Dr. Alan O'Sullivan

So trying to look around corners as such.

Naive diversification is this diversification which says that we think we're diversified like in 2008, but really all we have is a collection or a basket of different assets that fall together during a stressed environment.

And we need to be a bit more thoughtful, I suppose, in terms of how we build portfolios.

We talked about fat tails.

So what is a fat tail?

So if you're looking at a distribution of outcomes, so-called normal distribution, but what we know in life, in markets, in everything we do,

It isn't normal.

It's random.

It is dynamic.

It's non-normal.

So fat tails talk about the extreme.

We say fat tail is where you get an extreme event, but it has a disproportionate impact on the outcome.

So famously, Nassim Taleb, the author of The Black Swan, talked about fat

these black swans and essentially these are these fat tail events.

Like 9-11 perhaps could be described as a fat tail event.

Two planes hitting two tall buildings.

In terms of averages, this was Sebastian's most important thing.

So this is part two.

We're going to look into why over-reliance on the average can be really dangerous.

Especially when we look at all the investment literature says