JLF at Boulder 2018: Skin in the Game #JLFatBoulder #HottestThinker #Asymmetry

[Music] so on our second and last day for this year at the jLF in Boulder I want to thank all the tireless stage managers who keep things going and all the volunteers and all the writers who give so much and invest so much of their time their intelligence their learnings I've had a bit of a goof up this morning because I have known nothing for some years now he's come to Jaipur and I am I'm deeply in awe of his independent and contrarian and self believing thinking he he he listens to himself he listens to others but he doesn't fall into predictable ruts which all of us do but he is such a difficult person to introduce for somebody whose discipline is literature and translations that I was hesitant to do it and so we had many back-and-forth emails about how exactly I should presentation this for an audience who possibly knows a lot about him and then with the serendipity that happens in beautiful festivals like this we had the wonderful priyamvada Natarajan who you heard here yesterday and so we have an interdisciplinary conversation and that is the point of both their works that they talk across disciplines with hmm Wow I got a printout I'm a printout paper person so um let me begin by introducing Nasim very very briefly because we all want to get on with her listening to the conversation and then priyamvadha now same Nicholas Taleb spent 24 21 years as the risk taker in a quantitative trader before becoming a researcher in philosophical mathematical and mostly practical problems with probability he's the author of a multi-volume essay the inter toe the black swan fooled by randomness anti fragile and skin in the game which covers broad facets of uncertainty it has been translated into 36 languages and sold more than 5 million copies and I can tell you that he is a best seller in India as well in all the best-selling charts whatever happens in addition to his trader life Talib is also written as a backup of the Intertoto more than 50 scholarly papers in statistical physics statistics philosophy ethics economics International Affairs and quantitative finance all around the notion of risk and probability Talib is currently distinguished professor of risk engineering at NYU Stanton School of Engineering only a quarter-turn position and finance related bio he is also the scientific advisor for Universal Investments his current focuses on the properties of systems that can handle disorder and are anti fragile I know you say fragile in America would we say fragile in India he's traveled the conventional route of education to real life and theory to practice an inverse sequence from the common one moving from the practical to the philosophical to the mathematical started as a trader got a doctorate and MIT trading career wrote literary books before writing technical papers and his work became progressively more technical and formal with time but you wouldn't believe that if you read the Maxim's at the end of his new book skin in the game I've got a few of them here would you call them Maxim's and many of them are provocative and drink true no muscles without strength friendship without trust no opinion without consequence no change without aesthetics this is particularly reaches out to me no fluency without content and sadly we do encounter a lot of fluency without content no decision without a symmetry I don't know science without skepticism religion without and these all have no before them so no science without skepticism no religion without tolerance I think this is very good way to get us started on the conversations that's going to follow I want to pay special tribute to his stubborn integrity on the fooled by randomness website he specifically states please refrain from offering honorary degrees Awards listings in 100 most whatever and similar do basements of knowledge that turn it into a spectator spot and when he has come to Jaipur and on this visit we as the festival deeply appreciate that he has insisted on paying for his own ticket and his own stay though he has I think had lunch at the author's lounge [Applause] nasan will be in conversation with the brilliant and articulate priyamvadha natarajan who is professor in the Department of astronomy and physics at Yale University who gave us a wonderful session yesterday and works on the formation fueling and feedback from black holes and understanding their growth histories over cosmic time I look forward to what is bound to be a fascinating thought-provoking conversation across two brilliant minds and the learnings and sharings that will come to all of us my gratitude to you both thank you [Music] so before we start I have a comment from the intros looking for it than skin in the game and I explained I noticed yesterday that Priya was not looking up and I know exactly what the problem is it's gonna in a game people who deal with the projectors don't lecture okay and people who lecture don't deal don't work on projectors so I hope the people who get the projectors can lower the projector right and put more lights on the audience okay please all right so we're more like lonely obviously we see their faces no yeah that works better okay so now you get the point of skin in the game and whether those who do something don't know the consequences and don't pay for okay so I guess I'm really excited to have the opportunity to hear you talk about your work and to share how you think so I would actually refer to you as a systems thinker someone who has a very broad view and a grasp of the detailed simultaneously and therefore one who can therefore diagnose the pitfalls and not only how we frame problems and challenges but also as a consequence how and where we look for solutions so could we start by you just telling us a little bit more about your background in particular how you write great so let me start since a literary conference so symmetry or randomness probability all these things are fatiguing on Sunday so let's talk literature so I wanted to be a writer from maybe the age started the age thirteen but the problem is I was not imaginative enough so I didn't know what to write about but that was the idea then I realized that you have to read a lot so we become writer okay you gotta read a lot more than so I made sure that I read nothing that I was prescribed at school and everything outside there's no edge and later on I became a trader after the war in Lebanon and I was a kid or the traumatic thing then I got diverted and to thinking about something as vulgar as money the family had money before the war much less during the war things may come back so I became a trader and I loved it absolutely loved it and as a trader basically you know there's there's a common saying that what other people know isn't worth knowing okay so you got it and the reverse okay so you want to know what other people don't know okay you're on the focus what people don't know so so I I so but this idea of Noah reading stuff that are not in a common curriculum is something that obsessed me and then but I had of course favorite authors that were sometimes on a curriculum like more Hays or people like that so I wrote my first book it took me a long time to write it it was fooled by randomness and it was about I didn't know what you know I couldn't care less what it was about well there was about probability I just enjoyed writing it and and I said okay I want to make it a nice experience for the reader I made sure every paragraph could be read on its own and the fractal way and then you go up to the sentence paragraph chapter and the structure so and and of course I went looking for publisher like people do when they have a manuscript and the abuse I got from publishers for two or three years was incredible that that you know you're not writing communicating with your psycho and all this kind of crap you hear so that's my writing experience so I thought because I had fictional characters in my book so they said listen is this finance know it has history in it what the hell does history have to do with finance and then why are you putting this weird character Nero tulip later on had Fat Tony alright fat Tony's become horizontal Tony to be perfectly correct then then apologize and then said it is what he calls himself Fat Tony and so I have characters I had fables I had parables in my book fooled by randomness so then I realized that the same stories can in a game that those who published books all right are not the ones who judge the books those who judge the books are the readers okay so I ended up publishing the book with someone who eventually went bankrupt okay so I got the rights back who gave me half there was a relation I presume yeah I know but I mean but actually it sold a lot for it for for that that group but he squeezed me all right and he got vindicated he squeezed me he said no editing I didn't want to be edited sometimes they would change the word on a page and I look at it they would shut out okay so again copy editors don't have skin the games or not so I so I got the rights back and I went to Random House but fooled by randomness sold a lot of copies over time and it's probably the one that favors the most by people but the interesting thing it kept selling over time and and what was a rule that I applied without knowing it's something I'm gonna call the Lindy effect that I discovered later what's the Lindy effect there's a restaurant called Lindy's had cheesesteaks so horrible they went bankrupt today the my book was published skin in the game that discusses in details in the last two books I talked about the Lindy effect and then is in shortness as follows Lindy that the actors would show up at Lindy you know I'm a poor actor usually unemployed people most of the time as you know so they would show up and discuss the statistics of plays on Broadway okay it's not far while eating the very bad cheesesteaks that Lynn do selling so and they discovered that the life expectancy of a play that has 300 days history that survives the street holiday this 300 days if it had 600 days six holidays so life expectancy increases with time then you can make a rule with that so my rule okay that I applied and the Black Swan is if you're gonna predict the future fifty years from now remove everything that came in last fifty years not because what came last fifty years you know what the future will be technological the the point is that most recent technology is the one the most vulnerable it's the reverse is aging in the reverse all right we still use the book the table this is Egyptian thirty nine hundred years this I will show you we can figure out this la Phoenicians all right Seiden thirty two hundred and fifty years right that you know so the technologies stick okay sometimes they get there the Chinese make them for cheaper for one dollar now not five hundred dollars but so Kim came to writing started writing and I wrote fooled by randomness in a way for it to be read by people twenty years ago twenty years earlier if the book makes sense to someone and and interest someone twenty years earlier the ideas will survive twenty years I use that Lindy rule so the skin in the game when I talk about Microsoft I mentioned it micros a company that was still in existence at a time for example so so that was a trick I played odd and it worked because food by randomness still is still readable today if it's readable for someone in 2019 80 odds are be readable for someone in 2020 so that was a trick I think what is particularly interesting is that you know one of the people who's inspired you was one of our hallowed faculty members benoit yeah benoit who taught at Yale very eminent mathematician so anyway let's move on to could you tell us a little bit more about how your most recent above the skin in the game the arguments that it makes and how that actually naturally flows from your earlier blockbuster bestsellers Black Swan and anti fragile okay so and so I want you to talk a little bit about in certo as well to tell us exactly so the whole idea is I was training and my specialty I discovered that most people focus on probability whereas in a real world we focus on payoff how much you get it's not if something is high or low odds is what effect it will have on you if it happens it's at you know then I noticed some things called asymmetry all right asymmetry for example if there's a random event is this likely to benefit from it know if there's an earthquake this has no upside it only can go south you see so the asymmetry but those are some things that benefit from randomness because they have a positive asymmetry for example scientific research you're searching your the trial and error it cost you very little when you're wrong and when you're right you can make big so that's the idea pervading how to handle randomness how to deal with uncertainty and the way I I you know describe the insert' though in here is I said a very idiosyncratic book say investigation of opacity lock uncertainty probability human error risk and decision-making in a world we don't understand okay and then of course expressed in the form of person essays autobiographical section stories parable philosophical historical and scientific commentaries right so but the yeah but the whole idea is organized around if you don't know what the hell's going on okay there is one and only one way to go about it if you have so how you can recycle lack of knowledge into decision making based on what your payoff is okay like for example let's say something we're gonna apply to local global warming you get a package all right from northern Syria you know it's written on it was Arabic handwriting coming through your office okay what do you do you open it no you do have evidence that it could be you know harmful to used to open no you don't have evidence but you don't want to run that risk okay so it's the same thing with climate we have uncertainty about climate the moral certainty you have the more conservative you have to be regardless of the science behind it I mean all the people who don't believe in climate change should listen to ya know I say the more uncertainty there is I mean I may not believe the math but the more uncertainty there is about the world the less you want to mess with it okay so if I'm uncertain about what's in this water I don't drink it okay so the decision is very symmetric so that's the whole idea of how to deal with uncertainty and and and and so that pervades now that asymmetry of course can explain how we advance okay why technology how it advances because by thing curring trial and error you have an asymmetry big gains and small losses and stuff like that and their skin in the game actually is about skin the game hidden as symmetries in daily life about the greatest asymmetry is when someone makes the upside and someone else namely society or someone invisible the taxpayer is someone invisible of that story base for the downside so let me describe it with something I call the Bob Rubin trade I name names which is why I have a lot of enemies I enjoy having enemies so Robert Rubin Robert Rubin was a Treasury secretary under Clinton and then later on became chairman of vice-chairman of Citibank he collected 120 million dollars in compensation over nine and a half ten years and of course the crisis happened and Citibank was practically insolvent rescued by the taxpayer right the government okay he had all the upside who bought who paid for his hundred twenty million respectively thro actively you did I Spanish I keep the team's abilities Spanish grammar specialists all right yoga instructors then I have a list of people who paid for him okay so for his bonus so this is exactly the asymmetry that you see in any system that has rent seekers and or anything and then so it started with this asymmetry that's the practical thing and you can generalize to a lot of things let's talk about another asymmetry something that inflates me beyond measure especially that I come from the Near East not the Middle East but near the Middle East somewhat at no time in history in the history of the world have you had people who can be bellicose decides cause Wars and not be exposed to HAARP at no time typically in the system that has a score they have no sky no game they're sitting in the New York Times like Thomas Friedman oh man okay all these people they cause the wars so we have war in Iraq okay and then they come back they can't learn from it because they paid no price for being wrong okay that is skin in the game like a skin in a game you had no time we had war mongers who weren't warriors and as a matter of fact the way the system corrected itself is with warriors are the only people who historically were running except for India again and there's another exception the that's a Ming China aside from that the social rank of people based based on how much risk they take for others the idea of Lord the training risk-taking for privilege and even during the Falkland war the sorry the Malvinas war okay the the the the the member of the royal family had to take more risk than others because that was her contract the social contract say we take risk okay Hannibal took words always front in line how many Roman emperors I think that only one-third of Roman emperors died in the red one of them served as footstool for a Persian thing Julian was my hero in the book Julian the apostate was it was killed in battle and he didn't have a shield he was frontline okay just to tell you that you had you can't be an emperor if you don't take more risk than the other people so this has disappeared right so I want to move on - so in a way right you're trying to draw attention to sort of the morality of capitalism an angle that is scantily brought up by others so could you sort of clarify a little bit to our audience how you're not all against capital creation but rather against a rent-seeking yes okay so the rent seekers innocent of course are gonna the other mistake so what happened to the microphone is working okay sorry yeah okay now it works so the this is not Lindy by the way so it doesn't have Lindy attributes the the so let's talk about the the expert problem okay it's Sena Black Swan before the Lee recent expert discussions you know the pilot of the plane is an expert if the plane lands and takes off okay if you go visit your dentist and your teeth aren't you know you lose half your mouth right you know that your dentist has skills you agree a carpenter an incompetent carpenter will survive it would not survive so basically the my statement and a book is an it's a maxim or maybe you can call it effort whatever it's much easier to micro and macro is much easier to micro than micro so this is where so you tend to see the false expert in the macro areas like economics the predicting economic activities or basically people who don't have skin a game in a macro becomes collective and individually they have skin in the game and a micro basically saying that you know real value creation is it is to me exactly so and the criterion I'm gonna use again let's go back to literature there is a famous writer that's no longer you know famous and his problem is as follows an Indian fellow and every time he publishes a book there's a party you have Madonna bono all these things alright but and then you realize who was he writing for he's writing for his editors as this system and so and let me give you an anecdote Edison skin in the game a friend of mine a former trader like me decided like every former trader to get in trouble with investments and picked the place to get in trouble with the restaurant the industry so invested in restaurants restaurants in New York are very competitive as you know so there's an award given to restaurants there are series of awards best atmosphere best rock music that's this myth that the sushi best fresh sushi from from freshwater sushi or best something all right so you have all these best of this this award okay top was a top three this and then here at your end there is a gala dinner most of the restaurants that got awards then make it to the gala dinner why because they were not judged by their market when your restaurant owner isn't one impress some award schmuck you want to impress that's why I don't like worst you want to impress your you survive those who pay the bills who the people who were the regular but you can't fool them with the words okay they want food right so so that's a micro alright so there I have that like that this statement that any business where people are charged by peers eventually will robot will be invaded by rent seekers and that's what's happening and I'm not saying this because you're here because academia outside the very hard science is turning into a some kind of production field right sorry no no outside of sorry you're not gonna attack my field so few yeah yeah the the the or engineering my field engineering you can't really an engineer but in economics okay they have no connection to realities what I call a peer a peer ring peer review ring they start publishing and stuff on this macro this and this and and the equilibrium are now sense and they keep going alright so so they end up knowing nothing right so and I observed that being of course an academia Carnegie building goes all right so the so that's a the problem of the expert problem so in other words there is a class of experts there are not experts and we've known for 15 years or who they are okay and we know that these people don't have skin in the game so I'm gonna come back a little bit to connect with some of the kinds of work that we do in cosmology know that you've given us a bit of a clean chit as the hard sciences you know we you know we started out when the data was sparse about the universe we didn't have as many good instruments and so on we assume that you know structure formation and all the galaxies that you see were seeded by Gaussian random fluctuations so the gaussian random distribution was the norm but as the data got better we got much more data we the game now is to look for non Gaussian 'ti so the deviation from Gauss kennedys the tail so what's really going on in the tail because we are now able to vast survey vast portions of the sky and so we can get a fair sample of the universe so you would start seeing things in the tail so and of course now for us the kick is the Bayesian analysis so this idea of priors and marginalizing over probabilities assigning probabilities and so on so I'm just curious which academic disciplines you already started on this do you think have the largest blind spots at the moment okay so in the Black Swan I discuss say there two world video Christine or the bell curve works and extremists an determined where the rest curve doesn't work and the problem is not there the problem is that a lot of people use the mass of mediocre Stan because the math is available and not that of extremists at all right and you're lucky again for one reason is that guess where we discovered the bell curve why do we call the Gaussian in errors and measurement of right exactly so so the you heard about something called a 8020 rule you agree all right just to give you an idea how hard it is to statistics outside of it the 8020 rule basically it's a 150 because if you recurse the 20 are also unequal 80/20 because one will have 50% of the properties now if you have an 80/20 process which is basically something we call it an alpha 1.13 you need a lot more data but let me tell you how much more a gaussian needs 30 data points to get a certain error okay you have a sample of 30 30 observation you can draw an inference about the mean something called the law of large numbers how much more you need for an 80/20 to get the same error rate the same control of the mean what do you think twice as much don't necessary someone sorry hundreds you're not exaggerating keep going ten to the fifteen more data to get the same error rate I mean think about it this is really important because you are tomorrow when you read a survey done of 35 people that tells you coffee is good for you and then day after tomorrow you have one that has 54 people you basically know you should pay no attention yeah so so really so these processes so and so let me study so I started which fields are I said it on a Black Swan and I had a lot of problems or with it I said the first field that's is the more people use mathematics out and you know they think it becomes scientific they use mathematics and they do this wrong analysis all that comma crap all right it's fake math okay the the biggest bullshitters are the economists okay - typically macro economists the second-biggest bullshitters are psychologists now there is now a p-value crisis all right there is a replication there is a replication crisis now I went and played the game on Twitter the other day there's a replication crisis someone did there were in social science in general there were 20 paper published and two journals supposed to be called you know prestigious nature and science out of the twenty how many replicated nine out of the nine that replicated only four had the same effect so in other words when you hear a paper in social science you know it's you don't need to be told but I use this metric if you use you've put yourself in your grandmother's shoes okay grandmother's shoes and try to predict which paper is and which paper is not guess what accuracy you get 95% if you because he said grandmother these are the results of this paper they say that if someone talks about old age people walk more slowly all right yes or no she say okay so that's let's see yeah that's the field of psychology so so that so basically people have the illusion that there's rigor there's only rigor in math if you are in field that are hard science physics and related fields the rest clinical may be some rigor but go to the grandmother so the intuition intuitions of people okay and now I was in my book I was really very upset my book my bet more is a guy called Richard Taylor not they were not citizens into doing things if you take all his papers they're all it's not like nine out of ten ten out of ten they want to not you have the government manipulate you to doing things against your own interests because they have the wrong math so this is it so the idea is not whether use math or not are you using the right math for you feel okay if you're not then go to Fat Tony that's my character all right he makes money off of people using the wrong math and this is basically how Fat Tony not me predicted the crisis 2008 and made tons of money because he said they don't know what what they don't know so they think their maths leaves them somewhere so I'm gonna take their money and Fat Tony in my book anti fragile took their money yeah so I mean I want to know sort of know and don't let you you can imagine who that that Fat Tony is also too biographical right so so I wanted to go to a sort of move on to you know there's a point in pointing out you know in pointing out these severe limitations right I guess you're trying to show us how this imposes on how we comprehend things like epistemology right leave the generation of what we know the methodology of knowledge creation and so that's sort of your larger point I mean other than yes they are to to mistakes and okay so let's say if you don't if you have skin in the game you may not understand things verbally but you understand how things work if you've survived because systems do not learn systems do not learn by convincing systems learn you know by evolution by basically killing the person who doesn't okay so that's how systems learn to be very simple ideas there was an article today saying that people who have near miss and car accidents it doesn't make them better more careful drivers and my whole idea of skin in the game I'll explain it here why is it that when I drive on a highway you don't have not killing thirty forty people why they're already that because they have skin in the game so skin again puts a symmetry between people okay and and one minute parentheses let me talk about the ethics of it all of this started with Hammurabi Hammurabi had the first rule that was was moral and risk management and practical if someone puts a building the archetype the building collapses you can't just walk away and say hey you know what I mean Arizona out goodbye you know right know you call back the architect and he's put to death if the owner of the house is killed the architects put to death okay the later came to principles I for an eye but the eye for an eye people had the illusion the eye for an eye is a vindictive saying to the contrary it's a limitation saying and it's not I for I literal because basically if someone's blind makes a mistake and harm someone intentionally or hams who you know what do you do he's exempt because he lost his eyesight so they've been some Talmudic discussions on i four eyes tell me really is not literal but the interesting thing now this led to several rules the first rule is a the the golden rule do to others what you want them to do to you which i go against and then there's a civil rule do not do to others what you don't want to do - you wish to me is nicely more robust why because the do to others were you wanted to do to you what if you're an idiot okay so what if you don't know your all interest okay so so that's the idea is I want you to dress and and you know I was only allow you to dress in pink because I want to dress in pink so the whole idea that rule leads to something that can't took it alright and called universalism county-owned universalism act in all time in place as if it was you know okay so the problem is my whole problem with skin in a game is that universalism does not work okay you are not a physicist from whatever born here or you're not enough you are a person in fact you are Priya so he is not an african-american he is Joe alright you cannot apply universal rules and you can show I can show empirically how things are fractal so in other words you cannot go for Kant there's an individual and then there's humanity or maybe also not just humanity there's also the other end you cannot if I don't like my cat more than I like a cockroach you if I don't protect my children more than a stranger okay although I would like to protect the stranger as well if you don't have these great nation fractal gradation things don't work and so there is a fractal things and here I start talking a lot about the work of Elinor Ostrom who's not an economist but the political scientist but it had that pseudo Nobel in economics and she understood how fishermen works they have a unit that works up two to three hundred fishermen they are collaborative and you're asking me earlier about collaboration they become adversarial hence you have a scale at which things operate and so in my book skin in the game the more analytical part of it will tell you that I address problems that were dealt with statically by putting dynamics and scale to give you an idea of a scale behavioral finance they have a field called behavioral finance I think that we shut it down is the principle is if I predict how Joe works all right and gene works I can predict how the market works all right now if I predict how each and every one of you behaves I cannot predict the collective okay just try to observe children alone and I put them together in the room okay they can be come from well behaved rambunctious okay the same thing the market doesn't work as a sum of participants but it's another animal you have a transformation scale transformation I put a hundred people together there are another animal now I have a crowd agree with you on Hammurabi and I love the Mesopotamian so that's I said you know I wanted to edge a question and to provoke you a little bit yes not that you need more provocation but so even the skin in the game you make the point right that one must affirm in daily life and in principles what one claims to believe so practice what you preach so this raises an interesting conundrum so should we reject for example Rousseau's view on how to raise children because he abandoned his own or you know something that's closer to my heart so should the enjoyment of the work of an hour of work of art or or a book be colored by how the author led his or her life if for example an author was a total sexist pig and his personal life and did not respect women at all I mean should I as a woman really yes the two answers first as far as Rousseau if he gave his children for adoption I will not follow anything he says about educating children right or how to deal with children or anything about morality because even at a time I was not moral if someone behaved in a certain way you know that just as knowledge our knowledge grows all right okay our ethics body of ethics evolved over time little rule that now exists before the Romans the civil rule was not applied by the Romans which I think should be applied treat other states the way you you want other states to treat you alright and the Romans would go be the crap out of anybody you know because they liked it okay so so can I judge the Romans backwards using today's norms no but you have relative to the time you can say it's more ethical than other people at a time so you have statutes of limitation just like simply because you can't blame people for not having the Internet in 1820 you see because you know if we think that these will have evolved notion of justice is evolving you don't want tomorrow someone to say she ate meat I don't know if you're vegetarian you're vegetarian alright but me someone will judge me hey this guy don't read the insert' oh he ate cow meat alright for example you see the point okay as far as decision making I have very strict rule I am NOT allowed to give you advice if I'm not gonna be harmed by the advice you accept the consequences I accept the consequences I can only give you advice on what harm for example can tell you what to buy I tell you what I bought okay now when it comes to judging Rousseau they can advise a lot of people the problem with again if people don't lead the life that they advocate there's a problem because their message means they can't even apply to themselves so forget about that's gonna game that's epistemology 101 right so but so then this leads me to then what is your vision for an ideal Society because okay so what we're skirting around so how much longer do we have here let's do minutes okay alright so so an ideal society is a society that's built where no one makes decision in telling others with impunity period okay if you want so none and you can build a society like that it's called Switzerland Switzerland is fractal bottom-up you don't know the name of the president okay you because it's decentralized and the central state sole job is to remedy things or work on things that you know every small little control it doesn't want to deal with okay that's it just it's not a country it is a collection of cotton collection of municipalities at a municipal level and then the other thing about political systems I don't believe in right-left stuff like that because I said it if at the national level I can be easily libertarian republican at a state level and communist okay at the commune level okay you can you can be all of them it's just the level of the the scale at which you will act because once we say that there's a scaling so this is why Singapore works but not China doesn't work as well socialism work may work in a kibbutz but not in the Soviet Union all right this is where so the ideal Society is which one in which the decision of whatever you want to do is taken locally and flows up rather than is imposed from the top and also one in which the newspaper journalist because there is no 1% of people who don't have skin in the game so my ideas my morality is if you are a public figure then with it comes Morris taking so sure knows and responsibility I'm responsible to expose fraud that's our journalists job not to start getting into a collective you know monoculture right you have to straight and then you see all of them they they lump and you have evidence that they cluster all right you cannot cluster for example and there are other things that for example I say if I am a I don't want to be a public figure except for things that entail some risk when I voice them so when I called Bob Rubin fraud okay there was something that caused me some problems all right so and then I had attacked Monsanto it caused me some problem I'm exhilarated because it gives me skin in the game because life is about risk-taking okay and but before we open up to questions quickly is there anything new in the works book that's I mean the insert' those five volumes there is a technical version coming out it's done it's on a web for free and I'm starting a publishing house for it simply because Springer on surprise to book I won $50 $150 and I want it to be at about 20 okay in color so so I'm starting a publishing house a technical book the Volume one of the technical insert though so I think before we open up I just wanted to say I think it's fantastic to have people like you contrarians I'm not contrarian contrarian nice I mean it's like the you know the idea is are you in I don't think everything-everything you here traitor you believe half of what you read none of what you hear and and and what I mean half of your eat your is not about you read none of what you hear and half what you see all right when you say these people are all fake experts are you referring to experimental economists like Esther Duflo that do controlled experiments in economics okay that people have the illusion that in a very complex domains that you can do experiments that's addressed on the Black Swan and it reduced for experiments and then claim that you can generalize to other things so we would like to test the replicability of these number one which we need to see with the effect and two whether what I call the ludic fallacy is you invent the world in which these experiments work but out there in the open the conditions are not there and these are very sensitive to conditions okay so I I mean I believe really that that if economists didn't exist the world would be no different maybe a little you know would save some money but so but some of them no I mean visibly my idols popper is not an economist but Hayek is okay well there they are there is a rigor in economics that comes from thinking that needs to be retained but and and and very robust it is really about sort of the robustness and replicability and I think that's where discipline mixes economics run into trouble right and that's where physics has the upper hand whether you make a measurement of the acceleration due to gravity in Timbuktu or in Boulder you get the same answer exactly exactly and then a lot of the regularities you see turned out to be not yes you see the so what do you think about the Platinum rule which sounds like do unto others the way they want you do unto them I know Mudd was the problem if people want to do something for themselves it should be written services themselves and I should not have the guilt later on of having inflicted I shouldn't I saw some economists played with the same theory so I should I shouldn't bear the guilt later on of having inflicted some damage to others so I I don't know I mean it's the same thing with with finance I encountered that situation where people want me to do something for them then I'm doing for myself and you lose money I feel guilty but if I'm doing it to myself as well I don't feel built the rule is we go but we have have equality engenders and the representation of question but also in here okay that given that all people beat most people are prejudiced against both people right so we have to have some kind of privilege by getting you know all right so hi um I was just wondering what you think we might be able to do to help each other um maybe for some psychologists the intention would be to decrease suffering but I appreciate what you shared about how it's not always effective so what do you think we can do to show up well for each other I don't I mean the question is how can the economist tell me how we could do something better at um um go start a bakery or something like that so and when people young people say how can I make the world a better place they always come back to me with some idea of NGOs and have some evidence because from data that we're getting now by um behavior that loves in NGOs there's a lot of rent-seeking that take place in the in NGOs so it starts off with good intention and then anything rots after a while so and I tell young people don't do three things start a business take risks we need you to take risk for society right because society cannot advance by if anybody wants to get a salary from an NGO so take risks that's the first one second one do not signal your virtual okay in other words whatever you do do not do not try to rise by signaling that you because because a lot of games have been played something called Peter frosty oh I'm saving the children like in my hotel room save the environment not save money for them you know the say save money for us by not putting your towel why do you use the environment or because we're virtuous want to save the environment a lot of people play that game and what I call the merchandising a virtual do not engage in a merchandising a virtual and the third advice is do not let do not help people who are not who are in a zero-sum game okay because the whole problem is rent-seeking is a zero-sum game when someone gets a Nobel when you're gonna get their Nobel 500 people be very upset okay but if you've made money a lot of people are gonna happy from it you see this is where they are you have to increase the activities that be spending that money exactly gonna be helping the economy making money you're gonna spend it you do things with it you're gonna bless when we talk about inequality so the metric we didn't get to talk about inequality that can we talk we have a few seconds inequality is misunderstood if you take the billionaires in America in 1982 and 2012 only 10% on the same list ten percent of Americans spend one percent on a top ten percent of American will spend a year in the top 1% and 60% of Americans will spend a year in the top 10% at least so you have turnover but if you look at societies like France Italy they seem to have less than equality dynamically aesthetically aesthetically it seem to have less inequality but if you're a French person who graduated from in now your life is that's seen equality that's horrible so the rule also I come that comes with it is if you are a large corporation or a person you have to be subjected to bankruptcy in other words that's how you make the system work and effectively people complain about concentration of large corporation in America the life and the sp500 when I was a business school student 1980 something very old was 60 years in the SP the average life of a company SP five all right guess how long it is today it's close to 10 okay like 11 measured with birth you know if you're just 10 years so that is to me that's good in other words people at the top because people don't understand that the system cannot work if everybody gets to the top you want people to be displaced you want academics to be tenured you want circulation you want as a French state call it plus or Zota and the French do it by by by basically no civil servant can stay there after 65 right when they start to understand what's going on basically why because because it's not because it's simply to make the system rotate uh you know out of fairness of it but you cannot have systems so this is where when people talk to me but but the rent-seeking you can spot the rent-seeking immediately with these metrics of the same of people not coming down in other words the fare system is a system that will make Google go bankrupt okay so that's a fair system someone there so he seems to be very excited yeah do you just want to shout your question and I can repeat it on the mic maybe okay it made its way so I had the strange thought that the people that have in terms of risk the most skin in the game would be a bank for instance would be home a bank robber a bank robber no it doesn't mean okay the thing is skin in the game is necessary all right but not sufficient okay so and let me but okay so this is let's put it this way I baited a fellow I despise his name is Larry Summers and because he basically up the system by having every mistake in the book he made it okay so in Larry Summers were sitting down a trying to make me look like my idea of the Skinner game is to replace everything else okay and everybody you know he manipulated it okay into the skin in a game is necessary okay it's not sufficient because they could say that bank robbery or criminal has come the game okay I have a question there's someone else because we have to rotate the lady here there's a lady lady lady lady right here she was okay I have a quick question I haven't read any of your books yet and I'm wondering which one I should start with skin in the game I'd say the last one but the hardest one to read is anti-federal and and that's the one because it's about how systems love disorder all right and how systems need disorder how so I prefer anti-federal personally if I had to reach something I'll read anti fragile I don't I don't but the but the no no the Black Swan is a book that that because the image that that vivid image is a bunch of people who didn't read it start talking about it right so she's gonna read it let me tell you what I did after the Black Swan the Black Swan was clear you know what's going on by looking at a table of content so anti fragile I started the chapter titles are like made in such a way as to nobody can ever figure out what the book is about I [Laughter] think are you saying that Black Swan was like a brief history of time like everyone wanted to buy it so it was a shelf exactly it's so yeah and and but but and differential is actually read and you see people you know coming at the the and then my idea also of a book a book is not a newspaper article and it's not scientific papers a book is an experience so the interesting chronic and of course editors don't have skin in the game because they're interested in the beginning emissions survival so it's an experience all right so the the the the you know I think that it was time over time it got more unconventional so my my and and and and I became more aggressive in like in the game is the latest but Fat Tony is not present this kinda game so Fat Tony is and would come back I killed them at the end of anti fragile right and guess what I regret it okay the last two questions they've both emphatically have their hand for a while yeah very quick questions please I take your point that Citibank should have failed I didn't say she'd eventually have failed I said Citibank the problem is we financed Citibank okay but we've been claw back mister whatever his name is alright that's my point my point isn't I'm not going sort of would have so the whole idea is people are hijacking you bankers are hijacking taxpayers by making put himself in a position where they're of national interest to be failed and I have a solution for it if a firm is to be bailed out okay should that collapse then all of his employees are civil servants okay and the Chairman cannot pocket 25 million if we're gonna bail them out later so that's the role you can bail out the firm no problem but it is government a because effectively Citibank is a government agency paint or Fannie Mae or paying executives thirty million dollars explain all right so that final question from he has no hair that's good and he has a goatee with no hair yes okay very good very good so we have a good representation of thank you thank you for some equality here is there anything in the work of Paul Krugman that you agree with or admire okay let me tell you something about Paul Krugman right when I did anti fragile if anybody knows anything about mathematics nobody would grant them that Nobel and but and I told him all right I mean he said oh well you know what I don't quite know this what the his authority comes from a Nobel on something - something rules international trade that if you change if you make one parameter that's fixed random okay the things reverse so that's to start with so when you have that thing I think that Krugman is nice journalists okay who doesn't have skin in the game and he gets almost everything wrong so that's what I'd say but but the point is not whether you're wrong or right or wrong it's just like the point when a soldier is not is the point is if you have scars or if you let other people get your scars okay Paul Krugman is a person who never had scars so to me he's one of those to me that the the evil in society is represented by people who don't have scars okay that's that's the evil a society to me because your cab driver will have scars as an accident he's risk his life driving all right and actually you know when you drive a million miles a year it's a lot of miles okay so he has eight times the probability i don't minimize no I know a cab driver has multiple times the probability of dying on the road then another person okay so a lot of people take risks what the does for good would do just like make statements that are unimpaired chol okay and survive because you know that's that like class of people you know just like has has wrong metrics no so anyway let's wrap up and say that one thing that we can all get behind what you've said is that life is not a zero-sum game that should not be a zero-sum pain that's the way to think exactly should not be I mean you come from India and I've noticed countries like America and a lot of things or Switzerland in Switzerland people wanted to cap salaries of executives it didn't work but they're closed salaries it didn't work but they wanted they thought about capping salaries of executives but never salaries of entrepreneurs okay so they detected the difference between these two categories you see but you'd come a lot of countries or any country in which being a politician brings prestige is now a zero-sum game okay that's that's that's a nice heuristic it worse 90% of the time [Applause] [Music]

Channel: Jaipur Literature Festival

Views: 8,783

Rating: 4.7916665 out of 5

Keywords:

Id: XOkPiRDYgZ0

Length: 61min 40sec (3700 seconds)

Published: Mon Dec 17 2018