The markets are based on discounting physical reality. In a world where it's all numbers and nothing else matters, the bias becomes institutionalised and catastrophic.

I don't think Taleb makes that point, because he seems to have a binary view of physical reality - either it's irrelevant or it's catastrophic.

What depresses me is that financial modelling which takes into account physical reality - whether it's sustainability, or resource limitations, or climate change - is punished by the markets for being (ironically) 'unrealistic.'

In fact it's the woo-woo modelling which is pie in the sky, and will always - by definition - suffer a catastrophic collision with the real world when real world conditions change.

This shouldn't be confused with physical processes - like earthquakes - where we have very poor models, and/or very limited data. We have perfectly good models for many of the processes that cause financial breakdowns.

It's not that the maths doesn't work, but that the models and predictions are ignored for political reasons.