Nassim Taleb Talks Antifragile, Libertarianism, and Capitalism's Genius for Failure

my libertarianism would be not deontic libertarianism like you know there's a philosophical libertarianism that you know freedom comes first good right and so much as I want errors to be multiplied that's it hi I'm Nick Gillespie with reason TV and today we're talking with Nasim Nicholas Taleb Talib's latest book is antifragility things that gain with disorder which looks at how to create institutions that can survive in the face of chaos and adversity thanks for joining us thank you thanks a lot let's talk about antifragility what is antifragility as you discuss it in the book and you know why is it so important okay first I need to present the tell you what fragility is okay once you're mad fragility is what does not like volatility then then you can realize it well that the opposite would be something that likes volatility and lights variation like Saturn more like stress like stress up to a point and the opposite would be robust robust is like a rock doesn't care diamond is robust perfectly robust what is anti fragile gains from this order and effectively may even need this order for fuel so here you have three categories for objects the fragile doesn't like volatility the robust doesn't care the resilient the adaptable really doesn't improve from fresh and you talk about it in terms of you know materials that robust thing you mentioned a rock or a diamond it's it's just there it doesn't it doesn't gain but it can shatter from being kind of up to a point you know you're always robust or fragile as you fight up to a point right and but then for anti fragility and fragility applies more to kind of systems or human living organism exactly what what people fail to understand and this is we're libertarians tend to pick it up rather quickly that even when you read Adam Smith's you have this illusion that the economy functions like a machine it's not a like washing machine the washing machine needs maintenance it's more like a cat than a washing machine so this human body needs some stressors and everything organic and complex communicates with the environment via stressors so give a you know when you say the economy is not like a washing machine it's more like a cat I mean that's basically it's it's an organic whole or an organic isn't the right word but it's it's a comical organic like complex system yes okay and then it's a true though that in a complex system like that then is every element of it is it kind of a fractal system where then each act or each atom has to exactly it's exactly fractal and says that you have layers like just like the restaurant business okay it's composed of restaurants you see and and for the restaurant business to be robust at least robust or perhaps anti fragile you need every single restaurant to be fragile well you see so it's the opposite of Nietzsche what doesn't kill me makes me stronger I make claims what kills me makes other stronger that's right because they learn they learn from your mistakes and you have evolutionary forces where the individual sacrifice for the collective and works within your biological system even a little cell level cellular level you have your your composed of cells if you harm some cells you see your overall health will improve now this talk a little bit of a bit more about that because most people would say okay when you have a system and if there's a contagion in it if there's a cancer in it if there's some kind of stressor that starts taking over you you know it's going to spread to the whole system is what we hear in the banking you know in the financial crisis that others a contagion and it spreads out you're arguing that actually a robust or an anti fragile system is capable of seeing this part of the system being cancered examining from it exactly it to a you know site the great Yogi Berra sure a good anti fragile system is a system in which all mistakes are good mistakes right you see and a bad system is one as again to prefer as yoga Vera you tend to make the wrong mistakes right so let me just compare the banking system to say transportation all right the every plane crash makes the next plane crash less likely and and and our transportation safer now with the banking system it's because of you may blame it on government I do blame it on government but could be some something else like the way you do blame it I do sort of blame it on large government use large banks too big I mean so the the failure of a bank leads to an increased probability of failure of the entire system and that's a bad system how just with the banking system what's the best way to stop that so that you're not you're not allowing the the problem to replicate okay I have well the way I present things is overall I say what the what federalizes overall system what did that fragile eyes or a system the three things number one centralization decentralization spreads mistakes makes smaller mistakes like Switzerland perfectly centralized smack in the middle of Europe so decentralization which is where we converge with libertarians a second one is a low debt because we've discovered since the Babylonians that bet that debt has systemic consequences whereas equity you know doesn't have what we now talk about this because I happen to agree with you that large debt and you know we're at what 100 percent of they don't even yeah but I'm just saying but just today or yesterday Paul Krugman one of your great friends and nemec's right yeah but you know he was ready wait you know these trillion dollar deficits they don't matter you know debt large amounts of debt so why why does debt make things more fragile let me talk from risk based on all these economists they do not say let's put it this way the risk is not their thing all right so and then so the second so idea is debt and the third one I will say skin in the game so let's talk about that debt leads when you wait to fragility because let's say that you have two brothers one of them borrowed you know they both have provisions about the future of forecasts predictions about the future is one brother borrows the other issues equity the one who borrows will go bust if he makes a mistake the one who has actual equity will fluctuate but will be able to you know survive a forecast error but is it also true that the brother with equity can never really have that big payday for him but overall for the system you see the thing is well distributed per se you know there's an accounting quality so what you have is that traditionally that has blown up systems and has been very good for governments to wage war you know that's typically but and I'm not against credit I'm against leveraged credit you know let it credit is what made commerce possible so what we have is talk a little bit about that so then what what's the difference between credit where you know I you you give me a loan and I allowed you know and I say I'm going to pay you back and that gives me the ability to get something in the short run that will help me produce more in the long run that's a that is a credit rightly I mean most of banking started mostly I trust you you're gonna go to Aleppo Syria and I'm in Florence and you're going to send me some silk and you trust me and and then I give you some money when it's silk and then my correspondent in Aleppo would pay you the minute I get myself that kind of transaction so let's call leather credit you see where you have like that conditional on some commercial transaction being completed okay and it allows also allows people to finance some inventory provided the buyers are so committed buyer that kind of facilitation of commerce is how it all started the leather credit and developed very well before that we had debt in society and it led to blow ups in in Babylon and then they had to have debt Jubilees and then of course the Hebrews also had that Jubilees and and of course say neither borrowers or lender shall be in the settlement you can see that the the and then you had the Romans then like that the Greek sort of didn't like that except for a few intellectual intellectuals for some reason like mr. Krugman like that and by that's you know that's really diminishing the the currency of the term intellectual yeah okay but and and then of course the later on that came back to Europe with the Reformation and it was mostly to find us Wars the that revolution is not financed by that California you told me that you've read my book on a Kindle or something that was not financed by that right financed by equity right so so so that is not necessary I mean it's you can use it for emergencies and and of course we have you know a lot of societies Catholic societies you know akina's was against that and his statements were stronger than the Islamic fatwa against them so just to tell you that we have learned through history that these things that as leverage form of theirs can blow things up so this is where that federalizes now what we have had of course in this economy is a growth of that mostly financed by indirectly by governments because you blow up you know we're going to be behind you and and that was you know that's what we're this is the problem with too big to fail which went from being worried to being inscribed in official policy exactly it became became sort of like the the mode and then and but if you cannot separate the three right large government cannot separate this inseparable the third point is skin in the game right when you're a banker right and you have the upside no doubt side what are you gonna do create maximum number of loans that don't blow up often and collect your bonuses it's like selling out as money option and then of course you blow up now how do I link this to fragility it's very simple fragility a short volatility you see and selling loud money option to short a certain class of volatile and what you have is a banker has the option he has the upside and you have a you pay taxes every April 15 you're paying goes down side okay that's it all right they may make money or still cover this downside so this is this to me is not capitalism it's misunderstanding of basic rule and skin in the game you know start with Hammurabi and it led later on to eye for eye and let the golden rules right well I'll talk about how skin in the game plays out then in the current financial crisis the what you know we know I mean I worked on Wall Street I look at you have a lot of forms of symmetries that are not visible to the public corporation right you start your own the corporation and then you know you go public now and then you sell it to some manager not a professional manager is aim is to look good so you can collect the bonus he doesn't really care about the intrinsic health of the corporation in banking of course you know bankers we bailed them out the banking I wrote on the Black Swan I got so many letters the batterer asked me to prove it because people didn't believe it and also bankers of course then like my book in 1983 by 1983 for the last quarter of 1982 banks lost more money in you know money center banks that quarter then they made the necessary banking money central banking and of course we bailed them out so we start the mode on the Reagan right and and of course later on Greenspan made economic I refer to Greenspan as the fragile ista dodgy lista exactly okay but it's not just Greenspan though the fragile isto who's a system that bailed out by nationalized continental Illinois and then suddenly you know allows this and the symmetries to prevail where is that coming from though is that I mean this is where you talk about it's it's I mean big government is necessary for that but then the pressure is coming from the banking industry well the whole combination big government big central government was a big you know uh bailing out authority coupled with a huge number of regulators who don't have a clue and who eventually are it directly on a stake you know because you know in Africa you see people have outright corruption where I you know give you diamonds or something whereas in Washington you have this implicit you know corruption I call it Tony Blair problem the Tony Blair problem is do a good job and then you go and go be able to work for five million dollars er Goma Sachs so whatever you're going to do as regulator is going to be there to either facilitate your job at Goldman Sachs or make regulations complex enough to make yourself necessary later on and we have evidence of that you know going back to that idea of a kind of fractal system you know Adam Smith said that you know while each person is pursuing their own you know personal desires or their personal benefits the whole system gets more robust but you're saying actually that there are these actors in our system that are not the the manager of the tank what makes a did that happen is that it necessary or is it an inevitable outgrowth of larger and larger economic system it's a it's exactly a no it's not necessary for economic system if you let things fail if it's not that thing fails you're going to have concentration of mistakes you see that plus asymmetry doesn't work very well plus risk hiding where you have irregular I mean I was spent 20 years fighting something called value at risk that is it was mandated by regulators and allows people to hide risk in the tail it's not it's not so to meet when you have skin in the game it solves so many problems people are harmed first by the you know by their own mistakes so with the banking system how do we make sure that the banks I mean this is a common thing that either banks or mortgage underwriters were able to sell off whatever you know there is a there nothing nothing to lose by making bad deals so that how do you how do you keep their skin in the game partially when things are going to be traded on secondary interest yeah I mean use these on you actually don't have to go as far as that and just have at the level of a bank itself all right so we don't bail out banks here or bailing out individuals was true is a securitized mortgages but we'll just take a level of the bank Bob Rubin made hundred twenty million dollars and stuffing helping to stuff Citibank was risks and his boss made even more and then they blew up we're paying for it and bankers even spit in our face by paying himself 2010 high level of bonuses than ever in history all right okay so how do we solve it very simple I have rules either I mean I don't believe in nationalization but I believe as a taxpayer I would like if a I would have a list of banks all right what I mean decentralization solve the problem but if you don't have the centralization have a list of institution in this country all right if they fail would it be a national emergency to save them yes no if the answer is yes you call them up you tell effectively as of tomorrow morning 9:00 a.m. you are you belong to the taxpayer right the taxpayers should be able to set your bonuses okay you see that we don't have a this you know warp incentive who is who is making that list I mean it would be whatever I mean it would be the taxpayer whoever preferred government yeah government and whatever however you want to do you want to call it you know maybe I'm government for that but saying we cannot build out a company mm-hmm all right the fact other civil servants you can see so we have to decide on their bonuses so what would it do enforce corporation to be small enough that they wouldn't be on that list run that's one form right another one to solve associated problems would be what I call a Tony Blair rule the Tony Blair rule you cannot go work for the government and ever later on right have an income higher income that when you earn in that correlation I had it and without paying it to the taxpayer why because I don't want the regulator to go make to make something right to complexify his his stuff to go make five money for myself go work for Goldman Sachs now are they are these kind of thought experiments or do you actually think that these are rules that could be implemented in it these are heuristics I've come up with simple heuristics and you want to come up with heuristics that you know are not perfect but very applicable and solve complex problems without having side effects room okay and to me that it's very important and to have these heuristics and they would that would clean up Washington if you have such a changing room right so you want to work for Goldman Sachs go work tomorrow on the sides don't go work you know after a career and so it should be that working for Washington should not be investment strategy right so that would automatically you control the government you know I mean on our know you you talk about decentralization and one of one of the things that is kind of fascinating about the global economy over let's say over the past 50 years I mean you could argue over the past thousand years is that in many ways that's becoming more and more decentralized so certain certain types of knowledge are more decentralized than ever before economies in many ways compete in a way that they didn't before because investment you know countries can no longer force investors to keep their money in a particular currency in a particular geographic location so are we you know even as we're facing a global crisis are we in fact seeing is this is this any we have access needing some ourselves ok talk a little bit about that and we used to have there's something in the globalization is generally a good thing it is yet if you know how to handle it right if you know how to handle if you let firms fail ok the there's something called the element effect and the island effect in nature is as follows an island will have much higher number of species per square meter than incontinent and actually it's proportional to the square of the area yeah so it is a shockingly robust you know across them so we've lost the island effect now you have Google dominant all planets don't like that's not a problem the thing is if we stop letting these firms fail when they become ill right and they can get large enough to to dominate government so the problem is if you let them fail now computer firms I'm not worried about why what about why aren't you worried about computer because you know they're it's a competitive I'm right Google is a so it's yeah I mean we can see the end of Google we can see the end will be no Microsoft no difference you know the views no defense for you and at Google fails tomorrow or there'll be something else don't worry it's not like it'll be dramatic and the government won't save up right okay so and I don't think they've failed because for that reason given that they know the government won't sail but if you have so you can have some center of the same concentration that's not a problem the problem is we have had in almost all Western countries nominally they say well decentralization just decentralizing but but but effectively they've had more and more power to the government central government like the United States okay so you want decisions to be spread out now government debt as a result of centralization and typically the cause of more centralization it's a very bad circle right you see government debt now it was a debt now transferred to the government it was a small number of people calling the shots and some fellow you know with a beard who sort of looks like me but I hope not too much it's printing like there's no tomorrow right no clue all right why is that and yeah why why is that not is not exactly what we need that we need a monetary stimulus we did I don't know and this know-it-all understand is that the mistakes coming from that right can be monstrous but the point is is that you need to look at risks of things some planes may go faster right but that you wouldn't you know want to be on them because it got a crash right see we look at things was a risk adjustment the standpoint was a risk vision there is another thing about scaling the game bureaucrats don't have skin again especially looking at a local government people are much more responsible for deficits but the real cause isn't the smallest beautiful argue the real cause is what I explained here everything comes back to volatility when you are large you get to be short volatile why a hundred million pound project in the UK then to cost 30 percent more in overruns and problems then a five million pound project so you have a you know these errors scale faster and faster and that is bad for how do we get to a point because clearly at least in terms of political economy and the intersection of big government and big business there's no way in hell we're going to let companies fail anymore it seems I mean and so that what are the steps that can be taken to not necessarily scale things back but just to finally say okay you know what yet we're letting you go because during the banking crisis here people are like look if you let these if you let these I mean I had Hank Paulson it was certainly one of your bed Nevarez you know he said look it's Friday afternoon if we don't do something this weekend on Monday money won't come out of the ATM machines you know they said how do you want a white act okay you're libertarian are you yes I see are the vitally well your other have nationalization of the banks or moral hazard an assistant I would rather have moral hazard well I'm sorry minimize moral ask oh yeah the way to minimize moral hazard you'd nationalize immediately and then and then work with it okay so what we've done is which is something Sweden did Hank Paulson okay the one thing people don't know we're talk about deficits all yeah all right right half a trillion dollars every year we looked at the firm's foreign and the US that were helped by the by the Fed during the crisis of 2008 right we looked at the compensation to their employees half a trillion dollars now that's not government money right is government money and that's part of our deficit Russy that potentially we're going to have to pay back you know banking is a very inefficient business right so I think that we should have nationalized we wouldn't have had the problems we've had later and then you'd be forced to reorganize does do you think it works in in the in the context of GM we're not really active we don't analyze not president was the president was dictating personnel decision yeah nationalization is not something to save the company and bring it back to health that's like Jason because the system doesn't work run okay you nationalize and then you start from you know you have the government has control and we no longer hijacked by the bankers what has happened is the bankers took over the government and with the Geithner and servicers Geithner Paulson ever been I don't know you know if it's definitely Rubin and Paulson you know you need a microscope alright so so you have so it said mafia of Wall Streeters who took over the government I mean look at what happened 2010 how can we as taxpayers tolerate their pain themselves the largest bonus pool ever in 2010 well it looked to talk a little bit more about the fragility and anti fragility argument in in a excerpt from anti fragility or a part of it you talked about how you used to go to after you realize you didn't have to wear a jacket and tie everywhere you went to conferences of kind of futurists and people in the high-tech industry as well as kind of hip investment bankers and at first you thought these people were liberated but then you said that there was a problem with them that they were kind of autistic and that they had an engineering mind well there's something I mean I'm effectively at those things energy which is something called neo mania neo mania is when you want to change things when you think the future is in more technological items and if you look at evidence exact opposite I mean when a room here or sitting on chairs Egyptian but mostly reserved and these cameras go back to the ancient Babylonians but not what my point is that when you forecast the future you tend to add complex items right with and effectively is what you could do is remove the complex items that we are in a modern today that the cameras are removed but the chair out keep that's right that's something and the samurais are models of something that started a hundred years ago exactly they would be replaced by something else so there's something I'll call in the law and maps the fragility the longer something has been in print the more longer it will be a breath right the longer had technologies anything non-perishable so things are supplemental rather than kind of revolutionary I mean we're not content no I please even even beyond that it's like we're more into improvement the things that exist already then than anything else well this leads to one of the things that I thought was most interesting about antifragility was your emphasis I mean you're teaching at a you know you teach risk management you're good at math or let me but it does what you get into a lot of arguments about math yet your writing style and your your field of reference is very literary is very home Oracle okay and and at one point you wrote that you know the one of the things that bothers you about economics and about a lot of social sciences is there's an absence of literary culture and that that leads to a future blindness talked a little bit about that because the way we're taught in the u.s. is you know you know kind of literature the humanities are kind of or it's like frosting you but I know III okay I have a my feels a little different is I like to teach the classics not to teach what scott Fitzgerald ate for breakfast at given day is that to me is not literature that one right this is why I don't hang around the three circle right you are famously anti our chief arts exactly so you're right about this is I like the the the distilled wisdom of the Ancients it's a remarkable amount of wisdom that in fact is something anti fragile twit or at least robust if you map fragility into has more downside than upside from random events which is exactly what is concave in mathematical form of shade is hates volatility once you buy fragility that way an existing item anti fragile means has more upside than the outside and the first person to really understand the point in history was Seneca Seneca was in Greek so he's probably another great the greatest master story ossifer healer to Nero to Tortoni row but he was he was the wealthiest man in North in his day supposedly or has or what our or happened to me for a while you know it was random and time but he was his idea was how to get more upside than the outside in life and and he realized when you have wealth that you have more downside than upside from it you get used to it you have it created and then he was one of the reasons why I stay poor because the way I'm always on the upside well that's what is his idea he forced himself to become poor we had 500 desks to write on but he faked like he was a shipwreck once a week something like that so he understood that notion of antifragility and and and it's very strange Scott other than for Sonico what he committed suicide it was dignity the whole idea is the idea for a stoic Azalea is that you can't control randomness you can control how you behave right and he behaves the way he died the way he wanted to die Welch's was honor talk about I mean because one of the things that is I I suspect is one of the reasons why you are as kind of popular and as which isn't quite the right word but as dashing a figure as you are is that in the United States certainly it's rare for an intellectual particularly one who's good at math to also have any sense of you know that the Romans existed as something you know something we could still learn from you decided at an early age you were interested in becoming a philosopher talk about that and then how that linked into the work that you're doing okay well I mean I wanted to be philosopher from the beginning but then I decided then there was civil war and Lebanon I left came back from France and I went back and I realized I had too many books to read and and and I loved reading but I hated to be given books to read because if you're bored with it you have you like you lose the option I like option L well and you're you you think the autodidact to use the optionality of switching to finding your own path rather than being in a straitjacket alright of university stuff like that so then I realized that I had better study something more technical alright and and then of course I continued to lives one technical right and one non-technical and the technical led to option trading alright and the option trading led to more doctorate really related to probability theory applied to options and and some problems you know in off model you know some obscure stuff so so this is sort of so my background was technical by day literally at night you see with a class the classics aren't really Roman but I think like a Roman the Arabs and the Greeks think in the same way they love theory the respect theory the respect ideas the respect so the same things top-down right whereas although the Arabs were you know into systems that were bottom-up but they thought wise they respect top-down and the Romans were were immensely heuristic right and I mean it's experience versus exactly racism versus abstract it is it is a form of tinkering and trial and error and then there are Romans understood optionality they understood that their constitution the Republic was made through adversity see bouncing back every time getting better and and and rather liquor goes from top down thinking of how things should be and in a way they they figured out what what what took me a long time you know to be able to put down on paper optionality the option of changing not being locked into a plan they understood it but at the same time also using the past as a guide or as as a framework exactly the same as talking Lindy effectors as technologies what has survived what has survived has to survive for a reason right so it could be hidden reason they don't understand you don't try to rationalize right so you're also I mean but you're not you're not slavishly devoted to replicating the past or preserving them that's the idea the idea is as follows whatever change are going to do needs to be incremental and you know minimize adverse consequences of it and and and you you don't believe your ideas you only believe what you see this so this is really I mean you're you're very interested in the limits of knowledge rather than the perceived power of an all-encompassing universe exactly it's exactly the opposite of someone said you know what are you doing I said take the theory of everything I'm doing the exact opposite how to make decision if you don't understand everything right so the idea is you do have a single kind of line of thought that runs through everything no I mean well okay my line thread is probability probabilities have a superb thing going for them they add up to want right so and and so there are mathematical things that that come from that the fact that probably add up to one is that you never have the whole story you see so and you never see a hundred percent of things and stuff like that there is a thread but the way I framed it here is again it's a probabilistic thing this is hard to explain you know without graphs is that whatever has more downside than upside from random events has some attributes and these attributes are shared by everything that has these attributes for example if I take a medicine and I don't understand how it works we don't have a lot of history I face more downside than upside you see or I should act as if I face more outside than upside because benefits are seen and small and when you go against mother nature benefits can only be small right you see against the history of nature if you're not very ill so so all these considerations come from the same things are you long and often or short an option and in life you make decisions where we have maximum option right so it's not like a theory of everything is a decision-making rules that are distilled that are to me not as original as as they appear they're not particularly original if we are selling now 2000 years ago at Seneca stable and he had the table right he had the table and the next day would force you to become poor again right but you can enjoy dinner and who were talking nobody you know these people say what these guys talking about right alright this so unoriginal don't tell us something we don't know alright so that was that would have been you know so that's sort of like my yeah how does that fit in with I mean you you have shown another reason why I think you have you know really capture the public imagination is because you speak freely and openly and hostile e towards your intellectual adversaries and you've I say no I have a commitment if I saw fraud don't shop fraud I am the fraud okay so like for everyone well let me run through a couple of your greatest hits cuz they're really good at New York Times columnist Thomas Friedman you called so vile and harmful that when you accidentally make eye contact with them you became nauseated Joseph Stiglitz the Nobel Prize winning economist you talk about Stiglitz a syndrome which is what happens when public intellectuals have absolutely no responsibility for stupid and bad predictions Paul a Nobel laureate Paul Samuelson is an intellectual fraud Paul Krugman you I don't think you in your entire corpus have anything good to say no I mean Samuelson equivalence is a different I didn't say a poor probably and then I don't remember and there but I say that they have no consciousness of risk so they proposed a model we should follow it they don't have no no idea of risk and I think risk would come first because you're endangering the public by getting reduced models and but the idea that runs the whole thing is let me be technical for two minutes so I can relax sure something called Jensen's inequality which is like when you have a convex payoff mm-hmm your benefit from randomness and when you have concave payoff any error of your model is likely to hurt you right okay and and typically they have concave payoffs like the policies by Krugman all these can be voiced as concave payoffs right nothing wrong except they don't know it right you see this is what I mean is missing non-linearity of ideas it's a little technical so in the end I have a section showing you know how you know we can talk about mistakes made in economics by having concave bails what is your goal as I as a public figure I mean you know I don't want to be a public figure I spent five years with the Black Swan but the first six months nine months one year I you know walked around thinking it was nice to go to Davos and then I didn't like it came back home what I'm attracted to many empty suits and also what's my profession is to write books okay I only write articles let me tell you I only write articles because to explain some of the idea of the books and I do technical papers and books and everything else I do is because a publisher wants me to write the op-eds the rest I don't so well then let me put it a little bit differently what are you hoping that your ideas how do they add to the public understanding of you know of how a good society would work better and what kinds of mistakes what it has already led to two beautiful results I'm it was David Cameron when I was contacted by him and his administration took us before to help you know I told on us and I'm not public intellectual but I can we can talk about my ideas through my books I'm not going to write articles and we can have conversation right it led to being demonized by sections of the British public who cares and and as well as here but it had an effect but I say I'm a lot it's not bad people can pick up these ideas very quickly my point is to have a systematic approach to making decisions under incomplete information and under complete understanding of thing and build a society that doesn't blow up if someone makes a mistake which is the same thing now the society has seems to have unique attributes and I'm not the first person to think of these matters it's just I've devoted my life to the furthering of them talking actually about that in terms of you know mistakes that then you don't blow up and you talk about iatrogenic effects okay of interventions into the economy or into the social system because we've had this we've had a bunch of blow ups and then typically what happens is that we need a bigger government you know if government is partly to blame or partly responsible for something then we need a bigger government response in order to fix it and you talk about that how do we break that so if you a negativo via negativa is if if I want to cure diabetes and I give you any drug alright and people typically take drugs then they have to take more drugs of side effects multiplied and they spend their lives making Pharma richer so you have unintended multiple you know chains unattended consequences branching out alright if you remove say sugar from the person or food and make someone starve for 600 calories a day for six weeks no you can gain your weight back and you remove diabetes with the same probability as having good drugs right all right but there's no side effects it's called via negativa from Orthodox theology via negativa is you can't you can't figure out what God is but I can safely say what he's not all right so the via negativa permeates this book is a robust decision making stuff like that so what we should remove so removing is to me is like removing some sections of government it's probably the best thing we could achieve but since Reagan you know I seen it done but he's a problem right because you were just saying I mean he his rhetoric was I'm getting rid of government but in fact he wasn't he's nailed up he bailed out cotton well nationalize the bank yeah nationalize the bank continental Illinois and then later on these people blew up in the crash of 87 right from bad risk management just to tell you I mean it was not a it was but he bit Thatcher came removal all right removal is removal something harmful doesn't have long-term side effects right okay as a first step by then you can see what what what we became addicted to addition and academics like to add and I like to complexify and practitioners we like simple and relaxed attractive things who were your intellectual heroes I mean when I when I read your work and I looked at the you know at the index of various books and I mean I'll see a couple of references to Hayek or Karl Popper Joseph Schumpeter is in the in the index for anti fragility but you say these are not I mean economists are not the people who have who have generated your ideas you know where did they come from and how much of it is personal I mean you grow a lot of it's personal a lot of interest yes none of it is personal but I would say I two things the first one that Schumpeter is a creative destruction you connect any columns cannot come up with an idea as brilliant to that so had to be someone before him and turned out to be called Marx right well I get resulted about yeah recycling recycling me tree and each she understands the John is young and Apollonian that you have the reason you an easy and I have those dark forces and in here fat Tony my principal character from New Jersey whose anti-intellectual Fat Tony takes Socrates to the cleaner by reusing vindicating Nietzsche is what you don't understand isn't necessarily stupid right did what you don't see it doesn't it's not not there what is not intelligible nature said is not necessarily unintelligent right which is the government they do intelligent things and they can't abide by these forces so that was that was neatly I would say is more than anything it Karl Popper note because Karl Popper isn't called popper I mean the idea of Black Swan dates from Romans and it was elaborated of course by someone called Victor Borgia a lot of people who wrote on absence of not a you know evidence versus evidence of absence in the French literature before him and actually Nietzsche picked it up from brochures book on Greek skeptics and of course you go Sixtus empirica so their lineage and of course al-ghazali the Arab philosopher the Arabic language philosopher al-ghazali the the all these people have developed this notion of a negative information is more important than positive information so I would say popper is just said that people assimilated was popper I access that so he thought of that but then when I went to do history I realize that there were vastly more intelligent deeper thinkers about the problem the only thing popper did that nobody else did is this argument about the future being unpredictable because you have to forecast if technologies that are up for castable that is a popper not the popper of you know that people talk about now when you think about the future or you or you optimistic or pessimistic is that the wrong way well I mean it's the wrong way to view it we I'm you know it's the wrong way to view it I my view of the future is not you know they don't have to be right so you have to have a dominant strategy to act as a few pessimistic like when I say that I don't want the pilot of the plane to be optimistic you see but I want the flight attendants to be extremely after this right you see so it's functional like I don't believe in yeah well then you talk about how pilots who are too comfortable with their knowledge and everything they're bad pilots they're the ones who have the errors exactly yeah you have to have paranoid pilots and stressed all the time by so technology is weakens makes actually FDA order of the FFA figured out that makes the flights less safe but the again I take a stance again against knowledge knowledge isn't what run society its knowledge is a lot larger narrative that comes after we do facts there so so much we narrate you know so and so much we do that without the complete theory of things you see this is my central idea well to talk a bit more about cap ilysm in that or and of system where it's not it isn't knowledge per se but you've talked about that it you know a lot of people talk about it as you know what's great about capitalism it creates incentives that lead to success when actually capitalism in your view is about decentralization about creating disincentives and failing early it's exact opposite of incentive is disincentives right is have people have a since mohammed rafi we've had civilized society people living together get only able to do that when when people are accountable for the mistakes where where are the kind of signal incidents of decentralization that's leading to better outcomes but you know broadly speaking where do you see that in either in the united states or in the West or in particular pockets in subculture I mean you have a take Switzerland as a culture where nobody can name the president easily the Canaan president of France this is a good society because you have a lot of volatility but you know at the local low level right micro level translating to novo the other macro level stability so this is Switzerland this is a world with centralized system now what you know have you seen the third man the Carol yeah of course you know Everson Wells cares Harry Lime says look the Swiss have been around for hundreds of years and they produced the cuckoo clock is that what does that uh is that a cheap shot I think is very cheap yacht flood but the other thing I discovered myself through time by looking for the surface we typically attributed over satellites country actually to the the second the reverse of nation-state you know nation-state were born in Egypt and failed born in China and failed and then born and get France okay because the Roman Romans were too smart to have nation-states or Roman hands with city-states mm-hmm okay and then system city-states were although within a larger context of an empire it was a Pax Romana what I call the barbell you'll see no more than Commerce and then go live and that was how you know my SS really grew up city-states so the French effectively what they did is they had probably the weakest monarchy as you can see from multiplication of languages in a country not integrated area where the central government had no access and you had more people speaking French and st. Petersburg than you did in the province or France except along the tax lines so so France it was only integrated after Napoleon and it took a while to national education system stuff like that - and a train system to integrate France so France and look we have 400 pieces you know so so France was in effect a diverse country till I would say well into the 20th century when after the first war and now you know and it's you know it's common in the u.s. to just mock France or France's everything that were not but France is also an economic powerhouse that has what 70 million people but as you know one of the richest countries on the planet so but I mean they're doing okay fifty-five million level even zero so then there is power from that kind of century okay I think you don't with I don't quite believe I mean if you look at the strengths of France the centralization came to France mostly after the goes policies mm-hmm that later after the war as you know of course it has not been you cannot have to give the success of France to centralization okay you see the French were already powerful in a rich country without too much centralization that's a translation but without being hang up on France the idea of deriving the rule from saturation the problem is sighs you know visibly you can have centralized government in a small village problem is sighs the problem is a size gets larger okay you have some gains of becomes the scale what it is but you have some losses in governance and a lot of other things and this is you because the more homogenous you become the easier it is to to be wiped out to be wiped out to make many mistakes and be wiped out this is the island effect at work you see so and you don't want and what we have had in this country is a rise of the central government progressive rise of central government and you know particularly other deficits are the words of central government and as a human figure it out he said small states and steady states the law of Commerce and a lot of governance love war okay and that's what justifies a large government whether they fill a war so they immediately look like Germany after they got together at war and and you can see it and and and there's no justification for logical other than war and they're not good at now you say that you're not a libertarian but a lot of this overlaps with yes considered so why aren't you a liberal well I mean I whatever I don't know what a libertarian is live at 10 I mean I like like I'm risk based person and I want what my libertarianism would be not the optic libertarianism like you know there's a philosophical liberalism that you know freedom comes first good right and so much as I want errors to be multiplied that's it right you know I want as we multiplied and also it's a kind of John Stuart Mill you you like the idea of experiments and living exactly it errors need to be multiplied this is is that so I'm more of a in that sense I'm not conservative hundred percent but more of a left-wing conservative if you want you see the left Iran called libertarians you know right-wing hippies that was there they go so left wing conservatives that would plan exactly so it would be a I'm in a way you know I'm conservative conservationist you know I want to not break things that have been around for a long time there's own laws ik and but I'm not against you know things provided come from tinkering not from some radical transformation of things and the most successful states and history have been city-states okay or small and even if we had a lot of small wars they produced great things and of course you know sometimes you have an empire that prevents them all cost from waging Wars so even better you say like Pax Romana or Pax Romana let's you know we'll close out here right you you've mentioned the barbed effect or you know kind of bar bell-shaped distribution several times where you you know you have certain things at the end but not so much in the middle yes you also write a lot in antifragility about barbells in terms of lifting you at one point so that you could deadlift 330 pounds that I didn't say I could deadlift let's say if I did let you know there's better this more because we haven't have a stack of weights out here at the wheel I don't know confined talk it talked a little bit about because I mean this is one of the things that I find both I didn't say I was okay I was a know what happened that the beauty of this book the critics could incapable of addressing a central point so they nitpick and and and anything on wrong things like this more than 30 times another interesting thing about this book even tell one thing before we get there it's written in a way to be loved by the reader and hated by the journalist why because you can't get into it you can't figure out you can't skim it if it if it means anything one of the things that I am an admirer of your work in the book that I was like I get the pose and I want to get to the information which is another way of saying what you said that it is it's true it's it's an experience it's not it isn't something that you can kind of a strip mine exactly the meaning it's it's very discursive it's and you go deep deeper different topics don't live it I think so someone who wants spread their ideas every page you don't live in some way it's kind of curious that you are so popular in the business market because most business books will end with like bullet points at the end of what this chapter was about I saw them have that I sort of have that but was good let me tell you what this book is I have learned from experience I don't really okay so I enjoy writing all right what the minute I'm bored writing I get a stop all right so and I've developed some experience with it with a little quickly with the Black Swan that to make sure that no content of any section can be discovered without surprising czar either somewhere okay so you have titles and subtitles that don't really match so they're not bored text books bore you right so I'm I realized okay that critics would hate it because I want skin books but people who read will not hate it that critic needs to get to the whole idea to me of the Black Swan the people were frustrated and an empiricist if you sell 3 million copies of a book writing in some way I expect that that the style isn't I'm not going to be lectured about style so and then of course you know for the critics come in and they tell you it's a mess no you didn't see the order from the table of content or name voluntarily so you realize you're playing games with them probably their lecture you have to write when they've sold you know this you know the you know the Black Swan sold more probably in a day than they saw in a lifetime so you get the idea make sure you're not going to say that the market is always right and that you know billion Elvis fans can't be wrong no my point is that you don't someone who is onyx is yacht the limo doesn't take lectures on finance from someone who just wrote a subway right all right that's the idea that you can take ideas maybe if you want but you don't you know take instructions on how to write a book so if you want to write a book it take either instructions from the harry potter lady right that's it all right so or you can take instructions from from Seneca we survived two thousand years but definitely not from some academic at Cambridge who sold twenty two hundred copies you get the idea so this is this is what I have to say about lecture being lecture but yet these are the ones we're at book review so you have to bypass the saying and it's only a difficult phase in the beginning well you get out of the way and then as with a Black Swan then you have an open five years for people to discover your book without them right and that's what happened so to just end with barbells your preferred workout plan then is talk about your you know the Nasim Tuck tala okay then I apply it first why do I talk about myself but because as I say here scanning again I'm not allowed to give you advice I don't tell you what you should buy I tell you what's in my portfolio people are shocked I'll talk about my portfolio yeah because it's unfair I'd be a Stiglitz telling you what you should be doing with that being horn if I'm wrong it's unethical for me for my own system of ethics okay so therefore I can't tell you I can tell you what I do so what I do now I came up 21 days of eating without exercise but what I do is I try to lift weight and imitating you know and then I try to not take you know instructions but try to find big doorman at the gym who lift weight and see what the routine is and imitate it without having a trainer observe what they do not what they tell you all right because if you ask them you know they give you a different story so that's sort of like my idea so I take walks long walks 20 20 30 hours a week of walking and just one thing that you know happened later on to discover the Nietzsche said never trust ideas you haven't had walking right so I walk a lot and I lift a very heavy weight and that's it can I just you know is Nietzsche of the best life guide especially he told one story which is very interesting his if you imitated him you wouldn't be here right now would you well a Nietzsche was sickly from the beginning so you know for for his days he did very well for a sick leave of the beginning but me tree was not know his you know he's one you know do what he says not what he does no I mean in what senses and Nietzsche is not the baddest uber bench is but but he didn't take a lot of personal risk of his life that's true I try to take more personal risks I think my guide is a neat trait so much as the people I'm covered by Nietzsche my guides are the classics the respect I have for the elders is so high compared to Nietzsche because they've been around longer and and but if you look at how the elders words is the only sitting they respected discouraged and and of course actions not words and stuff like that and and also skin in the game as a you know a rank so and now I'm taking a risk not with whatever I'm take front take risk with this I know that I'm taking I'm going against the establishment say things the way they are lawsuits are probably gotta come so what the more risk I take for my ideas that better I do that'll you the matter I do why is if you fail that I you know I learn from your mistakes that's true and also in you know you probably if you have a cause and we have similar cause for a lot of things it will probably help but I have absolutely the only thing that makes me feel that I am my idea of living is taking risks for four causes so the more risks I take now of being attacked by academia by someone someone putting some note on my dinner table and a restaurant or the more I do the more I feel good about you know myself well hey thank you thank you very much I want to I think we'll end it there nice um Nicholas Taleb author most recently of antifragility thanks for talking to us Thanks

Channel: ReasonTV

Views: 269,731

Rating: 4.8539505 out of 5

Keywords: Nassim Taleb, Antifragile, Libertarianism, The Black Swan, Nick Gillespie, Reason magazine, Reason TV, Reason Foundation, 2008 Financial Crisis, Seneca, Libertarian

Id: ehXxoUH1AlM

Length: 56min 32sec (3392 seconds)

Published: Sun Jan 20 2013

Reddit Comments

[u/pdtmeiwn]

You act like this is some deep insight. I speak as a fan of Taleb, but public choice economists have been talking about this for decades.

And Lawsky is not some one-time event. This is the MODAL behavior of regulators. The reason I and so many others are against regulation is because aside from the defense of property rights, which I don't consider to be "regulation" per se, regulation is simply corruption.

There's not "good regulation" or "bad regulation". That sort of dichotomy ignores incentives. With monopoly enforcement, regulation is inherently corrupt. Ask yourself, Why the hell should Lawsky make good regulation? What will he get out of it? Will he be remembered by history as a benign regulator? No, he will quickly be forgotten. Will he gain financially? No, he'll keep his decent paying Superindendent job. The only way he'll truly benefit is to enact a monstrosity that helps his buddies in industry now, and for the future, market himself as the guy who knows the right people and navigate the rules he himself enacted.

Incentives from regulation result in corruption with regularity. Sure, good regulation could theoretically be possible, but people who would enact good regulation don't exactly end up in Lawsky's position, nor do they stay incorruptible if they somehow get there.

This is why regulation has to stay private. User reviews, independent for-profit ratings agencies, etc like what Amazon, Ebay, and Uber created are much less corrupting than a Department of This or National Department That. They are freely chosen by consumers (if I don't like Amazon's regulation of its member stores, I shop elsewhere, whereas if NY State passes crappy regulation, I have to move out of state, and if the US passes crappy regulation, I have to move overseas). They also evolve as the marketplace matures and changes. The US, on the other hand, still has a mohair subsidy.

[u/zoopz]

It's pretty outrageous just how logical and unstoppable it seems. Society, and certainly the people involved, has accepted this behavior.

[u/d4d5c4e5]

Approx 12:09 for mobile viewers.

[u/yourliestopshere]

That is outrageous that they do this. HANG A BANKER PLEASE! START WITH ERIC HOLDER!!

[u/targetpro]

Lawsky wouldn't dare use his position at the NYDFS to then profit afterwards in the private sector from "Bitcoin" consulting. As Lawsky has already stated, he'll only be consulting over "digital currencies". /s

http://nypost.com/2015/05/20/ny-financial-watchdog-ben-lawsky-leaving-to-start-firm/

This, after his office refused to release the research and analysis during the review of the bitLicense, in violation of his own office's policies. This was specifically requested from his office by myself, along with several others, and was ignored.

"According to Harper, Lawsky’s office violated New York’s Freedom of Information Law by refusing to release the research and analysis that it claimed to have done to validate the BitLicense regulation, and framed the regulatory discussion in a way that other regulators have felt obliged to copy."

https://bitcoinmagazine.com/20533/superintendent-lawsky-to-leave-the-nydfs-and-start-consulting-business-cato-institute-cries-foul/

[u/veritasBS]

He nailed it perfectly...amazing!