Sunday, June 18

Nassim Taleb Talks Antifragile, Libertarianism, and Capitalism's Genius ...

I first read about Nassam Taleb from a comment reference on my blog over 10 years ago where he provided a link to an article called "blowing up" which had just appeared in the New Yorker.
Nassam Taleb was once an options trader, whose activities  involve writing call and put options which give the holder the right to purchase or sell securities at a future value at an agreed strike price. His background was one of applying probability theories but of an evening he remained at heart a philosopher. He was interested in a society that could avoid "blowing up" and has written many papers and books.    

Now involved wholly with academia he provides some insightful ideas. Listen as far as it is of interest.      


susan said...

'Skin in the game' is the first thing that come to mind when I see Nassim Taleb's name, and I see that as the essence of a too-big-to-fail system of credit and finance. If you take risks with implicit bailouts in mind, why not take big risks? The profits are yours, the small losses are yours, but the big losses are never yours. No skin in the game.

Taleb's respect for the little guy is that the little guy almost always has skin in the game. He doesn't have the option not to. So I respect his take that government, if we are stuck with it, should help protect that guy rather than just helping those who fleece him. Nevertheless, the little guy should still be free to pursue being fleeced, if that's his desire.

Best of all, Taleb has a sense of humour and of irony, and a strange ability to show humility. He's entertaining and educational for those of us who don't have backgrounds in deep economic theory.

All the best

Lindsay Byrnes said...

Hi Susan,

What’s also infuriating is the lack of skin in the game for many of the CEOs and senior executives of the large publicly listed entities on the various bourses. At least there has been some measures introduced more recently to ensure one can claw back the benefits of generous bonuses to CEO’s under certain circumstances. That’s where in subsequent years the share price tanks as a consequence of prior short sighted bad decisions.

I’m glad you find him both entertaining and educational just as I do.
One further point I would make is that since the GFC which occasioned a massive drop in share prices in excess of 50% over 2 years understandably we have a crazy flight to safety. That is inconsistent with the reality of our existence, from the time when the first public debt default was occasioned by France becoming insolvent and unable to meet its obligations as a consequence of the massive spending due to the cost of the Napoleonic wars.

A good example is the crazy willingness of investors to accept negative interest rates, put forward in desperation as the last monetary theory policy card to be played out by respective governors. But such moves would not have been made or even contemplated if on accepting the fragility of the system the “blowup” was acknowledged and like the aftermath of a plane crash countries took immediate steps to avoid another. Japan was a good example going back decades when reckless lending was never acknowledged and so Japan had stag inflation for decades as the respective bourse went backwards. Their financial institutions unwisely were allowed to continue to trade whilst technically insolvent and carrying massive debts that could never be repaid.

Hence one has to hold those responsible to account and face the reality of making a fresh start, as otherwise you perpetuate past errors over and over gain. You cannot avoid air crashes but the way they are investigated and followed up, means one learns to avoid them in the future and in the process air travel is the safest form of transport known to man.

Best wishes