Saturday, December 13, 2008

Being Nassim Nicholas Taleb V

This is a great interview from a most brilliant thinker, Nassim Nicholas Taleb, one whose thoughts are full and flexible.

The beauty of Taleb's thoughts is his vast knowledge of history and the incredible insight of the future. This allows for a particular immediacy of now.

Capitalism and economics are in vast contexts.

The interview can be seen here.


dave wheeler said...

What an excellent interview and interesting perspective. I found the analysis of the changes in the banking industry to be particularly profound..."you can't privatize the gains and subsidize the losses".

Sounds like another book to add to the reading list! Thanks Judith!

judith ellis said...

I'm SO glad you like the interview, Dave! I thought it was absolutely brilliant! It should be required viewing for anyone in the financial industry and students in many fields.

TALEB IS BRILLIANT! He is unlike many others, as he sees things through large contexts afforded by both being and doing. This guy obviously reads a large array of material and lives in the now. He is a great philosophical thinker in this regard.

The Black Swan is a great book without doubt! But as Taleb says only four pages deal with the turkey economic theory. It’s a wonderful book of history and philosophy coupled with the immediacy of NOW! TBS deals with thought processes which affects why we do what we do when we do it. I include it in my top 10 for sure; it probably rounds out my top 5 actually.

While watching the interview, I took notes. Here are my favorite quotes:

1)"Never in the history of the world have we had a situation of such complexity coupled with such ignorance at the top!" (I love his narrative fallacy. It probably has something to do with arrogance and the lack of humility.) We make up things to prove improper hypothesis all the time in our daily lives. Loved the analogy of medieval doctors and present economists. The narrative fallacy probably has some root in excessive pride in position and the lack of humility. We don’t know everything.)
2) "Never in the history of the world have we had a situation of such complexity coupled with such ignorance at the top."
3) "He (Bernanke) was exactly the turkey." (LOL!LOL! LOL!)
4) "The fragility comes from the structure, not a particular component of the structure." (How true is this for so many things in our lives? We fix the component but the structures are wrong. Nothing changes.)
5) "I am an empiricist."
6) "Metrics by the economic establishment do not measure risks properly."
7) "You learn as a trader how to cook books. Analysts are, in fact, running your company...You learn as a trader that if someone gives you a metric you can game it."
8) "Markets are stupid. Markets are fooled by numbers." (COOKED NUMBERS: BOOM AND BUST!)
9) "Capitalism Two will be very different: Banks will be utility companies because we no longer will tolerate to privatize gains and socialize the losses any more...If you and I are going to bear the losses of bankers we don't want to pay five or six or seven years and bail them out."
10) "Less debt investments and more investments in upside...Now we have almost no upside for the downside and no downside for the upside. We'll have more symmetry."
11) "Debt needs to be reduced." (My partner and I developed this elegant model of how to reduce debt as we bought many foreclosed properties with cash and dealt with putting so many people back into homes, all of which were professionals with good salary, but strapped with debt. Perhaps we'll send it to Taleb for review."


I loved Charlie Rose's questions too, some of which I literally laughed out loud:

"Why are you so on Bernanke’s case?"
"What will be the manifestation of the badness?"

While the questions themselves may not be funny, Rose's sincerity and sense of WOW was! The beauty is that there are those out there with a firm grip on what has happened and what needs to happen. Taleb is obviously one of these!

Dave Wheeler said...

I would have to learn a great deal on the subjects of economics and finance just to earn the right to say I was ignorant on the topics. But Mr. Taleb (and you from your notes!)have a way of breaking it down into simple concepts. The idea that it is the overall structure, not the individual components, is something that is seen in many organizations. Treating the the wrong symptoms is not going to effectively "cure" the disease is in fact a very true statement. The same with metrics and their ability to be manipulated and to reflect a less than realistic picture health and well being of the structure. Cash is king and your model of enabling folks to keep roof over their heads just further validates the compassionate professionalism that is you.

I have been dealing with a case of viral pneumonia over the past month and have had an opportunity to read a great deal. I did get "The Black Swan" today and I am looking forward to learning more about Mr. Taleb!

Anonymous said...

I liked the Taleb interview.
I like the whole Capitalism 2 idea
he talked about. He also referrred the stock market as a kind of a Ponzi scheme, made me feel good, because I thought it was much like that myself. The Capitalism 2 idea is great because dentists or carpenters would make money based on what they actually do vs what they invest in. Houses should not be investments. They should be what we live in. If something has value, we should be able to hold it or at least point to it.


judith ellis said...

Dave - I'm sure you will enjoy the book! Taleb's writing style is most certainly erudite, but he is equally as readable and understandable. The two need not be opposites at all. In fact, great writers and thinkers are able to break complex things down to the barest of essence. I'd be interested to know what you think of the book as you read it! Take care of yourself, Dave.

judith ellis said...

Zed - It's good to see you here. Welcome. Yes! The Capitalism 2 notion really grabbed me in a powerful way. It seems more like a system of meritocracy. It will probably reduce schemes and require us to return to work that matter, the kind that includes relationships with others and producing products and services of value. We will probably need to spend more wisely without a system of debt. Regarding relationships, if you look at trends in technology the polar opposite seems so. But I have never bought the idea that technology will supplant face to face relationships of all kind.