail.

The second half is almost entirely worthless. It’s a combination of marketing pitches from different companies. “We use AI to predict climate change, impacts and invest accordingly” like that’s just people talking their firm up. And a tour of whatever headlines have been in the news the last few years with a loose tie back into “instability.” None of it has any relevant or interesting detail and most of it has been examined better in other books.

[Mark · Rating 2 out of 5]

The whole asset allocation industry is an empty narrative.

In short, this is a dumbed-down, post-Covid, post-FTX-implosion, hot-proxy-war-era addendum to The Black Swan: The Impact of the Highly Improbable. Some interesting highlights about Mark Spitznagel and others, but all in the vapid American financial journo style.

[Chris Boutté · Rating 5 out of 5]

This was a surprisingly good book. I’m a weirdo leftist who grabbed a copy of this book assuming it’d be a book crapping on the Wall Street stock traders who keep destroying the economy. Instead, this book by Scott Patterson primarily told the stories of Nassim Taleb and Mark Spitznagel. Taleb and Spitznagel made insane amounts of money on Wall Street from various crises in America, and it was really interesting to learn about their stories.

I’ve been a big finance nerd for the last couple of years after having no background in it, so there’s a ton of finance jargon I don’t understand. The stuff can get insanely complex, but Patterson did a terrific job explaining each concept throughout the book.

Not only did I learn a ton, but I was surprised at how neutral Patterson seemed throughout the book. I don’t know if I’ve ever read a book like that before where the author did such a good job leaving their opinion out of it.

I don’t really have anything bad to say about the book. But as someone who despises the people on Wall Street making money while destroying the economy, I cringed every time the book talked about how Taleb and Spitznagel “felt bad” every time they made money off these huge crashes. That’s just a personal thing though, and as I said, I respect how well Patterson wrote this from a neutral place.

I’ve never read a Michael Lewis book, but I assume if you like Lewis’ books, you’ll enjoy this.

[Jakob JS · Rating 1 out of 5]

This book does one thing very well: replicate the same idea in every chapter. It would have been a good book if it had one chapter, but ends up being extremely repetitive.

[Ryan Manganiello · Rating 2 out of 5]

Started out good, but then quickly became a shill for global warming advocates.

It would have been fine, but the author and everyone he writes about are all smart enough to know that the human race is already doomed, because no one is going to give up the comforts they now enjoy... especially politicians!

[Sanford Chee]

FT review
https://www.ft.com/content/9d8ee26a-b...

[Brahm · Rating 2 out of 5]

2.5 stars.

Lots to like in Parts 1 and 2 which mostly focused on Nassim Taleb and Dieder Sornette. Really close to a Michael Lewis-style Wall Street biz-saga, I was digging it.

Part 3 was mostly about the intersection of climate risk and finance. This felt like it came out of left field because and really didn't click with me or (in my opinion) the narrative and style to that point.

After just finishing a super in-depth climate book, Part 3 felt shallow, scatterbrained, and oversimplified. Lots of the sentences and sections in Part 3 felt like I was just reading Reddit headlines and top comments - shoot content from the hip, jam in a hot take or factoid, and pivot to something very different.

Patterson was quite good at capturing multiple sides of issues. Almost every time I thought he was giving one side of an issue too much credit (e.g. on energy, pumping up wind and solar power) he'd throw a bone to the other side (e.g. pumping up nuclear).

On the energy front, one issue I think he got wrong was the Texas blackout root cause - this was attributed to climate change, but Meredith Angwin in Shorting the Grid would make a persuasive case that it's due to perverse incentives in Texas' energy market, a high concentration of weather dependent energy sources, and extremely high reliance on just-in-time natural gas for power.

I enjoyed the Scott Patterson and Nassim Taleb episode of the Tim Ferriss podcast more than this book. There was still some great stuff in here, but as a package it didn't all feel like it fit together.

[Azam Ch. · Rating 2 out of 5]

DONOT READ THIS BOOK IF YOU ARE LOOKING TO READ SOMETHING ABOUT HEDGE FUNDS

this book was absolute trash and i would have given it a 1 star if it wasn’t for some tiny bits of stories about taleb scrambled at the start of it along with some about spitznagel,
other than that every other thing in it was unmemorable,
but thats the least of his book’s problems-

this book is titled to be about hedge funds and people making money through chaos,
and thats what it is about for 40% of the book,
but the other 60%? its endless leftist rambles and about climate change, and fossil fuels damaging the planet.

dude i was there to read about money, the good life, balling , not greta thunberg style rants about carbon taxing people by some midwit journalist

the only reason i read this was because taleb went on a podcast with the author talking about things, and so i thought the book may he good if hes a friend of taleb but but i should have been suspicious when taleb himself said he hasnt read the book

ah well
absolute trash

——————-

other than like the good 10% parts about taleb and spitznagel the entire book can be summarised as :



a old man of not much talent looking at things from afar and going in awe about news headlines, climate change rantings and climate news on the internet

[alex · Rating 2 out of 5]

They made an educated guess based on theory and got way more lucky than they should have. The end.

[Rohit N · Rating 4 out of 5]

I just finished reading Chaos Kings, and I have to say, it's a really good book! 📚 It delves into the intriguing concept of chaos as a financial instrument to capitalize on.

The author did a great job of introducing me to the world of the black swan theory and its impact on financial instruments. While the storytelling and historical context could have been more extensive, they still provided valuable insights.

However, there was a slight detour into linking chaos with climate change, which felt somewhat disconnected and lacked a clear storyline.

That being said, overall, the book is highly informative and enjoyable. It's definitely worth a read! 😊👍

[Chad · Rating 1 out of 5]

I enjoyed one of this authors other books and gave this one a try. Well it fell way short of expectations. The book highlights when someone out of the millions of investors really got something right. Gambling err guessing on market going up or down cannot be replicated statistically better than flipping a coin and betting on outside shots at things will show a small number of gamblers to be right and most won’t be, about in line with the expectations of the event happening. As they say, even a stopped clock is right twice a day, so gamble enough times on an unlikely outcome and well it just might hit one day, and then you can say see “I” know what I am doing.
I wonder if this author wanted to write a sky is falling climate change book but thought that book shelf might be full so he found a few outliers in market predictions and then rambled on about what he really wanted to say about climate change?

[Vitalijus Sostak · Rating 3 out of 5]

"An epic page turner" stands on the book cover. It is not, it bogs down after a while, but the first 1/2 of the book is worth reading.

The biggest mistery with Universa is that systematic option selling (that they assume the opposite side of) is actually a viable strategy, given that risk management does not fail during market crashes. Yet, Universa claims to have earned average +105% annual return on invested capital (2008 to Dec2019, why track stops there?) by systematically buying deep OTM options.
This is the crucial controversy of the "Black Swan Protection Protocol" strategy that gets no mention in the book. Yes, this strategy required constant replenishment of capital thus artificially increasing RoIC, but still - it does not add up, imo.
There's one outsider's quote about it that I agree with: "They deny it, but they have to have some kind of forecasting element to it that they do not disclose. You can't make it work without it."

What is mentioned a lot in the final half of the book is just musings on risk management, risk of ruin, few (not overly amusing) anecdotes about fighting climate change, dealing with pandemics or political upheavals. Non-specific and reads like a filler, better read the papers (like Taleb et al "The Precautionary Principle", 2014) or books ("Why Stock Markets Crash") e.g.

Overall: 2.5 stars.

[Lukáš Pelcman | From Book to Mind · Rating 4 out of 5]

This is an interesting book. I liked the parts about Taleb and Spitznagel the best as they provided sort of biographical background into the operations of the Universa fund (and its predecessor). Though it’s a shame that the strategies described in the book (by way of referring to Spitznagel) are useful to big money. Too bad there seems not to be an apparent equivalent of a similar risk hedging strategy for retail investors as well.

[Mohammad Ahsan · Rating 4 out of 5]

Chaos Kings, written by Scott Patterson (a financial journalist and author of The Quants and Dark Pools) is an exhilarating account of those fund manager and traders who thrive during market chaos and crashes, as they position themselves (and their portfolios) to capitalize upon tail risk events, which are commonly referred to as a Black Swan. The author has primarily covered the story of Mark Spitznagel, who started as a commodity trader in Chicago and then worked with Nassim Nicholas Taleb (needs no introduction) on one of the earliest funds using tail risk hedging strategies called Empirica before launching his own fund named Universa, that gained fame (and earned billions) during the COVID 19 crash. He has written a book titled “Safe Haven: Investing for Financial Storms” covering his investment strategy and philosophy. There are chapters on other tail risk focused investors/economists including Didier Sornette, who terms tail risk opportunities as Dragon Kings and is knows as a Dragon Hunter. He authored a book titled Why Stock Markets Crash: Critical Events in Complex Financial Systems); and Bob Litterman who was the head of quantitative resource group at Goldman Sachs, with his focus currently on climate change risk and he is the founder of Kepos Capital. He is famous for Black Litterman model that is widely used in portfolio optimization.

The book covers various crashes of recent past including the 1987 October crash, 1998 crisis, Dot-Com crash of 2000, Global Financial crisis of 2008, a couple of mini crahes in 2010 and 2013, Volmageddon of 2018 and lastly the Covid-19 meltdown of early 2020. The focus is on how the chaos kings (Taleb, Spitznagel, Sornette and a couple of others) capitalized on such events and beenfitted greatly from their “tail risk hedges”. The last section of the book covers some of the current major risks such as climate change and technological supermacy. It also explains “The Precautionary Principle” - an idea that was forwarded by Nassim Taleb and several other co-authors in 2014.


Some of the profound messages from the book are given below and in the comments section:

The “Love to Lose” trading philosophy

“If a position started to lose money - sell immediately. Doesn't matter if you think it's going to bounce back. Doesn't matter if you think the market's wrong. Doesn't matter what you read in the Wall Street Journal that morning or what that fancy chart says. Sell, lose. Love to lose. And move on.”

“The discipline. Trading was about discipline; the rest was just detail. You have to do the opposite of what feels good. You have to put yourself in discomfort. Overcoming that means you'd be successful.”


Taleb talks about Empirica's crash-bang strategy
"In the markets, there is a category of traders who have inverse rare events, for whom volatility is often the bearer of good news," he wrote. "These traders lose money frequently, but in small amounts, and make money rarely, but in large amounts. I call them crisis hunters. I am happy to be one of them."

Universa is the counterfactual to the risk-reward calculation, Spitznagel said. "People think of risk mitigation as a liability, as a trade-off against wealth creation, because it usually is," he wrote in Safe Haven. "Universa is, if nothing else, a real-life case study and out-of-sample test that unequivocally proves the point that risk mitigation doesn't have to be viewed that way. Risk mitigation can and should be thought of as being additive to portfolios over time-with the right risk mitigation, that is."

The Pitfalls of Models
“Exactly. In finance, you are not as confident about the parameters . The more you expand your model by adding parameters, the more you become trapped in an inextricable apparatus of relationships. It is called overfitting."

Karl Popper - The author of The Logic of Discovery
One of the philosopher's most important ideas, the Falsification Principle, asserts that science doesn't advance by proving theories true-it advances by proving theories false. Hence the European belief that all swans are white was proven false when sailors discovered black swans in Australia.

A must read for people with interest in financial markets, probability theory, returns distribution, economics, decision.

[Mattias Ek · Rating 4 out of 5]

Om man redan tagit sig igenom Nassim Taleb och Mark Spitznagels bibliografier innebär Patersons bok oundvikligen många upprepningar. Den Universa-associerade duon är berättelsens huvudfigurer - fondens filosofi, positioneringen man tar samt när man kapitaliserar på densamma - men under bokens knappt 400 sidor hinner ett brett persongalleri presenteras. Samtliga tillåts möjligheten att brodera ut sina resonemang rörande olika potentiella olyckshärdar och fragiliteter mer sannolika att aktualiseras i bakvattnet av globalisering, optimering och konsolidering. Det är inte bara i finansiella marknader som inslag ämnade att kväva turbulens istället resulterar i en ackumulation av turbulens och adderar till magnituden på distributionens vänstersvans.

Betoningen i boken berör turerna kring Covid och riskerna associerade med klimatkrisen, men för mig var bokens stora behållning den vidare initieringen den innebar i Didier Sornettes ramverk. Jag kände till schweizaren sen tidigare - främst från det här klippet https://www.youtube.com/watch?v=vuvbg... - men hans idéer måste ha lämnat mig oberörd vid första interaktionen. Den här gången var jag redo att uppskatta digniteten i Sornettes Dragon Kings, vars essens kan kokas ner till det jag ofta beskriver som marknadens mikrostruktur och endogena tendenser eller förekomsten av självförstärkande processer i komplext adaptiva system. Ett ramverk som blir mer rimligt mot en marknad mer betingad av passiva eller prisagnostiska köp- respektive säljflöden.

Sornette showed how dynamics found in earthquakes also could be detected in financial markets and blowups, factors tracked by the Financial Crisis Observatory he’d launched in 2008. Most crashes aren’t caused by outside or “exogenous” events like bad news, such as a negative earnings season, he explained. Rather, they’re caused by “endogenous” events that take place inside the market, strategies reacting to strategies, cascades causing cascades—earthquakes triggering earthquakes.

I samband med att jag läste den senare delen av boken - som nästan uteslutande tillägnas klimatrisker - påmindes jag om Martin L. Weitzmans paper Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change https://scholar.harvard.edu/files/wei... från 2012. Jag tenderar att ogilla klimatforskning pga att området inbjuder till modeller med antaganden i basen som om felaktiga får enorm effekt vid extrapolering över tid. Men Weitmans paper innehåller inga modeller utan beskriver en alternativ approach baserad på första principer om hur man bör konfrontera händelseförlopp med uppskattad låg sannolikhet att aktualiseras, men med enorma implikationer (systemisk risk) i avsaknaden av naturligt absorberande barriärer. Stark rek.

***

”This is the evidence… that crises are not Black Swans, as my friend Nassim Taleb describes in his famous book, which is now a paradigmatic representation of financial crises. They are dragons,” he said. “What does it mean? If you think of the Black Swan story… they are basically unknown, even unknowable, until they occur. A great earthquake according to this view is nothing but a small earthquake that didn’t stop. Impossible to predict. There is nothing that you can diagnose in advance, it cannot be quantified. There is no predictability. In the case of the financial crisis there is no responsibility. The wrath of God! And there is only one unique strategy. Only buy insurance,” a reference to the Universa strategy.”

”Not so with Dragon Kings, which can be quantified, Sornette declared. “There is a degree of predictability.”

Financial crashes display unique and identifiable mathematical characteristics totally unlike what” ”happens during a typical trading session. A phenomenon that can cause a normal day to turn into a catastrophe, he claimed, is super-exponential growth combined with positive feedback loops. Price declines cause more declines triggering more and more declines until a critical moment is reached—a panic, a crash, a blowup. Sornette called such an event a finite-time singularity. He displayed a slide of phenomena with similar positive-feedback characteristics: the formation of black holes, turbulence in plasma, large earthquakes.”

. . .

”The dream: By identifying these special mechanisms at work inside Dragon Kings, he could predict them. The overarching goal wasn’t to always try to predict the future, a visibly impossible task, but rather to identify “pockets of predictability where there is this condensation of complexity.” In other words, a crash crystal ball—albeit one that might be slightly cracked.”

***

”A key tool used by complexity theorists is the study of the physics behind phase transitions—when water turns to steam, or ice turns to water, or an everyday market downturn accelerates into a crash. It was these phase transitions that fascinated Didier Sornette—beginning with his analysis of the sudden eruption of Ariane rocket pressure tanks—and led to his concept of Dragon Kings. Such transitions are sudden and disruptive. When mapped onto social phenomena, the phase transition can help explain how something stable suddenly becomes unstable and chaotic, such as a breakout of ethnic violence.

Such a transition, theoretically, could happen on a civilizational scale. In 2008, New Scientist magazine ran a pair of alarming articles: “Will a Pandemic Bring Down Civilization?” and “Why the Demise of Civilization May Be Inevitable.” Bar-Yam was a key source. “What if the very nature of civilization means that ours, like all the others, is” ”destined to collapse sooner or later?” the latter article asked. “A few researchers have been making such claims for years. Disturbingly, recent insights from fields such as complexity theory suggest that they are right. It appears that once a society develops beyond a certain level of complexity it becomes increasingly fragile. Eventually, it reaches a point at which even a relatively minor disturbance can bring everything crashing down.”

[Richard Thompson · Rating 3 out of 5]

It's a Michael Lewis style book that focuses on the people who design trading strategies to succeed when disasters happen. Of course the god of this stuff is Nassim Taleb, who comes off in this book as being an even bigger jerk than he seems to be in his own books, but who is a smart and literate guy with some very good ideas who I'd love to hang out with. And then there is everybody else - Mark Spitznagel who got started as Taleb's partner and then continued to run hedge funds based on the Taleb black swan philosophy after Taleb got out of trading to devote his time to writing and academics, and then the guys who think that they can predict and perhaps avoid black swan events, in whom Mr. Patterson seems to have no faith, and then the rest of the world that thinks that the whole concept of investing to profit on disasters is a bunch of crap. I absolutely believe that investors systematically underestimate the risk of massively bad events. It's too much to contemplate, and too hard to go against the herd mentality. And many of us share a sense that if it all goes to hell then either the government will bail us out or it just won't matter if you made one last big successful bet as the curtain was falling because we'll all be in the crapper anyway. Perhaps there is a reasonble investing theory around the idea that you can bet on really bad events that are so bad that they seriously screw up all the standard models, but not so bad that they kill us all. I don't know. And then there is the issue of how ethical it is to make a killing when everyone else is being killed. The people in the black swan hedge fund business sell it as a risk mitigation strategy that is better than the standard theory of a diversified portfolio with 60% equities and 40% fixed income because they can give you the same downside protection with only 3% in cheap out of the money put options and allow you to put 97% into equities. Maybe. Investment theory is interesting enough to me that I read popular books like this, but it is essentially boring so I'll never spend enough time on it to feel confident in managing my own money. Let the pros handle it, even if the pros are charlatans.

[Hugh · Rating 3 out of 5]

This book is an addictive and interesting read, but isn't really what it claims to be. There isn't really a coherent thesis here, at least not one that's articulated by the publisher's summary, the subtitle or the endorsements on the cover.

It gets off to a rocky start -- the first 50 pages of the book seem kind of unclear about what's to come: is this another The Big Short: Inside the Doomsday Machine?

No. The core of this book is a profile of two guys: Nassim Nicholas Taleb and Mark Spitznagel. I've read several of Taleb's books and largely enjoyed them, and his Twitter persona is entertaining, if a bit cartoonish. Spitznagel's name was new to me.

The profile of these two is pretty good -- Taleb seems thoughtful and insightful, Spitznagel seems like a kind of obnoxious rich guy. The book retains its' Michael Lewis vibes for the first half, with fun anecdotes and tension. I learned a lot and enojyed doing it.

The second half dives into climate change, and it's jarring. We move well away from financial markets and trading, and kind of come back at a tangent involving insurance and the blockchain. While the climate activists are interesting, it feels like a different book. Taleb makes a return for some of it, and I could see the threads that the author was trying to pull on, but the second half of this book felt undercooked and out-of-place.

That's not to say it's bad! The second half of the book was interesting also! But it burned whatever momentum was built up by the first half, and I struggled to maintain interest because I was trying to understand how it related.

SBF shows up at the end, for about a page and a half, which was also bizarre. I wonder if this book went through a hurried rewrite in late 2022, and the author and editor didn't have time to weave everything together.

Anyway -- it's a good read -- just ignore everything on the outside of the book.

[David Kennedy · Rating 2 out of 5]

Terrible, about as formulaic as your 1980's daytime TV shows.
My second DNF of 2024... Just could not do it.

Every single chapter is the same thing.

- Start off by telling the antics of someone with a LOT of money.
- drag on and on about some mundane point about how our super-finance hero made so much money and was so much smarter vs everyone else.

Some of it is downright childish and rather pathetic.

CHAPTER 7
"The road shifted into a streaming gray blur as Didier Sornette, complexity theorist, econophysicist, and stock market visionary, raced furiously along a Los Angeles freeway on his Kawasaki Ninja ZX-12R motorcycle. It was 2006. The UCLA professor was pushing himself to the edge, hitting 100 miles an hour as he cruised past an 18-wheeler in a flash, bursting along the open highway and opening up the throttle, 125, 150…175 miles an hour….”

Excerpt From
Chaos Kings
Scott Patterson
This material may be protected by copyright."

Others use those roads as well, I'm pretty sure some mother taking her kids out for a ride would prefer not to be in an accident because some d*ckhead felt like being an immature jerk on the roads. There are tracks for this sort of thing where these people only hurt one another with their excessive speeds.. If they have money, why not go there?

Anyhow, we see the same formulaic approach in almost every single chapter:

CHAPTER 8
“Mark Spitznagel ripped down the steep incline of a ski slope on Whistler Mountain, his snowboard gliding over the fresh, deep powder. ”

Excerpt From
Chaos Kings
Scott Patterson
This material may be protected by copyright.

....

I wonder, what will chapter 10 start out with??

[Man Ha · Rating 5 out of 5]

Chaos kings describe all the chaotic events in the human world, from Donald Trump presidency to COVID until the collapse of the FTX scandals. Nobody could predict what was coming. However, analysts like Professor Taleb, Spitznagel, and the "Dragon King" Sornette had their own ways of dealing with the stock market's volatility. There were the Ukraine war and natural disasters. Those models might take time to see the effectiveness of the market behaviors. When Brexit happened, the market changed again. It ended up depending on human reaction to all the events to change the behavior of the market. However, it took a little longer to monitor the market due to the pandemic because of the cessation of global trading and the logistics impact. Analysts know how to cope with situations very well, ideally. In the macro scale reality, traders or humans have to diversify themselves and money into multiple scenarios. Fat Tail distribution or Dragon King model might be able to predict. Systematic errors (humans refusing the vaccine, WWIII, and BREXIT) might happen anytime, which could break those predictions in just a second. It could be chaos at some points, but splitting it up into small components to fix it with phases will suppress that chaos. The long-term example of climate change or natural preservation has been discussed decades after decades, but telling humans to work together is a big topic to solve global problems. We ended up having SpaceX or Blue Origin move into another planet to have their own rules.

[Jan Hoekman · Rating 4 out of 5]

Good book. I expected a larger variety of characters in but it's predominantly about Talebs ideas put into practice by Taleb himself and perfected by Spitznagel.
That however is a captivating story, as any brand-new and ultimately successful trading strategy is (with the struggles along the way).

I especially enjoyed the long chapters on the psychological toll of trading, and how Spitznagel had to learn early to "love to lose", because humans just fundamentally hate to (as Kahnemann has wonderfully shown) and the importance to "panic early" when faced with a potentially ruinous crisis. Interesting that despite the whole Black Swan idea being Talebs crowning intellectual achievement he actually couldn't himself handle the day-to-day of trading and slowly bleeding money, tying his own mental state to the PnL.

Some other excellent parts on the flaws of Modern Portfolio Theory, the familiar but very true critique of much of Wall Street having no value add, the idea of the Precautionary Principle and how it applies to ideas far beyond finance, like climate change....

here the books veers a bit of course in the second part by going very deep into climate change. Some well written passages and great ideas, and of vast importance no doubt, but feeling a bit disjointed from the beginning of the book, other than by the link of them being one form of "extreme events" from which Spitnagel/Taleb/Universa can make hay.

[Shan P S · Rating 5 out of 5]

Very interesting book about people who try to measure catastrophic, rare risks and profit from it.
There are well know persons covered in the book - Black Swan author Nassim Taleb and Mark Spitznagel, and others who may be less well known - like Didier Sornette, for example.

The first half of the book deals with stock market/financial market risks, which are relatable to investors. There have been several market crashes in the past and these seem to be plausible risks. The book covers how traders like Spitznagel handled the crashes of 2001, 2008, etc.

The book also gives an origin story (sort of biography) for Nassim Taleb, who has written famous books, but very little is know about how he came to these ideas. I have always been curious to know the back story of how Taleb got the ideas covered in his books. This book was a great source.

The first part of the book also covers the recent Covid-19 pandemic and how Taleb and others reacted to this emerging risk as events were happening.

The second part of the book deals with risks of climate change, which are hard to explain since we do not see a direct link...yet.
Simple and easy to read, with sources for further reading, if interested. Definitely a must read for everyone, not just investors. It will help readers to be aware of the precautionary principle and be more aware of the unknown risks that may occur.

[Piinhuann Chew · Rating 4 out of 5]

Some highlights:

a) The part where it berates the Modern Portfolio Theory in finance

b) Spitznagel repetitively emphasised to his clients that by putting a small part of their money into Universa or Empirica's put option fund, the clients now could afford to put more money into risky stocks...gaining the best of both worlds

c) The dispute between NNT vs Cliff Asness (billion dollar hedge fund owner)

d) A big retirement/pension fund changing management and the new management decided to withdraw their money from Universa (Spitnagel's fund) then fared very badly in the next crash

e) parametric insurance, a new class of insurance designed to insure tail risk and the payout is automatic based on blockchain based on a tail Risk index (something called VUCA or Ryskex? cant rmb). He managed to sell quite a bit of that insurance to alot of corporations which are interested to insure tail risks

f) The author mentioned 2 funds (Malachite Capital & Allianz Structure Alpha) that did the opposite of what Spitznagel and Taleb's Universa does, then went broke

Universa bought alot of cheap put options, while Malachite & Allianz Structure Alpha sold alot of put options

[Laimis · Rating 5 out of 5]

It's an uncomfortable read, no doubt. COVID, the collapse of the human race, catastrophes, and similar topics dominate this book. If you can detach and remove the emotions while reading it, you might enjoy it, it really has some fascinating parts in it. If you are a trader, you will find plenty to love and think through.

I loved it despite the grim topics the book discuss and mentions. I found it super fascinating to see a very small group of people refuse to drink Wall Street koolaid and set their own path when it came to risk management, and win. They did it unconventionally and thrived.

Also you will get some good insight into how Universa was born and more insight into Mark Spitznagel. Taleb's name usually dominates when it comes to Universa but Mark is the one that created the fund and runs it. I actually read his book, the DAO of Capital, and no idea who he was and found the book SUPER strange. This book actually talks about it a little bit and warns about the book as to how "weird" it is. Mark apparently wrote a second book that is much more readable, I will have to pick it up and see.

[Leander Horres]

At the beginning, the book is exciting and captivates with anecdotes by Nassim Taleb and Mark Spitznagel. I find the reasoning behind the Black Swan theory and Universa particularly impressive. It's fascinating how, despite their different characters, they both arrived at the same ideas and were willing to test their theoretical concepts in the real world.

Unfortunately, the book loses momentum after this story. It drifts into an enumeration of crises of the last decades and describes the various courses of action of crash investors. After a while, the considerations become repetitive, which increasingly flattens the arc of suspense. After about a third of the book, the instructive part is over.

The last part is particularly weak. Although climate change and investments are an exciting topic, the book lacks practical examples that could make the topic more tangible. It feels as if this section was merely meant to satisfy the need for topicality and complete the obligatory 300 pages.

[Szymon Kulec · Rating 3 out of 5]

3 out of 5, I liked it

How Bill Ackman, Taleb and Spitznagel gained a lot during market crashes? This is the top question answered by this book. It nicely covers various investments and does well by putting them on a time's arrow. This, and coverage of the relation between Taleb & Spitz, make it unique. It also nicely separates facts from thoughts of T&S covered in their books. If you, like me, read a lot of Taleb, you might find this book a good factual complementary to his work.

For some strange reason, the author put climate related stories in this book. Yes, this is one of the best places to apply the Precautionary Principle that Taleb co-authored, but the climate part (almost 1/3) is terribly boring, repetitive and floods the reader with a lot of facts that can be omitted without loosing any context. Even if you add CO2 market emission, it still does not make it aligned with the rest.

[Dan Watts · Rating 4 out of 5]

I've tried reading a couple of books by Nassim Nicholas Taleb, abandoning them because his ideas failed to hold my interest when presented in the abstract. It turns out that a book about Taleb is a more engaging read, demonstrating how his ideas are applied in the world, as well as tidbits about his colorful early life and career.

Only about half this book is about Taleb, the rest covering the founder of his hedge fund and various other people that work in his area of expertise, in and outside the world of finance. The sections about compensating for risk when investing were fascinating, as were many of the sections about how risk is accounted for, or fails to be accounted for, in issues like climate change and pandemics. On the other hand, I didn't get much out of the chapters about Didier Sornette and his Dragon Kings theory, probably because the complicated model and the mathematics behind it is difficult to explain to a layman.

[Matthew Keck · Rating 4 out of 5]

This book is a good introduction to the fat tail/risk practitioner crowd. Although this isn't a replacement for reading Taleb's work, this serves as an accessible book that summarizes somewhat recent news and the role the "fat tail" folks play in these realms. This is very much a "Michael Lewis"-esque non-fiction book, that's the expectation to enter with.

Always enjoy hearing about these folks, but as a person that's read/listened to all of Taleb's books and recently reread Spitznagel's "Dao of Capital", there wasn't a lot new here. I would still recommend this book to virtually everyone that reads political/economic/current events non-fiction books. This is a high recommendation considering that most accessible books about economics/current events are either "noise", self-righteous moralizing, or "anti-knowledge".

[Stefan Wennin · Rating 3 out of 5]

Interesting read focused on the genesis and evolution of Nasim Taleb and Evan Spitznagel’s, amongst others, trading strategy, which is fixated on protecting assets and capitalizing during seemingly unpredictable and drastic market downturns, coined “black swan events” by Taleb. In the book, author Scott Patterson does an admirable job of exploring the protagonist’s influential childhood experiences, from which an aversion to risk was borne.

While overall an enjoyable read, the book does drag in certain chapters - particularly towards the tail end as Patterson’s legitimate yet incessant focus on climate-related black swan events straddles the thin line of alluring urgency and boring redundancy.

Nonetheless, the book’s concepts are fascinating. Would recommend to anyone interested in finance and the markets.

[Chris Liberty · Rating 5 out of 5]

Chaos Kings, by Scott Patterson—a Wall Street Journal reporter and author of other books I’ve read: "The Quants" and "Dark Pools"—delves into the strategies hedge funds employ to capitalize on market disruptions. Patterson sketches a vivid contrast between two schools of thought. On the one hand, there's Nassim Taleb and Mark Spitznagel, staunch believers that massive financial upheavals are unforeseeable and advocate for the purchase of deep out-of-the-money put contracts as the sole defense. On the opposite end is Didier Sornette (and others), who contend that impending chaos can be predicted. Intriguingly, there's an element of truth and error in both perspectives. As a reader familiar with most of Taleb's writings, this book informed a deeper understanding of his combative personality. If you are a nonfiction finance junkie, I highly recommend “Chaos Kings.”