04/24/2023
Wall Street Journal reporter Patterson (Dark Pools) delivers an illuminating investigation into those who profit from anticipating crises. Patterson outlines the two prevailing camps of catastrophe forecasters: there are those who follow trader Nassim Nicholas Taleb’s “Black Swan” theory, which posits that world-changing events are often entirely unpredictable, and then there are those who follow French physicist Didier Sornette’s “Dragon King” theory, which holds that events can be predicted if one has the right inputs. The author explains how Taleb positions himself to profit from sudden market crashes by purchasing put options (an agreement that obligates the option seller to buy back assets at a predetermined price should the option buyer decide to sell), which usually result in minor losses but have huge payoffs during market plunges. Sharp profiles of Taleb, Sornette, and other traders leaven the complicated financial discussions; for example, Patterson describes Sornette as a strong-willed risk-taker whose idiosyncratic thinking led him to predict the housing bubble of the mid-aughts. Additionally, the author has a knack for translating complicated financial maneuvers into easily comprehensible terms (he likens put options to “fire insurance that pays off triple the value of your mortgage... if your home burns”). Detailed yet accessible, this will appeal to fans of Michael Lewis’s The Big Short. (June)
Rock-star status is reserved for a clique who have made storm-chasing in stocks and bonds into something between an art and a science, and an extraordinarily lucrative one at that. They are the subject of Chaos Kings, a new book by Scott Patterson, who casts an engaging and accessible light on what makes these oddball savants tick, and how they make fortunes from disaster.”
—Financial Times
“A closely observed chronicle of the storm-chasing edgelords of finance and the critics with whom they clash…Even those unfamiliar with, or uninterested in, the oscillations of the stock market may find themselves gripped by Patterson’s account.”
—The New York Times
“In Chaos Kings, the indefatigable Scott Patterson has done it again: delivered a riveting account of Wall Street mavericks whose unconventional understanding of risk has netted them a fortune and us a fascinating account of how they did it. The unlikely partnership between Mark Spitznagel and Nassim Taleb has made them rich, saved their clients from financial calamity and, under Patterson's deft pen, produced an epic page turner.”
—William D. Cohan, New York Times bestselling author of Power Failure, Money and Power, and House of Cards
“Wall Street Journal stalwart Patterson continues his explorations of high finance with a clutch of contrarian risk takers... Deft, accessible analysis and guidance.”
—Kirkus Reviews (starred review)
“An illuminating investigation…The author has a knack for translating complicated financial maneuvers into easily comprehensible terms…Detailed yet accessible, this will appeal to fans of Michael Lewis’s The Big Short.”
—Publishers Weekly
“Scott Patterson's Chaos Kings is an extraordinary exploration of cutting-edge efforts to understand the manifold and interconnected risks slamming civilization at an alarming rate. It's a critical read for anyone with an interest in what's coming next and how to prepare for it, financially and otherwise. Scott has an uncanny knack for diving into the fascinating convergence of technology and investing, so I'm always excited to see what he's discovering.”
—Bradley Hope, New York Times bestselling co-author of Billion Dollar Whale and co-founder of Project Brazen
“Financial markets covet stability; they don’t like surprises. In our new age of crisis, Scott Patterson convincingly recounts how a unique type of trader has learned to embrace the disruptions and make a lot of money doing so. Combining risk theory, finance, and portraits of some of the most interesting billionaires of doom, Patterson takes us on a disturbing tour of what could come tumbling down. But he also provides a detailed road map showing average citizens how to steer past catastrophe. You’ll be left wondering whether these Chaos Kings are brilliant, opportunistic, visionary, or even loathsome. In Patterson’s lively account, you’ll definitely find them fascinating.”
—Juliette Kayyem, former Assistant Secretary of the Department of Homeland Security, and author of The Devil Never Sleeps: Learning to Live in an Age of Disasters
“We live in a world of pandemics, climate change, war, and unstable institutions. Scott Patterson’s fascinating Chaos Kings is a provocative look at those placing big bets who believe they have tamed the financial risk whipped up by these unruly beasts. It holds perceptive insights for anyone who lives—or invests—in our modern uncertain world.”
—Russell Gold, author of Superpower and The Boom
“Fast paced like a thriller but, also, thought-provoking in its willingness to show us the range of possible catastrophes, Chaos Kings tracks the adventures of contrarian investors who, rather than hide from chaos and confusion, seek it out. Their reward in many cases: a fortune. This book teems with great stories as well as market insights that you won’t get from conventional investors.”
—Aaron Brown, formerly, Chief Risk Manager at AQR Capital Management, and author of The Poker Face of Wall Street and Red-Blooded Risk
“The world is an increasingly unstable place, threatening to go off the rails at any time. This chaos is devastating to many, but a boon to a few who are cashing in on it. Read this engaging book to learn about who they are and how they do it.”
—Mark Zandi, chief economist of Moody’s Analytics and author of Financial Shock and Paying the Price
★ 2023-03-29
Wall Street Journal stalwart Patterson continues his explorations of high finance with a clutch of contrarian risk takers.
Playing the market is part art, part science, and part leap of faith. Investor and statistician Nassim Nicholas Taleb, who stands at the center of Patterson’s latest, following The Quants and Dark Pools, takes an alternate view. He assumes that the world is a series of rare black swan events (“extreme events no one could have predicted…like a sudden market crash”), and he further urges clients to think that the conventional wisdom of investing—diversified portfolio, trying to time the market—is a fool’s game. Come the pandemic, and the contrary wisdom of Taleb and company, codified as “Panic now—panic early,” proved its use. While a single “black swan” event might be survivable, a cluster of them, including disease, financial closures, supply-chain issues, inflation, and more, can break the bank. Taleb and like-minded investors bet on things going wrong and planning for worst-case scenarios. Although Taleb’s black-swan protection protocols were widely if incompletely imitated, they were not universally accepted. Patterson highlights the thought of “complexity theorist” Didier Sornette, who argues that Taleb’s notion that the future is hard, if not impossible, to predict is unnecessarily dark and who developed an alternate theory exemplified by “dragon kings” rather than black swans. No matter which image you follow, the facts are incontrovertible: Set a multipartite catastrophe such as the pandemic in motion, and huge amounts of wealth will disappear, as with one popular fund that lost 97% practically overnight, “a stark real-world example of gambler’s ruin.” If anything, Taleb, by Patterson’s account, is more pessimistic than ever, warning that climate change is going to yield a world that will make us long for the present. Throughout, the author provides deft, accessible analysis and guidance.
Complex economic and scientific theories lucidly rendered, even if the resulting picture is unremittingly gloomy.
