Ten principles for a Black Swan-proof world By Nassim Nicholas Taleb Published: April 7 2009 20:02 | Last updated: April 7 2009 20:02 1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest. 2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal. 3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean. 4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards. 5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious. 6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists. 7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them. 8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab. 9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control). 10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties. Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news. In other words, a place more resistant to black swans. The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable
Agree with all 10 points.
I do too.
I do to. However, I think he wrote an FT article a few months back, putting some of the blame on CFAI for teaching/promoting bad, out-dated financial concepts…( I could be mis-stating some of his points…)
> 8. Do not give an addict more drugs if he has > withdrawal pains. Using leverage to cure the > problems of too much leverage is not homeopathy, > it is denial. The debt crisis is not a temporary > problem, it is a structural one. We need rehab. > 1000% agree!
- -100000000000000000000000000000000000000000000
gaffano Wrote: ------------------------------------------------------- > I do to. However, I think he wrote an FT article a > few months back, putting some of the blame on CFAI > for teaching/promoting bad, out-dated financial > concepts…( I could be mis-stating some of his > points…) I think he includes CFAI under #3…
gaffano Wrote: ------------------------------------------------------- > I do to. However, I think he wrote an FT article a > few months back, putting some of the blame on CFAI > for teaching/promoting bad, out-dated financial > concepts…( I could be mis-stating some of his > points…) Yep, it was also in the FT and was scathing. though I agree with him, especially when reading this 50+ year old view of Economics in L2…
gaffano Wrote: ------------------------------------------------------- > Ten principles for a Black Swan-proof world > By Nassim Nicholas Taleb > > Published: April 7 2009 20:02 | Last updated: > April 7 2009 20:02 > > 1. What is fragile should break early while it is > still small. Nothing should ever become too big to > fail. Evolution in economic life helps those with > the maximum amount of hidden risks – and hence the > most fragile – become the biggest. > > 2. No socialisation of losses and privatisation of > gains. Whatever may need to be bailed out should > be nationalised; whatever does not need a bail-out > should be free, small and risk-bearing. We have > managed to combine the worst of capitalism and > socialism. In France in the 1980s, the socialists > took over the banks. In the US in the 2000s, the > banks took over the government. This is surreal. > > 3. People who were driving a school bus > blindfolded (and crashed it) should never be given > a new bus. The economics establishment > (universities, regulators, central bankers, > government officials, various organisations > staffed with economists) lost its legitimacy with > the failure of the system. It is irresponsible and > foolish to put our trust in the ability of such > experts to get us out of this mess. Instead, find > the smart people whose hands are clean. > > 4. Do not let someone making an “incentive” bonus > manage a nuclear plant – or your financial risks. > Odds are he would cut every corner on safety to > show “profits” while claiming to be > “conservative”. Bonuses do not accommodate the > hidden risks of blow-ups. It is the asymmetry of > the bonus system that got us here. No incentives > without disincentives: capitalism is about rewards > and punishments, not just rewards. > > 5. Counter-balance complexity with simplicity. > Complexity from globalisation and highly networked > economic life needs to be countered by simplicity > in financial products. The complex economy is > already a form of leverage: the leverage of > efficiency. Such systems survive thanks to slack > and redundancy; adding debt produces wild and > dangerous gyrations and leaves no room for error. > Capitalism cannot avoid fads and bubbles: equity > bubbles (as in 2000) have proved to be mild; debt > bubbles are vicious. > > 6. Do not give children sticks of dynamite, even > if they come with a warning . Complex derivatives > need to be banned because nobody understands them > and few are rational enough to know it. Citizens > must be protected from themselves, from bankers > selling them “hedging” products, and from gullible > regulators who listen to economic theorists. > > 7. Only Ponzi schemes should depend on confidence. > Governments should never need to “restore > confidence”. Cascading rumours are a product of > complex systems. Governments cannot stop the > rumours. Simply, we need to be in a position to > shrug off rumours, be robust in the face of them. > > 8. Do not give an addict more drugs if he has > withdrawal pains. Using leverage to cure the > problems of too much leverage is not homeopathy, > it is denial. The debt crisis is not a temporary > problem, it is a structural one. We need rehab. > > 9. Citizens should not depend on financial assets > or fallible “expert” advice for their retirement. > Economic life should be definancialised. We should > learn not to use markets as storehouses of value: > they do not harbour the certainties that normal > citizens require. Citizens should experience > anxiety about their own businesses (which they > control), not their investments (which they do not > control). > > 10. Make an omelette with the broken eggs. > Finally, this crisis cannot be fixed with > makeshift repairs, no more than a boat with a > rotten hull can be fixed with ad-hoc patches. We > need to rebuild the hull with new (stronger) > materials; we will have to remake the system > before it does so itself. Let us move voluntarily > into Capitalism 2.0 by helping what needs to be > broken break on its own, converting debt into > equity, marginalising the economics and business > school establishments, shutting down the “Nobel” > in economics, banning leveraged buyouts, putting > bankers where they belong, clawing back the > bonuses of those who got us here, and teaching > people to navigate a world with fewer > certainties. > > Then we will see an economic life closer to our > biological environment: smaller companies, richer > ecology, no leverage. A world in which > entrepreneurs, not bankers, take the risks and > companies are born and die every day without > making the news. > > In other words, a place more resistant to black > swans. > > The writer is a veteran trader, a distinguished > professor at New York University’s Polytechnic > Institute and the author of The Black Swan: The > Impact of the Highly Improbable 70% BS, 30% stating the bleeding obvious
Obviously I’m a diehard fan of Taleb here, but I might have to go with newsuper on this one. I think this guy’s ego and need for adoration are beginning to get the better of him.
newsuper Wrote: ------------------------------------------------------- > gaffano Wrote: > -------------------------------------------------- > ----- > > Ten principles for a Black Swan-proof world > > By Nassim Nicholas Taleb > > > > Published: April 7 2009 20:02 | Last updated: > > April 7 2009 20:02 > > > > 1. What is fragile should break early while it > is > > still small. Nothing should ever become too big > to > > fail. Evolution in economic life helps those > with > > the maximum amount of hidden risks – and hence > the > > most fragile – become the biggest. > > > > 2. No socialisation of losses and privatisation > of > > gains. Whatever may need to be bailed out > should > > be nationalised; whatever does not need a > bail-out > > should be free, small and risk-bearing. We have > > managed to combine the worst of capitalism and > > socialism. In France in the 1980s, the > socialists > > took over the banks. In the US in the 2000s, > the > > banks took over the government. This is > surreal. > > > > 3. People who were driving a school bus > > blindfolded (and crashed it) should never be > given > > a new bus. The economics establishment > > (universities, regulators, central bankers, > > government officials, various organisations > > staffed with economists) lost its legitimacy > with > > the failure of the system. It is irresponsible > and > > foolish to put our trust in the ability of such > > experts to get us out of this mess. Instead, > find > > the smart people whose hands are clean. > > > > 4. Do not let someone making an “incentive” > bonus > > manage a nuclear plant – or your financial > risks. > > Odds are he would cut every corner on safety to > > show “profits” while claiming to be > > “conservative”. Bonuses do not accommodate the > > hidden risks of blow-ups. It is the asymmetry > of > > the bonus system that got us here. No > incentives > > without disincentives: capitalism is about > rewards > > and punishments, not just rewards. > > > > 5. Counter-balance complexity with simplicity. > > Complexity from globalisation and highly > networked > > economic life needs to be countered by > simplicity > > in financial products. The complex economy is > > already a form of leverage: the leverage of > > efficiency. Such systems survive thanks to > slack > > and redundancy; adding debt produces wild and > > dangerous gyrations and leaves no room for > error. > > Capitalism cannot avoid fads and bubbles: > equity > > bubbles (as in 2000) have proved to be mild; > debt > > bubbles are vicious. > > > > 6. Do not give children sticks of dynamite, > even > > if they come with a warning . Complex > derivatives > > need to be banned because nobody understands > them > > and few are rational enough to know it. > Citizens > > must be protected from themselves, from bankers > > selling them “hedging” products, and from > gullible > > regulators who listen to economic theorists. > > > > 7. Only Ponzi schemes should depend on > confidence. > > Governments should never need to “restore > > confidence”. Cascading rumours are a product of > > complex systems. Governments cannot stop the > > rumours. Simply, we need to be in a position to > > shrug off rumours, be robust in the face of > them. > > > > 8. Do not give an addict more drugs if he has > > withdrawal pains. Using leverage to cure the > > problems of too much leverage is not > homeopathy, > > it is denial. The debt crisis is not a > temporary > > problem, it is a structural one. We need rehab. > > > > 9. Citizens should not depend on financial > assets > > or fallible “expert” advice for their > retirement. > > Economic life should be definancialised. We > should > > learn not to use markets as storehouses of > value: > > they do not harbour the certainties that normal > > citizens require. Citizens should experience > > anxiety about their own businesses (which they > > control), not their investments (which they do > not > > control). > > > > 10. Make an omelette with the broken eggs. > > Finally, this crisis cannot be fixed with > > makeshift repairs, no more than a boat with a > > rotten hull can be fixed with ad-hoc patches. > We > > need to rebuild the hull with new (stronger) > > materials; we will have to remake the system > > before it does so itself. Let us move > voluntarily > > into Capitalism 2.0 by helping what needs to be > > broken break on its own, converting debt into > > equity, marginalising the economics and > business > > school establishments, shutting down the > “Nobel” > > in economics, banning leveraged buyouts, > putting > > bankers where they belong, clawing back the > > bonuses of those who got us here, and teaching > > people to navigate a world with fewer > > certainties. > > > > Then we will see an economic life closer to our > > biological environment: smaller companies, > richer > > ecology, no leverage. A world in which > > entrepreneurs, not bankers, take the risks and > > companies are born and die every day without > > making the news. > > > > In other words, a place more resistant to black > > swans. > > > > The writer is a veteran trader, a distinguished > > professor at New York University’s Polytechnic > > Institute and the author of The Black Swan: The > > Impact of the Highly Improbable > > > 70% BS, 30% stating the bleeding obvious werd. ban complex derivatives? are you stupid or something?
Just a few of the BS statements: “Let us move voluntarily into Capitalism 2.0 by …marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here…” “… Complex derivatives need to be banned…” “…Citizens should not depend on financial assets … for their retirement…” “Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage.” Do you think Taleb has got himself a batch of fresh Jamaican weed and stoked up a big bong right before FT called him to see if he had finished his article?
newsuper Wrote: ------------------------------------------------------- > Just a few of the BS statements: > > > > “Let us move voluntarily into Capitalism 2.0 by > …marginalising the economics and business school > establishments, shutting down the “Nobel” in > economics, banning leveraged buyouts, putting > bankers where they belong, clawing back the > bonuses of those who got us here…” > > “… Complex derivatives need to be banned…” > > “…Citizens should not depend on financial assets > … for their retirement…” > > “Then we will see an economic life closer to our > biological environment: smaller companies, richer > ecology, no leverage.” > > > Do you think Taleb has got himself a batch of > fresh Jamaican weed and stoked up a big bong right > before FT called him to see if he had finished his > article? Well I happen to agree with every point whole heartedly and obviously there are others who do too. I think that you and those in your camp havent really come to grip with the new world order.
Ok needhelp, expand on this one for me: “Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage.” Explain what he is saying here. A few points I would make are: 1. economic life and biological enviroment have nothing in common and why should they? What does a shoe have in common with the moon? Why must they be more similar? It’s as logical as Taleb’s demand that our economy should mirror our ecology. 2. Smaller companies - why? Why? Is a big company bad? How big? Will Taleb tell us when a company is too big and it must be downsized? 3. Richer ecology - wtf? I don’t even know what he means. 4. No leverage - yeah lets get rid of all debt. We’ll start with Taleb’s mortgage and credit card and then see how it goes. Why does he even spout sh1t like this? Leverage is not a problem, excessive leverage is a problem and always will be. It’s like saying guns kill people - they don’t; people use guns to kill people. Don’t just read sh1t like this and nod your head in agreement, think about the stuff he is saying.
newsuper Wrote: ------------------------------------------------------- > Ok needhelp, expand on this one for me: > > “Then we will see an economic life closer to our > biological environment: smaller companies, richer > ecology, no leverage.” > > Explain what he is saying here. > > A few points I would make are: > 1. economic life and biological enviroment have > nothing in common and why should they? What does a > shoe have in common with the moon? Why must they > be more similar? It’s as logical as Taleb’s demand > that our economy should mirror our ecology. > > 2. Smaller companies - why? Why? Is a big company > bad? How big? Will Taleb tell us when a company is > too big and it must be downsized? > > 3. Richer ecology - wtf? I don’t even know what he > means. > > 4. No leverage - yeah lets get rid of all debt. > We’ll start with Taleb’s mortgage and credit card > and then see how it goes. Why does he even spout > sh1t like this? Leverage is not a problem, > excessive leverage is a problem and always will > be. It’s like saying guns kill people - they > don’t; people use guns to kill people. > > > > Don’t just read sh1t like this and nod your head > in agreement, think about the stuff he is saying. I think what he is driving at is some basic economic principles. I happen to have claimed a deep love and respect for economics and also stated in this forum that economics can explain anything and everything in the universe including love et al. This is kind of a disclaimer that if you think i am stupid you have your reasons. So back to this article. He is saying that we have been living beyond our resources and means. leverage would do that to a household, a country and the world. Thats what he means when he says the economy should be more aligned to the actual resources and also to the value people create. for example, US creates less value than many other nations, yet consumes more than others. I think his problem with big corporation is that such an enity is able to manipulate the political and economic state of a society. richer ecology also goes back to actual resources, not made-up resources. individuals should not depend on a 3-4% equity risk premim to spend 30+ years of their lives. this is akin to free lunch and is hit or miss as is evident today. derivative instruments could work in a highly regulated environement but if you were to pick heavy regulation and getting rid of derivatives, he wants to pick getting rid. finally, leverage is like magic. its really a trick but looks like the rabbit actually came from the hat.
needhelp you and I are obviously not going to agree so I’m not going to keep trying. but let me say this, I’ve always thought of Taleb as a pseudo-philosopher in search of a philosophy. Actually, he’s more like a bad and lonely, solo guitar player in search of a band. He desperately wants to be in a band so that he can point to people and say, hey look! I’m in a band! So he looks and looks and eventually he finds a couple of guys who are banging sticks and stones together and making a helluva noise and he says, hey! this looks like a band! I’m in! So now Nick is in a band, but when he calls out to people and says hey! look at me! I’m in a band! they just laugh and say Nick, that ain’t no band, that’s just a couple of guys banging rocks together.
newsuper Wrote: ------------------------------------------------------- > needhelp you and I are obviously not going to > agree so I’m not going to keep trying. > > but let me say this, I’ve always thought of Taleb > as a pseudo-philosopher in search of a philosophy. > > > Actually, he’s more like a bad and lonely, solo > guitar player in search of a band. He desperately > wants to be in a band so that he can point to > people and say, hey look! I’m in a band! So he > looks and looks and eventually he finds a couple > of guys who are banging sticks and stones together > and making a helluva noise and he says, hey! this > looks like a band! I’m in! So now Nick is in a > band, but when he calls out to people and says > hey! look at me! I’m in a band! they just laugh > and say Nick, that ain’t no band, that’s just a > couple of guys banging rocks together. Except the other two dudes are none other than krugman and nouriel.
newsuper Wrote: ------------------------------------------------------- > > Don’t just read sh1t like this and nod your head > in agreement, think about the stuff he is saying. I agree with this. Taleb’s philosophy might be interesting but good luck trying to get the US government to enact even one of his suggested changes in our lifetime. Consider the fact that they are already offering private investors 6x leverage to invest in their bad assets fund. Lesson learned about the “evils” of leverage over the past 2 years: none.
gaffano Wrote: ------------------------------------------------------- > Ten principles for a Black Swan-proof world > By Nassim Nicholas Taleb > > Published: April 7 2009 20:02 | Last updated: > April 7 2009 20:02 > > 1. What is fragile should break early while it is > still small. Nothing should ever become too big to > fail. Evolution in economic life helps those with > the maximum amount of hidden risks – and hence the > most fragile – become the biggest. Useful point, but the moment they need regulation to break them up is the moment that they are so big that breaking them causes disaster. How do we identify the hidden risks, aren’t they hidden to begin with? > 2. No socialisation of losses and privatisation of > gains. Whatever may need to be bailed out should > be nationalised; whatever does not need a bail-out > should be free, small and risk-bearing. We have > managed to combine the worst of capitalism and > socialism. In France in the 1980s, the socialists > took over the banks. In the US in the 2000s, the > banks took over the government. This is surreal. I agree with this. Heads I win, tails you lose is not a formula for a just, legitimate, and stable society. > 3. People who were driving a school bus > blindfolded (and crashed it) should never be given > a new bus. The economics establishment > (universities, regulators, central bankers, > government officials, various organisations > staffed with economists) lost its legitimacy with > the failure of the system. It is irresponsible and > foolish to put our trust in the ability of such > experts to get us out of this mess. Instead, find > the smart people whose hands are clean. Smart people whose hands are clean? I guess that would mean me. Thanks Nassim. However, the attack on experts (something NNT loves to do) is a bit too broad brushed. Are you saying that anyone who studied a lot is by definition not qualified? > > 4. Do not let someone making an “incentive” bonus > manage a nuclear plant – or your financial risks. > Odds are he would cut every corner on safety to > show “profits” while claiming to be > “conservative”. Bonuses do not accommodate the > hidden risks of blow-ups. It is the asymmetry of > the bonus system that got us here. No incentives > without disincentives: capitalism is about rewards > and punishments, not just rewards. I agree. The nonlinearities in the incentive structure have turned out to be highly problematic. Probably the problem is how these bonuses have become the lion’s share of the pay, rather than just a nice treat for doing well. > > 5. Counter-balance complexity with simplicity. > Complexity from globalisation and highly networked > economic life needs to be countered by simplicity > in financial products. The complex economy is > already a form of leverage: the leverage of > efficiency. Such systems survive thanks to slack > and redundancy; adding debt produces wild and > dangerous gyrations and leaves no room for error. > Capitalism cannot avoid fads and bubbles: equity > bubbles (as in 2000) have proved to be mild; debt > bubbles are vicious. I don’t think we can truly say that equity bubbles are mild. This debt bubble was expanding just as the equity bubble was popping. If we didn’t have the debt bubble, the equity bubble might have seemed very vicious too. > > 6. Do not give children sticks of dynamite, even > if they come with a warning . Complex derivatives > need to be banned because nobody understands them > and few are rational enough to know it. Citizens > must be protected from themselves, from bankers > selling them “hedging” products, and from gullible > regulators who listen to economic theorists. This is a funny metaphor. But who should the gullible regulators be listening to, then? Isn’t NNT considered an “economic theorist” or at least a part of “financial theory,” that would suggest that they shouldn’t be listening to you either. The solution to bad advice is to get better at determining what is good advice, not to stop listening to everyone period. > > 7. Only Ponzi schemes should depend on confidence. > Governments should never need to “restore > confidence”. Cascading rumours are a product of > complex systems. Governments cannot stop the > rumours. Simply, we need to be in a position to > shrug off rumours, be robust in the face of them. Confidence doesn’t substitute for real economic growth and financial stability, but lack of confidence can kill everything even in the face of strength and underlying robustness. It is true, however, that complexity combined with “tight coupling” (not THAT, you dirty b@stards) leads to rampant rumoring and conspiracy theories. > 8. Do not give an addict more drugs if he has > withdrawal pains. Using leverage to cure the > problems of too much leverage is not homeopathy, > it is denial. The debt crisis is not a temporary > problem, it is a structural one. We need rehab. Cold Turkey is not the only way to cure drug addiction and it is not even the most effective way in some cases. It is clear that we have grown too used to easy credit, and the assumptions we have made about what is financially feasible or responsible may be based on unrealistic experiences accumulated over three decades. We need to find a way to live within our means and pay down debt. However, coming down gradually may still be a better way. Unfortunately, I still think the most likely way we will deal with debt is that we will inflate it away. Poor Grandma. > 9. Citizens should not depend on financial assets > or fallible “expert” advice for their retirement. > Economic life should be definancialised. We should > learn not to use markets as storehouses of value: > they do not harbour the certainties that normal > citizens require. Citizens should experience > anxiety about their own businesses (which they > control), not their investments (which they do not > control). This sounds nice. So we get to have our Social Security and Medicare entitlements, then? Much has been made of the fact that Americans save so little of their money. I think that part of the issue is that many Americans have put their “savings” into the market as investments. They’ve thought “why get 1.5% in a savings account, when the S&P has been galloping away at 8-10% a year (until lately).” If we look at how much americans have been saving PLUS putting in the market, it may not look as dire. The problem is that savings accounts are insured from falls in value; stock indices aren’t, and the average american hasn’t really paid attention to the difference. > > 10. Make an omelette with the broken eggs. > Finally, this crisis cannot be fixed with > makeshift repairs, no more than a boat with a > rotten hull can be fixed with ad-hoc patches. We > need to rebuild the hull with new (stronger) > materials; we will have to remake the system > before it does so itself. Let us move voluntarily > into Capitalism 2.0 by helping what needs to be > broken break on its own, converting debt into > equity, marginalising the economics and business > school establishments, shutting down the “Nobel” > in economics, banning leveraged buyouts, putting > bankers where they belong, clawing back the > bonuses of those who got us here, and teaching > people to navigate a world with fewer > certainties. Some of this makes sense. What do you have against the “Nobel” in economics. Not all of these prizes (not even most of them) have been finance related. Are you just upset that you didn’t get one? Clawing back bonuses does sound appealing on an emotional level, but I don’t think it’s really going to be all that useful and may have even worse collateral consequences. Teaching people to navigate a world with fewer certainties - that sounds sensible. Of course, the first thing that they’ll want to do is set up a European socialist system (not that there’s anything terribly wrong with that). > > Then we will see an economic life closer to our > biological environment: smaller companies, richer > ecology, no leverage. A world in which > entrepreneurs, not bankers, take the risks and > companies are born and die every day without > making the news. Interesting. In ecology, immature systems are about maximizing energetic throughput - grabbing resources and energy and using it up as quickly as possible. Mature ecosystems are about maximizing the ratio of biomass to energy. In finance, I guess the parallels would be that immature systems are based on maximizing deal flow, whereas more mature systems are about maximizing the value gained per dollar used in financial deals. > > In other words, a place more resistant to black > swans. > There you go about Swans again. > The writer is a veteran trader, a distinguished > professor at New York University’s Polytechnic > Institute and the author of The Black Swan: The > Impact of the Highly Improbable Agh… one of these academic types… I heard some book author say that we needed to ignore them. Especially the ones who talk about finance and economics.
His knock against academia is based on the fact that the creators of widely accepted theory defend them to the death for their own self interests, keeping new creative/better theories from bubbling up. I mostly agree with this. Didn’t Al Gore get a Nobel prize? Lost all credibility with that one. I’m surprised he entertains the idea of a black swan proof world. We live in Extremistan afterall and that is a fact.