10 Questions for Nassim Taleb

[Music] I'm Michael Elliott the deputy managing editor of Time magazine and were here to talk with Nassim Nicholas Taleb about his new book the bed of pro Krusty's Nasim's previous book the Black Swan was an international bestseller which many people read as an explanation of what we weren't thinking about before the financial crisis broke in 2008 an academic a market trader a mathematician and all-round polymath it's a delight to welcome that's him Nicholas Taleb to Time magazine thank you I'm very honored to be here Tobey Whitby from Houston asks you're a trader and a very successful one do you think that sensationalized stock market programming by the likes of CNBC and others have affected investor behavior and market efficiency I think I think so I think the fact that you're exposed to market variations all the time Byrne burns you out which I mean I think that started happening in 2001 we still had the web and people who otherwise would not have access to prices except if you have the morning paper we're constantly exposed to it throughout the day I think it burned out a lot of people who switch to money market funds where you just give your money to someone and get your monthly statement you warned us about the financial crisis and your prediction is right can you foresee any other crisis yes it will happen in the near future yes unfortunately there's this debt crisis I mean of course unless you you use Frank let's try to modify that bridge we have a fundamental problem at the core of capitalism that will blow it up and it's what I call the agency problem this is symmetric payoff I have you know a manager of a company gets bonuses but no malice is so the stock market now down about in Western Europe in United States between 20 and 50% and France okay the stock market down so much but all the managers are rich see because they have the upside no that's asymmetry upside notice so that asymmetry plus that is going to blow up capital it's not what it's meant to be so unless we and and it doesn't look like from what I see happening this is going away as a matter of fact was getting worse banks are benefiting even more from that asymmetry they're making a record money and and and and people are unemployed because there are mistakes so those who are making the money are not you're paying the price of their mistakes a Black Swan event is generally an extreme outlier is it possible to profit from these events I mean half the Black Swan is about saying that they're positive and negative black swans and I kept talking about an anti fragile systems are systems that are a benefit from black swans evolution benefits from from random events otherwise we wouldn't be here natural systems are not just robust to Black Swan but they're like what I call Philo stochastic they love Authority they love the love the love because evolution cannot take place unless you have sharks that that you know purge the system in a way that's what people call creative destruction but there are a lot of things like that even economic life needs Black Swan to remove you know certain like people who don't belong there but unfortunately the government's they prop up these people many people accept that specialization is the key to human advancement do you think that's true or is this still a place in the world for the Renaissance man it's not true the specialization of specialization over specialization visibly makes you fragile because you feel you know may disappear you see the success stories of those who over specialize and happen to be successful okay not not not the other ones there's a huge cemetery of over specialized people or disappeared number one - I don't know what he defined we called Renaissance man but knowledge has not improved massively people don't realize that that we still have of yeah you have the impression from listening seeing that you have about a million papers and social science okay that we have advanced knowledge we have not made read Seneca and you'll see that in the moral Sciences and a lot of fields we have not advanced that much in a complex domain we have not advanced that much so being a generalist as you know other people were 500 years ago it's still feasible Kenny Smith from Boston asks if there are any problems that you're really interested in right there well I mean my central problem now is is figuring out antifragility which is a number one are there two things that do it number one defining it of course it's something that benefits from voting in Black Swan but another another problem that comes with it that's vastly more central to me is why is it that we humans denigrate the system's ability to correct themselves on their own well you see because we act as if we were necessary for things to take place and that's that's that's a big problem is this has killed people in medicine you know human intervention when mother nature can do a better job we always have two things that were smaller than nature we have that bias so this is my my my the problem I'm working on is how to mitigate that how to replace that instinct was something that that's not as harmful very good Nancy thank you for coming by great great I see you again thank you

Channel: TIME

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Keywords: 10 Questions, 9/11, antifragility, bear market, black swan, books, boom, bull market, Business & Economics, bust, downturn, economics, financial crisis, fragility, fund, hedge, markets, Nassim, people, Procrustes, profit, randomness, stock market, stock-market, Taleb, Unemployment, Time, Time Magazine, Michael Elliott, Book, Market, Market trend, Nassim Nicholas Taleb, Session, Stock, Trading

Id: E3bu_7Bfatg

Length: 6min 3sec (363 seconds)

Published: Fri Dec 03 2010