Wednesday, March 18, 2009

Being Nassim Nicholas Taleb VIII

Nassim Nicholas Taleb addresses some very important issues in an interview with CNBC. I have written more than a few posts on this brilliant thinker. His book, The Black Swan, is the single most important book that I read last year followed by Enough by
John Bogle.

In this interview Taleb and Nouriel Roubini make some great points. The only problem is that the newscasters' questions and responses are glib and idiotic. It's as if they want to tag team and simply hear themselves speak, repeating "witty" dimwit ditties.

Taleb and Roubini make their points nonetheless.



Here are some of Taleb's highlights:

*Those who did not see the crisis coming in government should be out of there.
*Those responsible should not only be punished but removed from office.
*Bernanke did not see the risk coming.
*Bernanke should not be the Fed Chairman.
*Bankers who got us here are still around and we're giving them more money.
*Unless we do something drastic we are not going to pull out of this.
*The responsible people, need only be punished, but out of there.
*The dependence on debt needs to be eliminated.
*You cannot trust someone making a bonus and handling risks.
*Society pays for this risk. This can't be.
*We need to de-leverage massively.
*Build robustness by eliminating debt.
*Change the culture, maybe change the system too.
*This class of people, i.e., Geithner et al, can't manage this problem.
*Geithner et al have failed before and they will fail again.

Nassim Nicholas Taleb and Nouriel Roubini should be advising President Obama.

What do you think?

15 comments:

allen said...

"Bernanke should not be the Fed Chairman"

Have you seen the 60 minutes profile?

Has Taleb ever been in a position as complex as the job of Fed Chairman?
If not, he's just taking pot shots.

judith ellis said...

"Has Taleb ever been in a position as complex as the job of Fed Chairman? If not, he's just taking pot shots."

So, by this statement, are you implying that one would have to have been in such a position in order to understand the complexity of the problems we face? I disagree.

This seems to be why Bernanke stayed on and everyone in Washington agreed that Geithner would be best person for Treasury Secretary in our current financial crisis despite tax issues.

I don't know if Taleb would even want this job, but I strongly disagree with the premise of your statement above. Have you read anything my Taleb and have you seen other interviews?

By the way, many believe that the Federal Reserve should be disbanded.

I did not see the 60 Minutes profile in its entirety. But I'll check it out, probably today.

"Pot shots" is a cheap shot, I'd say, allen.

allen said...

"This seems to be why Bernanke stayed on and everyone in Washington agreed that Geithner would be best person for Treasury Secretary in our current financial crisis despite tax issues"

Geithner is Obama's choice. Attcking Obama is the same as attacking Obama. Only 50 or so days have passed -
I voted for Obama because I felt he had good judgment - let him do his job - I'm tired of people on the sidelines (not you - but opinion makers or 'wise men' I did not vote for stopping by the networks for coffee and blessing us with their wisdom.)
I just don't want all this public anger to make it impossible for the admisitration to be able to do what is actually needed to get us out of the economic downturn. The bonuses did not anger me. I was angry the day I was listening to NPR explaining what credit default swaps were. That upset me because I could not believe that anyone could think it was a sane idea. Credit default swaps are at the core of the finantial meltdown and at the core of AIG's problems. Not only did it anger me, it was frightening because I was sure the goverment was there to protect us from such stupidity. The bonuses are unfair and unjust, but they will not be detrimental to our economic situation unless they enrage the public so rational thought goes out the window.

judith ellis said...

In a democracy I think it is very important that the voices of the people be heard. As anybody who has ever read anything that I have ever written wells know, I am a BIG supporter of the President. He probably could not have a bigger supporter. But I was not, however, never too keen on Geithner. I did not appreciate the tax issue at all and I also had some general questions regarding his time as President of the New York Fed. I have wondered about his role in all this being so close to the situation, not to mention the physical proximity.

My concerns of Geithner, however, were somewhat allayed because of my confidence in the President. I had not written of Geithner expressly because of my confidence in President Obama. But as we progress, it would seem better to change course sooner rather than latter if the change includes those like Taleb and Roubini who warned of the impending financial collapse and have clear solutions in moving forward.

I also hear your concern with the hampering of the Obama administration to do what "we the people" elected him to do: bring change to Washington. I also am very aware that in Washington systemic change is needed and whether President Obama is in office 4 or 8 years, change will be a slow process. What's most important is that it sincerely beings NOW. There seems to be two necessary tracks: stabilization now and systemic change later.

Regarding credit default swaps, I have been looking at this for some time now and there is no doubt about it that they are by and large a large reason that we are here. The SEC and Federal Reserve have both been sleep at the switch and I am afraid that a great many senators and representatives were co-conspirators for a whole host of reasons, campaign contributions, not withstanding. Campaign reform is still necessary; the lack of such reform negatively affects democracy.

allen said...

I probably worry a little too much.
All through the campaign whenever Obama was challenged (Rev Wright, when Obama was caught on audio tape talking about rural people and thier guns and religion, etc) I was afraid he'd fall behind and loose. He fought his way back and became even stronger. This situation might pan out the same way.

judith ellis said...

He is some fighter. If he could be easily beaten he would have most certainly been so by now. Know that your concern is also mine and millions upon millions of others. I think we will win. :-)

allen said...

Why is Geithner in Tresury?
Obama is a student of history.
I bet is has something to do with the following wikipedia entry about
Joe Kennedy (JFK's Dad)

"Roosevelt rewarded him with an appointment as the inaugural Chairman of the U.S. Securities and Exchange Commission (SEC). Kennedy had hoped for a Cabinet post, such as Treasury. After Franklin Roosevelt called Joe to Washington to clean up the Securities and Exchange Commission, somebody asked F.D.R. why he had tapped such a crook. "Takes one to catch one," replied Roosevelt"

judith ellis said...

Thanks for that, allen. I laughed aloud, but there may be some truth to it. I would, however, be of the opinion that such crooks need not be around. Period. I also believe that there are many political moves that one must make in such a position. But utimately if the President does not do what he said he would do, i.e., bring change to Washington or at least begin the process so that it is well on its way, the American people will be unforgiving--rightfully so. But this change does not rest on the President's shoulders alone. If he fails, it will indeed be our failure too.

dave wheeler said...

"Those who did not see the crisis coming in government should be out of there." Yeah...

"Change the culture, maybe change the system too."...Ya think?

Once inaugurated one is accountable. You must stand by your decisions and be judged not by what you have said but by what you do and the results that you get.

I listened to discussion on a local radio show with a young man today who said vetrans who opposed the administrations "trial balloon" plan to make their private insurance pay for their service connected disabilities made him angry because "Republicans" just criticized and didn't have a plan of their own. I wrote a Letter to the Editor this evening to reply. I pointed out that some of the folks who immediately opposed this "idea" were Democrats like Patty Murray of Washington. Disagreement need not be partisan. Bad policy is bad policy. Why should those with "service connected" issues risk losing their or their families coverage or by the rest of us having to pay higher premiums because those costs will just get passed along to the rest of us some how or in some way. Why is this even being considered? To cut costs in some areas to pay for the stimulus and spending packages that have already been past and are being enacted.

Real change will come we stop funding programs that simply do not work. It will occur when we change the system too and who knows how much cash that will saved by eliminating the waste, inefficiencies and incompetence management of existing programs.

Great topic Judith...thanks!

judith ellis said...

"Real change will come we stop funding programs that simply do not work. It will occur when we change the system too and who knows how much cash that will saved by eliminating the waste, inefficiencies and incompetence management of existing programs."

This is a great statement, Dave. You also make a good point about policy. Who cares who makes great policy so as long as it works? (Of course, those who care for such are vested politicians who care more about themselves than their constituents.)

Our care should, however, be focused on the "inefficiencies and management incompetence" that you point out. There is also something to be said for the sheer necessity of looking at all programs anew. A program that worked a decade ago may not work now. This is as it should be; time brings about changes.

We have a bad habit of making policy and sticking by them even thought everything around them changes. We are often inflexible and inadaptable to change. I think this is our greater problem as well as our often inability to see the whole of situation and our inclination to go to far to the right or left at any time.

Speaking of accountability, I do not think the President wishes to eschew this responsibility in the least. There are so many issues facing the country that he alone is not the only one that needs to be held accountable and should be responsible; this includes Congress and the American people. We should not take a seat back and look to see if another will be accountable or responsible. What are we doing?

Thanks for your comment, Dave. Thanks also for your activism. It matters and heartens.

dave wheeler said...

Judith,

You are far to kind. Also please know I didn't mean to imply this President is somehow personally trying to escape accountability at all. He really can't. He earned my vote the last time and he will have to earn it again as he will have to do with millions of other citizens. I agree 10000 percent that all elected representatives be they federal, state, municipal be held accountable. They work for us and need to be reminded of that fact.

It is I who should be thanking you for my "activism". Your support and encouragement have been invaluable and I still have that vision of a non-profit's building with a tribute to a very special friend and her mother displayed in it to symbolize what parents can accomplish. I av told you you're the best, right?

judith ellis said...

Yes, thanks, Dave much appreciated. :-) I also think you're pretty super! Your words are compassionate, thoughtful and hard-hitting.

While I agree that politicians are put into office by us, I am also not aligned with the pitch fork mentality often associated with the "you work for me" mindset. As you well know, in any employee and management/leadership situation there is give and take and an ongoing relationship of role reversals.

But I do think I understand your point and agree that many politicians are self-absorbed and get to Washington and often forget why they are there—to make policy for the people and not build careers for themselves.

Career politicians were probably never conceived by our Founding Fathers. They probably intended for legislators to legislate and then return to the communities to live under the legislation they initiated or helped to pass. Term limits for Congress may not be a bad idea.

dave wheeler said...

Judith,

A "pitchfork" mentality...like the concept and in the case of some...the visual! Term limits is a terrific concept and I have spoken to some folks recently who also speak of this, one who thought a single six year term for our President made sense to them. For me I would like to see Congressional terms extended to four years . I don't know if I mentioned I was going to be working on a State Senate campaign for a 2010 and the candidate I'm working for was a term limited state representative. Our legislature has been trying to overcome, override or otherwise look for loopholes in our term limits laws but to no avail.

It would indeed be terrific to get the founding fathers take on our current political system.

judith ellis said...

Yes, Dave, you have mentioned that you would be working on a State Senate Campaign for 2010. All the best with that. I have also worked very closely with a a Michigan Senate Campaign and it was a great experience. I also supported a brother's local campaign when I was in college and this was great fun.

Regarding our Founding Father's thought of our current politics, it is probably not much different from the politics of their time. In fact, politics may have been more brutal then. But we can get pretty good ideas from their writings and those of others.

I have faith in our ability to be better still. We must insist on change. We must demand it. Frederick Douglass said "power does not concede without a fight." I believe him.

judith ellis said...

Correction: The Frederick Douglass quotes is actually: "Power does not concede with a demand." I think it was President Barack who said "power not concede with a fight." It is an obvious take on Douglass' quote. Let's hope that he holds true to this, though he's in for a monumental fight. The greater question may be are the American people ready to fight?