Nassim Nicholas Taleb on the Nations, States, and Scale 7/11/22

today is june 20th 2022 and my guest is nasim nicholas taleb this is nassim's tenth appearance on econ talk he was last here in july of 2020 talking about the pandemic nasim welcome back to econ talk thank you for inviting me again and and thanks for allowing me to test my ideas on you before uh completing my my books and also have to admit that a lot of my uh economic education comes from econ talk the reasoning the economic everything the case from the economic reasoning because you read stuff in books you learn it at school it doesn't work in a podcast form because you have a conversation between two people somehow it's it it helps the idea sink in and stay there well i said it's a huge sacrifice to have you on again uh like like a few other guests you're one of my most popular guests yes you're also a guest that occasionally there might be two or three people who ask me why do i have you on but i booked the trend i'm a contrarian and you're back um i have i guess i guess if it's only two or three people uh i may be doing things wrong you need uh you need to have more enemies i mean more enemies yeah okay i'm very polite it might be 30. it might be 20 or 30. um our topic for today is uh a big picture topic we're going to talk about the nation the state and some of the principles of governance we're going to draw on a few recent pieces of yours on these topics that we'll link to i want to start with the difference between a state as a nation which you talk about in the ethnic sense a nation and the state as an administrative entity what's the difference why is that important for for you know the notion of nature and state is extremely modern and i think it's not till 1780 that that people started talking talking about it and and of course you had what we call nations now as territories of kings so and then the king would acquire the territory or expand whatever the kingdom would be so so the and then of course people became became addicted to the notion of nation state and then we had uh the german italian unification and other things but in the past and of course the french what i call domestic colonization when when they they just realized that they were in a state and about 50 60 years into their ideas that now were a state they they decided to destroy anything that was not french and france and french as defined by the upper class language that was spoken in the area uh near paris so uh and then jude ferry banned all uh local languages you know you go to school you get punished for speaking uh the dialect of strasbourg the germanic dialects or other uh you know they call them dialects of course because dialect is is basically dialect is something that doesn't have nation state that language has a nation state anyway so so this concept which is a fairly modern concept a couple of hundred years old or maybe even less uh this was the nation as a homogeneous ethnicity speaking not necessarily homogeneous like for the french the idea of the nation was those who would want to acquire french because it it was the the formal language so so not necessarily ethnic and then again the notion of ethnicity is is very weird because you know you have recombination recreational ethnicities every day just like you have languages are born every day uh they separate so so you have ethnicities uh developing all the time the the and the turks for example uh when we talk about ethnicity what is an ethnicity is it a race the turks created their nation state and and that's when they decided uh to lose whatever tolerance they had for uh the other and you know turkey was turkey today was when it was the ottoman empire had a huge number of ethnicities or people speaking different languages armenian greek kurdish and then in the south turkish speaker with alephis people christians before greek and then different varieties greek monthly then all these this mosaic of people and people who spoke uh the levantine dialect and some parts of turkey you had all of these and then they became a nation state and short and four they tried to destroy all these minorities i mean visibly we know by the armenian and assyrian massacre uh yeah they also had people who spoke aramaic there and so they had the massacres and it became intolerant because the nation state by definition something intolerant and uh and and of course uh you know there's there's one one interesting thing about it is that it's not really ethnic because when you think about it when you do the dna of turkey today you realize that's maybe about seven percent turkic at the most the entire western turkeys greeks the greeks who speak who convert to islam and was islam came to the turkish language so what is the sense in which a nation in the ethnic sense is is a meaningful example one is very small okay one is very small and uh the the to me if you're gonna have a nation state it must be the smallest possible unit because if you make it too big then you start having minority problems you start having uh conflicts uh and let me explain it okay uh in this term uh when p two people uh and why scale is important when two people are roommates they can have fights they may not get along but then you you you instead of giving them say a thousand square feet for two people together at school or you break it to 500 square feet for each and each one has an apartment they'll get a lot better and there have been studies uh showing that good fences make good neighbors and and we saw that in yugoslavia i mean we saw that in switzerland historically in love with you know these canton which effectively are sort of states small states under some kind of umbrella but if you if you look at if you look at what happened in yugoslavia look they're getting along now how many states have croatia montenegro uh slovenia the the north macedonia all these states okay they get long because each one has a little so even if they're open to commerce with others see it's still better than what it was before now there's two aspects of scale here one is that in certain dimensions and you can expand on this obviously in certain dimensions small works well generally there's some economies of scale also but small works well but it's not just that it's small you're making the claim that when i clump my smallness with people like me my ethnic group my so-called nationality we can solve our problems in certain dimensions more easily than if i'm trying to negotiate across roommates is what that's the point you're making right i'm saying i'm saying like take take a very simple example cops in egypt okay the cops are being persecuted in egypt but if they had their own state within egypt if they were not geographically distributed but they were concentrated in a small state it would be a lot better for them and and it's the same thing with with a lot of a lot of countries so that idea of the state is modern okay the state as a person uh as a sort of an entity that kind of hegelian you know idea of verification of you know states it's almost like a person and a new person okay composed of others uh that fueled a lot of germanic uh ideas of course we know that we know um that idea is very modern in the past you had ethnicities you had different groups but uh the administration was a city and the city is a place that obeys uh laws okay some laws and it's pretty much it was an administrative entity of the city and city state flourished where nation states historically and i discussed that antifragile uh turned out to be fragile empires feared well what's an empire the difference between an empire and a nation is that empire has absolutely no interest in your life other than collecting taxes and making sure you don't wage wars uh you know uh you don't allow their enemies or wage war so basically it's a tax uh it's a mafia scheme it's a it's a some kind of uh piso as the italians call it so that's pretty much what an empire was and and the emperor i mean the emperor empire lasts long when when they don't overcharge the people there so they're happy and i know the the history of the phoenicians they never really had a big nation they were uh small states small cities city states and uh and i said okay so what the persians are gonna come ten percent okay you know cheaper than have an army and who's going to come after oh you're going to have uh you're going to have alexander's account 10 cheaper than having an army and the romans will come 10 okay when you say 10 you mean tribute to the home tribute to whatever to whatever you're going to you're going to pay them so it's cheaper in texas yeah it is and and and and the the after the the bronze age collapse you know there was where all these uh big states uh vanished the big important states uh you know uh egypt you know was was brought to its knees the the the city-states of the eastern mediterranean flourished so in modern times yes city-states are rare and if anything the impulse is to to expand so the classic example would be uh the su dayton land right so there's a piece of czechoslovakia that happens to have a lot of germans so hitler says i think that should belong to germany because those people want to be part of germany now of course some of them did some of them didn't their neighbors like the cops you're talking about they were not all in one little place they were spread out among other uh ethnicities and other other peoples and nation states tend in my historical observation observation history to expand to try to grab more of the local ethnic group rather than to be more pure homogeneous so what's going on there that's true it depends if you're rural or if you're uh are you rural or are you uh uh you know not urban but based on uh you know is are you deriving your your uh your livelihood from land or from commerce so the phoenicians were not interested in the land they're interested in commerce same with venice take singapore today you see they're not interested in conquering land they're not interested in geopolitics they're interested in making money so they become that there's that tolerance of of city-states that you don't observe essentially one observation you are located in a nation-state now currently as we're talking okay a few times on the way yes yes and and what's the name in the the the language their language what's the name of that state i mean i'm in uh i'm in israel which is what's the name what's the name the city is jerusalem that i'm in no no the the name of the state only passport what does it say israel no it's not me it says not israel is that okay so so from the israel no no not means actually in arabic the same word means city so it means is law it means i live under the laws of of israel and that's the city city state is the body of laws if you look at it like most i live under the laws of of of that place you're under their rubric the modern nation state which of course is there there are many different ones of different sizes they have varying abilities to enforce their laws up to their borders meaning yes in the united states if you live in south dakota or california or texas at the edges of the country the federal law pretty much still applies you can hide in a cabin somewhere off the grid maybe for a while but in general you're going to be subject to the administrative entity known as the united states but there are other nations where that's not so true right you live in the borders of that visit that geographical country but the administrative entity does not fully extend all the way to the border reliably is that that's correct no uh i i kind of given them kind of an example somalia yeah china on paper even sure of course even china's which is people think of this korean state i mean that that was actually what you're saying traditionally held okay because uh the today that the modern state has tools they represent a lot more of the gdp than it did before in france up to i don't know how you counted education 50 to 70 percent of gdp comes from the state whereas 100 years ago it was uh one almost an ordered magnitude uh lower so the uh so the state was not very powerful in the past and if you take the land the french language distribution in france for example it was along the tax routes so that that that because the king contacts these areas so the the it was very limited the access of the state they didn't have radars they didn't have satellites they didn't have uh all these tools of enforcement they couldn't spy on you uh they didn't have the internet so we had the state is had had different morphology but let me let me make a comment here why size is central to what we're discussing because people keep using names state nations and stuff the size is central uh you you do a lot better i think meeting a person a thousand times than meaning a thousand persons once so in other words you're in a big city like new york city you walk out you're gonna see uh every day different people which is gonna okay so whereas in the village you're gonna probably encounter the same number of people assuming you're encounters it would be the same people so it's like noah is a friend the person that you see a thousand times you see one person a thousand times rather than a thousand strangers once you see so the the things don't scale properly there are things that that work differently at a lower uh scale than and that's what i've discovered while working on volatility models to show that why an elephant for example is not a large mouse an elephant is vastly more fragile okay because of the waist risk scale an elephant falling by one meter would break a leg and would never recover a mouse visibly is vastly more robust okay so so we can see some some biomechanical things and and and and it comes from the non-linearity of shocks and and and to use an example i i have an anti-fragile the story of the rabbi who one day was asked by the king to find a solution to the following problem he had to punish a son who committed a certain crime and the punishment was to crush him with a large stone so the rabbi said of course there's a solution he said what he said you break the stones in pebbles so that non-linearity falling 10 meters once is vastly worse and falling 10 times 1 meter so most of my work since uh like 2009 has been on this only finding you know the effect of these non-linearities in places and and and hence you know a large state is nothing more fragile that requires uh an extraordinary uh increased expenditure in monitoring so when we take russia for example that has always been a large state it has to curate an identity centralized has always been centralized always has a created identity and throughout the three regimes had the same system you see the that big uh uh sprawling country and and and of course it has to be aggressive because that's the mode on which russia was built the three regimes you meaning the tsarist regime the communist regime and whatever you want to call that not what we have almost the same apparatchiks kept moving what happened is you kill hank or or fire the top uh people in administration but as we know from trump's experience he went to washington you know he you know he had to face an infrastructure that was entirely hostile because they were all democrats and didn't like him and you can't you can you you can do so little you see in the administration when you change the regime the same thing happened in iran the same they kept the same uh the same apparatus that the shah had you know to monitor this and they used it and and of course the the the local uh offices have got to be the the practically the same people it takes a long time to change the administration but and when it's large it is it is when it's large it is a severe problem so i don't let's go a little deeper into this let me let me start let me start by i love it's a very provocative idea that if i see a thousand people once is very different than seeing one person a thousand times it's a very interesting way to think about um quality versus quantity in terms of how you interact with your children um it's a very deep idea it i don't see how it works in this case though so that's what let's start going by going deeper into that and for example new york city would seem to me to make make a pretty good city state but are you saying it's already basically it is obvious but it has to be brooklyn manhattan queens and even then i'm still not going to see somebody inside a village no we have we have to understand that the the the us is not a uh a republic the us is a federation where you have a lot of uh power to the local municipalities and local cities and new york city is effectively a state you can view it as a state the way it does business uh the area the new york area is pretty effectively a state it's they say they say that the optimal size of these units is about eight million see so so the notion of city state is is i mean let's not go by labels let's go by the function if you look at functional like the area around london area around amsterdam and then the word tend to cluster now in these you know to these kind of zones but the nefarious aspect of the state that i was discussing is is when you have a top-down state and it needs to curate this identity all the time becomes like russia very aggressive it cannot tolerate uh the you know neighbors who you know don't abide by their uh by their rule it's imperial in in nature and then of course you have the story of ukraine now to go back to uh uh the notion of empire versus nation okay we are going to you know the beauty of an empire and the ottoman empire lasted long the roman empire lasted very long the habsburg empire also hungarian lasted long it was multi there were always multi-ethnic and mostly you know distributed states and they were there for their attacks you know and and of course to dump to make sure that military is the area of theirs but not the police i mean you can you know have a local police what is important and that's saying that uh we recreated that model using nato you see when where you can have now instead of having an empire protecting you you can have a some kind of self-protection mechanism via some kind of leak okay well it's a way of overcoming the economy as a scale problem if you're small you're gonna stay small exactly so what happens is that when you have economies of scale the the the the notion for when when i keep arguing that uh you can't it's not you know the the it depends on the domain it's domain dependent you need to be centralized for a military although in some cases it helps to have decentralized military as al-qaeda and us right replicate their model with the building of this unit but and size what is large okay for example a restaurant was a hundred table is large but a company that makes manufacturers i don't know chemicals uh you know needs to be a hundred times the size to be large or or thousand times the size so it depends on the domain and and it looks like the thing that requires centralization is a military and and of course and i will argue also pandemics and i've argued that that people like von mises and hayek said the state is needed for centralized activities such as epidemics and wars that's hayek and from isis accepted the state they didn't hate the state they just said you know their idea of the state having its function and that function is things that cannot be done by by other units and that's a notion of subsidiarity under which the european union was built unfortunately execution uh is not in line with the uh with the claims the initial claims so so so yes we gotta back up we gotta back up the whole the whole point that that i understand you to be making both in the pieces that you've written recently and going back to your books get in the game and anti-fragile the value of the small scale is to maintain skin in the game it's to maintain it's also you have skin in the game exactly because a local ruler okay a bureaucrat in brussels is not gonna be punished if the bridge doesn't work well but the local uh mayor particularly if is elected among the citizens will you know have you know to encounter you know the cafe on sunday afternoon would encourage shane would feel shame if uh she or he uh you know fail on the project so there is there is some kind of of game and particularly when you elect people embedded from the community but that's a very lovely idea and but it it doesn't i don't know how you get there from here so let me take the you have to look at where it worked and and how it worked it worked very well in sweden and and and and the scandinavian countries that they're already small and they got smaller you know swedish and norway speak languages that are close together okay and and and uh and and when you talk about other countries like uh like in the middle east countries that speak languages they call it arabic but they're like they're absolutely not connected okay i mean the dialects are not mutually understandable but so so they they broke up things as fast as they could and within the the way they they manage their provinces okay it is bottom up switzerland is the country that is built to be bottom up and to stay about a month where you paid most of your taxes to the municipality and the residuals to the to the to the control and and to the local unit and and the residual to the state whereas whereas the things that were came you know from the old world were top down and uh by the way germany has always been bottom up you know there were 300 states before the say the french revolution 39 states when it came to unification uh and and of course now they they had they had their boons so now because after the people didn't realize that after the war the french wanted to punish them they said oh unification then you get bismarck and then you get hitler um you know what let's make sure that there are federations so they unify that's what made them strong economically so they wanted to punish germany by by making it the federation exactly distributing the power make allows for things to work better why well as you mentioned skin in the game there are also a lot of mechanical things and and and uh you also have to understand that the the the bureaucrat thinks in terms of geopolitics and abstract matters whereas a local person thinks in terms of water bridges uh uh cleanliness of the uh schools sufflex yes so as an economist the way i think about it is similar but not exactly the same as the way you think about it i think about is that you know i want to be in in a club ideally i want to be in a club with people who who share my preferences we can then do things together effectively but that's going to be a very small club so it has to be bigger than that usually and i'm going to have i'm going to sacrifice some autonomy some freedom of choice and in particular they're going to be situations where it's inherently going to be a conflict that we don't agree on the size of the military size the police force and we accept that restraint on our ideal because we understand that the gains from uh banding together are sufficiently large when you go past that point and i'll use the united states as an example all of a sudden you're there's a there's a potential cross-subsidization and the political process can start to devote itself to rent-seeking to exploiting certain groups yes at the expense of others and you can't you're stuck you can leave to leave the country is relatively costly and the the the politicians are then able to pass certain regulations and laws that are not quote for the good of the people but are rather good for certain people not for others so what you're suggesting and i think it's um maybe you'll maybe don't agree but what i think you're suggesting is something um that was unimaginable 25 years ago but i think is increasingly likely which is that the united states will divide into more than one country uh california could be could be itself it is designed for that united states is designed to be divided in one country all you have to do is weaken the federal government's role in some affairs and and and and increase the role of the state the problem is uh the every time i talk to people about it the the republicans love the idea of a strong state okay weak uh weak central government on the other hand they want to they want a strong state over the municipalities as we saw with govind so so we already have the structure in the united states for what you're discussing you have states okay yeah exactly so you have statements it's called the united states that that name actually it's just like fred it's an actual description exactly so so people may be fighting in washington over something and an estate over something else what matters for you is what happens in your municipality and in your state not far away and states here are unevenly you know those that have size size problems some states are very small some states are very large or california so texas so effectively all you have to do is redistribute decision making from the central government to the states but that's not very popular although although again i think the south could secede again ironically the coasts could secede from from the federation right you could have california oregon washington state called a new new country you could have the east coast be another country the midwest would be a country and the south would be a country now what would be wrong with that there would be two things potentially wrong one is they'd still need some perhaps unified defense policy although it's not obviously so necessary because they have the oceans but the other idea that that's fascinating which we haven't talked about is that people like the idea belonging to the united states of america they used to i don't think they like it so much i i don't think there's a national narrative that's shared by those four different countries the notion of national narrative again i mean and in my work now the narrative should not be the driver because national narratives change all the time this is why when you're small you it's easier against matter of scaling they can change narratives uh much faster and i saw the piece i was i wanted to discuss today is the one i wrote on ukraine versus russia not because we care about ukraine we care about ukraine of course we care about russia but because it represents the model and and it's uh a thing it's the talk i gave in ukraine during the summer i was a guest of the government and and i saw what was happening uh and where i explained first that you can speak russian it's not a problem you don't have to create you know a new category linguistic category you can speak russian and not be part of russia the russians couldn't get it but the swiss get it you can speak french and be culturally linked to france but administratively linked to switzerland where it works better so first i started explaining that you had to break up that notion of of a state equal uh nation equal people that equality and then effectively you start having pathologies with the nation of state where where the whole nation as an entity okay on balance acts against the interest of the individuals see where you have you have these things that start emerging from from bad scaling so uh and that piece i i said what we have here it's a war and then i rewrote it you know after the war started said we have a war not between two countries not between east and west between a model the new model okay which is nato based where basically all we have is you could have any kind of name so long as our defense is insured as it was during the ottoman empire the roman empire during other alexander under some kind of new imperial power which is nato shared with shared decision making a consideration of military power exactly for and then you do whatever you want outside of that you see and and what what we call the west is not the west versus russia it is west includes taiwan you see so look at and and when you when you look at that model all right it is a of course it's a classic liberal model and when you when you let nations be start working on nations they focus on prestige like napoleon was interested in prestige of france the english couldn't understand them and he did not stand the english the english was interested in commerce and couldn't understand why this person hurting his economic interest in the name of prestige simply to prevent ships from carrying merchandise across his territory so he couldn't understand the english they couldn't understand they were already one century apart you see we're living in adam smith world where this pencil is made by people who have never met one another and don't even know okay that their contribution is going towards a pencil except for one uh we're living in that world thanks to some globalization and of course it can have its uh its limits so so what people are nobody really wants to autarky so what we're disagreeing about is the degree of the limits of that globalization you know but nobody nobody wants to go back to uh to otarki so when people say i'm against organization they usually mean i would like it reduced in some places to exactly to to be managed better but globalization visibly is the the the name of the game today and and that idea of people uh obsessed with national identity prestige and stuff like that is very archaic but it was already archaic 225 years ago but don't you think it appeals to people i mean isn't isn't part of what we talked about uh brexit with megan mcardle based on roger scrutin's book where we are don't people have a sense of self part of their identity that comes from where they live it changes all the time that's the problem why is that important explain uh okay the the the the what you this this is why i like the minimum deliverable see the the the the minimum deliverable unit uh in size because when when things are small they can change more easily whenever things are big it's again a matter of scaling you see running russia versus say uh is much much more much much more difficult uh much more than ten times much more difficult than running a country a tenth of the size it's disproportionate you have to curate an identity you have to keep creating an identity oh the state has to keep managing things uh the flag the anthems the history the language and all these matters uh and it gets harder and just disproportionately as the state gets bigger just like the stone harms you more and more as it gets bigger disproportionately so you double the storm you have four times the harm yes in the united states you're suggesting that at its at its current size given its diversity it cannot curate an anthem a narrative a language it can it can because the united states united states is probably an exception to that rule because the way it's built in the united states you realize the federal government doesn't enter your lives that much you know the municipality the county the state the smaller units enter disproportionately and a country like russia under putin as as it was under you know the the the tsars putin now names the governors of provinces and then you end up having a large state with at least 100 ethnicities russia that needs to be curated all the time because otherwise it'll break apart so i want to get this you gave me half the story of this this recent essay ukraine is western you're arguing it is de facto kind of under the umbrella of a military confederation known as nato france is part of that germany is part of it's not there yet that's what it wants to be i understand yeah exactly it's aspiring to be part of this uh what you call more bottom-up quote western approach did you point out western is a misnomer in the sense that taiwan is in the west it wants to be a independent um entity what's the other side what what's what's against the west the other side is a tsarist model okay of centralized over-centralized administration curating an identity and a large territory and needing to acquire more territory because you have to think of the genesis of that okay think when we had venice venice was a flourishing republic for 1100 years more or less some years uh venice it did not try to acquire territory it was that's not the business they were in you see that i mean it tried to acquire places like famagusta and other other spots for commerce but not like for the sake of territory and that was not their business you see russia has businesses to acquire territory plus we have to think of russia why but why why can't it just well that's how it's happening you know that's how it started when you talk about ethnic state and that you have said ethnicity as of one you see when people go back in history and say oh this is a territory as okay but every piece of the world that had belonged to some other group so claiming uh historical answers but russia is very weird because it's the one it has it's two exceptions one is the the a place that was formed by migrations coming from west to east you know from the the the volga uh the freshwater vikings coming down and mixing with these populations west to east and the other one is it creates its identities big identity rather late in history and then you know we're quite in this i mean you have to remember that uh that uh in the 13th century kiev was a khanate of kiev you know under the grandson of genghis khan so that eurasian steps is is the one the mediterranean was settled early with the original steps of the one that was settled the latest so creating identities and things that that formed late requires a lot of work a lot of a lot of a lot of work and it was helped by orthodoxy not because of the religion but because they had that slavic language or church slavonic as a beacon as a pure language to work with but but that that curation challenge which i understand it's you know it's like um i understand the challenge of it but it seems to me the point you're really making is that a state of that size with that loss of skin in the game that loss of accountability for the people the people you're if you're living in in um going to say leningrad uh if you're living in what is it called now is it saint petersburg yes okay thank goodness didn't humiliate myself completely you know i had coveted recently and assuming they say covet is tough on your memory but i don't know it increased mind yeah well i mean i didn't have very good memory i forgot stuff a month ago before i had coveted two and i get tired in the afternoon before i had coped and i still get tired in the afternoon i'm so tired with coven um but anyway um if you're if you're living in saint petersburg it's true you care about the how the whether the water's clean whether the the bridge has potholes that is safe you care about the quality of your school if you're going to a public school and so on and it's true that if putin has basically named the mayor of saint petersburg or named the head of the province or whatever the you know the governor it's not not going to work very well but isn't that the essential point that the lack of skin in the game of a large centralized top-down place is the problem not not this curation identity there is there are a lot of things together but uh skin and game that's not one of them it's multifactorial but i think that it's also easier to manage when one small other than skin in the game it is communication wise because things grow you know the connections grow you know non-linearly when you have a large country so having this communication network of all that requires more and more effort to just keep the thing uh centralized so centralization has not worked in practice aside from skin in the game and you're saying the u.s is partly an exception because it's a more federated system it started as a federation in the united states it is uh [Music] and the individual has a big role in the united states you don't have a national narrative you don't have a national language you speak spanish you can speak spanish the the common narrative is the law i mean that's as people talk about the constitution as if it were religiously the the you know the the there's a the the mechanism you know of the united states actually has been used as a model in europe you know to try to have the same the same the same the same thing to hold together these bunch of countries now the new legal system called eu and a lot of people are using the the united states you have to also realize it's a the oldest it was the oldest democracy is functioning in in at the congress of vienna uh there were only two democracies and people didn't understand where the king i mean who does it belong to because before when you had kings it belonged to a king so it's a it's a country built differently and it works but i like your metaphor that the thing i've enjoyed so so far that the most of what we've talked about is it's better to be a mouse than an elephant uh in in many times many situations because you're more uh you're anti-fragile but of course there are times you'd rather be an elephant um when there's a lot of cats around you know of course the elephant is has got those advantages and that's the that's the guy yeah but look at survival and survival let's look at numbers you don't have a lot of elephants left the mammoth went even before we started messing with the environment the mammoths disappeared the larger animals disappear quickly they go extinct very quickly it tells you something about if you want to survive the amount if you're you want your genes to survive or species to survive yes but that's one of your big that's your other big point in some of this writing which i also love it's one of the deepest things i've learned from you that uh as a species as a group uh we really want to avoid ruin and ruin for one person is a tragedy of course a death a single death is a tragedy but a uh the death of a people the death of a species the death of a of a humanity on the surface of the earth that's apocalyptic that's a cataclysm that's a catastrophe it's not a tragedy and that we should be very aware of things that threaten ruin we should do that as individuals too i think it's a powerful personal lesson but but your point is that mice may be vulnerable to a stampeding elephant but mice as a popular a mouse might be a vulnerable but mice they're hanging in there they're doing pretty well exactly we have we have more mice in new york than humans they claim right you can't say the same about elephants in africa even if you if you scale by you know by the size uh i i have a couple of more things uh uh you know i would like to discuss with a modern world so and if effectively i just thought of contradicting your ideas or the united states should break up the rest of the world is trying to resemble the united states it is trying to work to resemble united states the structure europe for example so it's not i mean we're far away from that okay so uh it works and it doesn't work in many other places that are large because this structure is effectively you you don't need to belong to another country because you don't feel the need but you feel the need to belong to another country if you're in if you're in tatarstan for example part of the russian federation you want to be out if you're tatar you want to be out of russia if you're english you want to out of russia if you're chechen they tried okay by the way uh was you know before the ukraine was even more disastrous consequences more more more live lost you know per uh you know per per square mile uh so so one thing i'd like to add is the perception of the system and that's an idea uh i'm borrowing from tokyo and extending to the modern world we live in a free world okay but sort of like yeah let's just say not so free because that's a reason you feel that it's not so free because it's free you say and it's improving so tuckfield realized that the degree of dissatisfaction in the country is proportionate to how good things are you see so if you're uh and then effectively if before uh we had the internet people weren't obsessed with freedom of you know about this people spying on you but the state had j edgar hoover you see that now so so the more people talk about uh loss of liberty and stuff the more liberty there is in the system see at no point in history have we had uh you know more given more rights to people who were are underprivileged but at no point in history have people complain more so that comes with a system like you see another phenomenon where transparency is is it a be a problem because you tend to see the bad things more easily in the western world whereas in places like russia and opaque systems and you don't see them see you see the general you don't see what's going on and people don't complain about it so so what happened is states like russia and china have tried to exploit that attribute of the western system by creating a distrust of the government on the part of citizens you see by you know finding examples a cherry-picking example it's a mel you know of course you have malfunction everywhere it's not perfectly free but it's free generally free stay well so i do think i think vigil i think um vigilance is um is the um constant vigilance the price of um of liberty and fighting tyranny is is is always important and i just blew that quote because i've had coven i can't remember correctly but i may not remember by the end of our conversation but i i want to come back to your point in the united states in a different way i think it would it would help i think maybe listeners see this helps me see it when i think about if the united states had a federal police system and we have the fbi which is a federal bureau of investigation but suppose all police were employees of the united states that's a remarkably enormously different system than san francisco having police or new york city having police so all of the the terrible things that have happened with police in the last 10 years or so and of course remain that before we weren't as aware of had created enormous backlash but it's localized and the people who are accountable uh have had trouble if it was at the federal level it would be hard to hold them accountable yes exactly yes it's profoundly important that in this country the scope of the united states the fact that police is decentralized even though it they're it's imperfect doesn't work great it's not not perfect it doesn't have some accountability which you would have none of that firing the chief of police of the united states because somebody in san francisco was treated badly or somebody in new york city would be unimaginable and it would just persist yeah so there are two things things that are imperfect okay but functioning well self-correcting mechanism i call the west a self-correcting mechanism okay with complaints cause self-correction so long as complaint leads to something we had snowden arguing about ticks and i think i don't think that he did that in earnest he wanted to hurt the country whatever but it led to some correction okay whatever leads to correction there's a good system now uh the the the the the this is very similar to food by randomness the problem by randomness okay because uh you know as you said earlier the deaths of a person is statistic that that's sorry that's a tragedy i didn't say that that's what stalin said i said to millions as a catastrophe so all right so the the way we perceive things is uh again scales and and i know that from trading if you show someone uh his p l alive he or she would go nuts they would they would do they would magnify us if you look at the screaming cnl being profit and loss yeah profit and loss if you if you're a trader and you siri piano throughout the day you go nuts you see you have all these emotional swings whereas if you see uh see it every day you you have uh the you know it's better okay and and i gave the example and food by randomness by saying if something has a uh one unit of uh standard deviation for one unit of returns okay you have say 51 chance of being profitable any given day you see but you have a very high 90 some percent chance of being profitable over a say a year so uh the the over longer the years like uh something like that okay so the the 85 probably been profitable over a year but but but very small and intra intra-day is nothing 50.01 so it's the same thing with when you have details so what this information does is provide people with a lot of details rather than the central city drown you in details so you don't see the thing it's at scale we don't see what we have scale you're giving a theory of propaganda if i'm if i'm yes i'm surfing on the web and if my facebook feed or my twitter feed is full of these little nagging thorns of dissatisfaction yes i might start to think i have a bad life when in fact i have a great life just it's not perfect exactly you you want to prevent yourself and and the therapy i you use as a trader is you look at your life to date p l you see so when you focus on your life today p l put things in perspective say what this is tiny or you're here to date sometimes when you have a good year but the best of focus on your life to date you know this is tiny and it allows you to continue but a lot of people don't do that they they're drowning in news they're drowning and we're not good at scaling the news so you have a piece of information you know how to put it it's well-known statistical uh problem you have decision scientists and psychologists you know who who created the whole field with it the conumentversky approach all that how representative that piece of information how you overestimate its value so this information will play on that whether it's vaccines uh or other things so just to tell you that hey we live in a under in the tyranny why because so it so happened okay because you have truckers and as i said i think that and people manage to make you believe that truckers trying to block roads in canada are equivalent to uh fighters in ukraine you see so so i mean think like that the the the the mechanism is very linked to fooled by randomness now it's certainly true that we have trouble putting things in perspective and understanding the law of large numbers in every direction right that yeah the things it's like when the student complains about the exam being misgraded and you want to say were you going to cut are you going to come in when i gave you too many points you know when you have lots of exams there's no it's not a major injustice if your homework is off by a couple points and it's six and 10 of the grades it's a question of scaling it's the same thing as scaling how your mind scales how things scale you see there's a lot of large numbers a question of scaling how randomness washes out under at large scale and it's the same problem with the with with a lot of other things related to to political life so this is really interesting i see but here's here's my let's close with this question and give you a chance to make fun of libertarians so which i know you do occasionally but there's something right because i i am i am at the arctic libertarian at a you know italian school and uh where i think that nobody should coerce me into something but at the same time like for myself i believe this has limitations right so you're not an anarchist we know that neither am i i'm not anarchy i don't wanna i saw anarchy in lebanon we see it in somalia we see it in libya we know what happens when you have no state okay you just want to you want to correct you want to reform the establishment so this these observations that you've made today and you've started to write about um i would i think you would describe them generally is what is the appropriate scale of the state what is the appropriate scope of the state and that many of the states today around the world are quote too big so that's an interesting observation is it a political message is it a rallying cry is it just a description and observation of how the world works like i guess yeah i mean this is like switzerland you want us to turn into switzer do you think we should all not move to switzerland but do you think all countries should head towards switzerland in some ways or united states or germany uh i mean people when people don't realize when i tell them listen what's the most successful place in the near east or place would like to go to they tell you in the middle east near east they say uh dubai dubai is a city-state okay the other one abu dhabi abu dhabi is a city-state as part of a confederation of city-states the sharon army okay and and they share is an honorific ruler and they share ambassadors okay so so you tell them hey what's the most successful modern country last 50 years singapore ah what is a city state see so so so what and and it's a model for china i mean if the chinese want to survive okay they should read more about the bronze scholar bronze age collapse and try to build themselves as a confederation of hong kongs and singapores so what is stopping that what is the is it is it simply the desired culture blindness culture and not to accrete for power to accrete around uh centers that naturally want to expand i i think that it it all starts with we have bad uh education and and and many things i mean it's like look at french education how napoleon was great because he made friends great are you interested in french or frenchman so okay there's a difference uh the gold is actually more non-interested frenchmen gloria france and the spice frenchman so just to tell you how how bad things can be the education they think that it's an entity religious entity you have to ratify and all that came after the french revolution i mean all this disease of nation state you know came after french revolution and it has some things that are horrible about it to give you an idea what happens the deaths you have in another country don't count on your balance sheet you see so what is what is the the the the christian religion makes you treat foreigners as equal so urea so we had a a step in the moral field a step backwards with the nation state and think about it it's not wars and and i'm going to give you something quite convincing we looked uh cherilo and i we study wars we studied the you know to do the dynamics and the properties of wars how many people died in italy before unification you had hundreds of wars like at least okay that we know of okay some killed three people all right sometimes the same medicine and then they settle okay small towns small wars between people states and this and this and some killed of course fifteen thousand but over five hundred years okay the number is somewhere between we think fifteen thousand under eighty thousand people died in wars the first war cost italy six hundred eighty 000 soldiers first world war first world war six hundred eight thousand people okay so you realize what nation states they like war but isn't part of that aren't you confounding the advances in technology that made the first world war much more lethal was it merely that it was the wage between nation-states right maybe but have you seen states were waging wars we had the the defense of situation wars with the uh the greek confederation against the state so you know the the the persian state but the the when you think about what what what i mean city state have wage wars but nothing uh central that's not part of the record that's not the business they're in well the other point that to make your point when they wage a war it's it it's impact is limited it's your point about you know a couple people drink and drive well some of them are gonna die they're going to be taken out of the gene pool and they're not going to kill other people down the road literally and city states that get rambunctious well they may cause some trouble in the neighborhood but they're not going to accept that quickly it doesn't generalize quickly uh i mean so i'm not wrong to say that never they're never bellicose we have had uh uh you know in italy there it's always over something small and it's never systemic like hitler wanted you know some systemic one of you know the the the german uh uh race to dominate this part of therapists wild territory or or or what we have with the russians so i really like this vision but you know it reminds me a little bit of my favorite poem by hillary bellock although i have a couple um it's called pacifism it goes like this it's very short pale ebenezer thought it wrong to fight but roaring bill who killed him thought it right so if you're it's nice and a poem so it's nice to have a city state that minds its own business involves engages in commerce let people flourish choose their own paths in life and so on but but in a world of nations a city state's very vulnerable and there's a natural tendency towards forming a nation so any imaginable path toward a reduction again yeah i told you nato nato is there that's the purpose of nato that's why i was excited about nato you see that's how it started that's how my whole this whole essay on on ukraine started in ukraine rather ukraine before the war because it was like anibal at portas you know hannibal at the gates you know they were they all saw this monster okay silent monster you know but a bear exactly so it was a bear so they they saw you know at the border uh trying to get in and and sure enough trying to explain the notion of a system where these things don't happen small states i mean i said nationalism works at small scale because you know it's you know you may be you may not like your neighbors but you end up dealing with them and look what's happening in yugoslavia people forget to look at yugoslavia as the best experience we had in years and and there's actually an additional state to the sixth at kosovo as a state now by the former yugoslavia when you think about it uh this is this works i i guess you would also make the observation that that nato's military power uh under the umbrella of a set of nation states uh all smaller than the whole has yet to run amok is that an accurate statement there's never been a aggressive aggression by that kind of confederation it's a defensive confederation is that am i romancing it a little no no no you're not romancing it the only problem was nato i mean i'm i'm going to play the devil's african the native a lot of people say nato is extension of the united states using their colonies you know militarily speaking to do work for them okay and they said european union is an extension of germany using their economies we're going to hit a lot of things but but but you know to end my point is that i've spoken to a lot of political uh scientists over time and not one of them was interested in scaling so you just introduced the notion of scaling non-linearity of scaling to the discussions and you come up with all these results you know that that are obvious and answers a lot of questions that are obvious scaling is is important they didn't think about communism failed in the united in soviet union is it because communism is bad or is it a question of scale communism works in the kibbutz no you had a kibbutz fellow it all sort of worked in the kibbutz no yeah or in the family as we were talking about anytime exactly exactly it's it's it works in the kibbutz but not the the failed soviet union so so we ignore that the the essential thing that that people who work with non-linearity non-linear responses under uncertainty are familiar with so we just translate some of our you know modest knowledge about nonlinear response to of uh foreign affairs political science and and international relations my guest today has been a sim nicholas taleb assam thanks for being part of econ talk thank you i'm always honored to be here [Music] this is econ talk part of the library of economics and liberty for more econ talk go to econtalk.org where you can also comment on today's podcast and find links and readings related to today's conversation the sound engineer for econ talk is rich coyette i'm your host russ roberts thanks for listening talk to you on monday [Music] you

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Published: Mon Jul 11 2022