[APPLAUSE] NASSIM TALEB: Hi,
thank you very much. Sir, you forgot your phone. I was very privileged
to present at Google when "Antifragile" came out
in California six years ago. And one observation
I would make is that the average
age in this room is six years older than
it was six years ago. So I'm going to talk about
my book, "Skin in the Game." And a book is not an idea. And the first thing
before we start, I'm going to
discuss how I write, how the whole body
of work is organized, and what is the
"Incerto" and why it's organized in a fractal way. My idea, that if a book can
be summarized, two things. One, it will not survive. And the second thing
is, not worth reading. You read a summary. So a book cannot be about an
idea no more than a painting is about something other
than being a painting. So a book has to be
self-standing item that you cannot reduce. And that may communicate
some message or not, that's not the relevant point. It [? cannot ?] be organized
in a way that you read it in fractal way. So the way it's written, you
have sentences, paragraphs, sections, chapters, and volumes. And everything has to be
integrated as a whole. So that's the idea
of the "Incerto," five volumes on uncertainty. And the idea is, for
the author to write on his or her own terms. That's my idea how an
author should write. And I do it myself
with passion, all right, I write on my own terms. The first volume was
"Fooled by Randomness." And "Fooled by Randomness"
is an interesting book, but nobody wanted to publish it. Nobody could figure
out what it was about. It had probability,
it had finance. And people tell me,
what does finance have to do with probability? It had fictional
characters, Nero Tulip, and then there's me. And they say, what does a
fictional character or a fable have to do with the book? They couldn't figure
out what it was about. I tell them, oh, the
book is about philosophy. Ah, OK, why is there any
finance in a philosophy book? Or why is there a non-fiction
fictional characters in a philosophy book? So I wrote on my own term. I told them to get lost and I
keep writing on my own term. And in the end,
the book survived. So what is my modus operandi
while writing the "Incerto?" Now, there is a
restaurant called-- used to be a restaurant called
Lindy that closed on the day this was published. It went bankrupt on the
day this was published. It delivered very,
very I would say-- I don't if inedible conveys
the right impression. [LAUGHTER] Absolutely horrible. It was known for its
cheesecake, but you know what happens when you
get famous for cheesecake, you sort of cut corners and it
becomes inedible after a while. But tourists kept flocking
in for a while until they, you know. So the thing went bust
right after my book. And the problem
that Lindy-- there is something named
after that restaurant called the Lindy effect. Now what is the Lindy effect? It was discovered
in that restaurant by actors, that plays-- because the
restaurant specialized in giving cheap coffee
or undrinkable coffee to unemployed actors. So when you're
unemployed actor-- actors by the way, are usually
unemployed, particularly on Broadway. So they would sit down and
talk about plays, all right? So they discovered
that a play that had been around for 200
days had an extra 200 days of life expectancy. And 1,000 days, 1,000 more days. It was discovered and became
known as the Lindy effect. And about every
single generation of mathematicians had tried
to model it, and each-- the models always work, but
complete different models, all right? And the last
iteration is the one I've been working,
on Lindy effect. How do I use the Lindy effect? Well, very simple. When I write, when I started
"Fooled by Randomness," if you want a book to
survive, how do you write? Can someone tell me? How do you make
your book survive? What's the trick? If you want people to
read your book 10 years, or 20 years from now? If you will have any
chance of that happening? AUDIENCE: Make somebody hate it. NASSIM TALEB: That
works, but there's got to be something else. What else? AUDIENCE: Write another one. NASSIM TALEB: Sorry? AUDIENCE: Write another one. NASSIM TALEB: That may work. Showed that you-- like the
"Incerto" is not body parts, but it's one whole. Yes? AUDIENCE: Use all the ideas. NASSIM TALEB: Very good. Use all ideas. By the Lindy effect,
an old technology has a huge survival advantage
over new technology. I'm not saying that the future
will not be technological, but I'm saying that
what will be displaced is the newer technology,
not the old technology. So the way-- if you
want to write something that can be read 20 years from
now, or hope to be read 20-- make sure it could be read
by someone 20 years ago. So protect yourself
backwards in time. It's much easier
than go forward. Had someone read the
book in 1960, 1980, would he or she have-- would it have been interested in
the message, in the treatment? Yes, no? If yes, that's
exactly how you do it. So it's basically backwards. People who think
that they have to be technological for
their work to survive, it's the exact opposite by the
Lindy effect, simple logic. And effectively, if you
want to predict the future, you can't predict
what new will happen. Nobody predicted Google. Your grandparents didn't
think that you guys would be wearing gym clothes with
dog friendly things delivering sushi for free, OK? And cappuccino, actually
a very good cappuccino. I mean, I remember when I first
came to New York how it tasted. So your grandparents
didn't predict that. You cannot predict-- but
you can predict something, which is that what is recent
will be replaced by something more recent. So it's easier to predict
that what is fragile can break and what is-- by
the Lindy effect. So it has some--
for some domains. It doesn't work for all domains. So now that I-- OK, spoke about literature. Is good, good enough? So now we can move to
skin: "Skin in the Game." Now "Skin in the Game," I
have absolutely no idea what's "Skin in the Game" is about. Because every time
I try to explain it, I come up with a
different story. So it's me that has a lot
of layers, multi-layer. The only problem is, it
doesn't have Fat Tony-- my character in previous books-- because I killed him at
the end of "Antifragile" and I couldn't really-- I didn't know how
to get him back. I had to-- I looked at how Sherlock
Holmes came back, and it was anachronistic. So I didn't know how to do it. So sorry. So for this episode
of the "Incerto," Fat Tony will be absent. However, his [INAUDIBLE]
will permeate the book. So someone asked me, what
is "Skin in the Game" about? I say, it's about how
Fat Tony learns things, how he would view the world as
compared to some bureaucrat. Simple, OK? So that's one approach. Now a little bit of
background about how I got-- this is by the way,
the German edition. And they couldn't
translate it to German, so they had to translate,
skin in the game by skin in the game. So that's German for
skin in the game. So my national origin is this. I was a trader. So I didn't become someone
mathematically oriented early on in life. First I had to become a trader. Now, you learn when you're
a trader, first of all, you learn that the
mathematicians and people who model are full of s*-- I never spell it
out in my books. So let's use baloney
as a good proxy. Whenever I say baloney, you
know what I mean, all right? So that theoretician and
academics are full of baloney because we have a
view of the formulas we use that is
organic, bottom up. And this led to
"Antifragile," where I was explaining that architects
always do a better job when they don't use
Euclidean geometry, when they use the rules
required by architect, not mathematical top down
rules, bottom up. But I discovered probability
in a specific way, bottom up, was different. And then I started getting
into the field coming from the back door. And after you stop training,
I couldn't find anything interesting to lose my life. So I decided to do
that stuff here. That's my retirement from
trading, and of course, with a mission. So I came from
practice to theory, and usually people
go from theory to practice, particularly in
something very technological or something very scientific. But this parallels what I
showed in "Antifragile," that-- and that we had so much
evidence from history-- that people have the
illusion that technology comes from science when
in fact, science come from technology more often. Except for well
advertised things, most sciences came
from technology. In other words, they
started doing something, didn't know exactly
why it worked, and then someone
claimed credit later on. What I call lecturing
birds how to fly. So starting working with
probabilistic models, and I realized that
people who traded have a different view of the
world than those who came from theory, which is obvious. As Yogi Bear, I
would say, in theory there is no difference
from theory and practice. In practice there is,
so a different mindset. But there's something
else I figured out. That those who
became practitioners after knowing theory
always blew up. So in other words,
practice didn't help you if you came from theory. There's something in
the mindset of people who studied economics
or something that made them blow up, with the
exception of mathematicians, because they're
sort of theory free. Mathematics is just some
kind of list of things that you believe to
be true, basically. And among these things,
there is something I call the ludic falalcy. Now why am I talking
about ludic fallacy? Because when I googled-- you guys just like, invented
the word, I'm using google. When I search for
it on the web-- [LAUGHTER] --I discovered this very
ugly painting by a fellow called Isaac McCaslin,
exhibited at the Saatchi gallery called the "Ludic Fallacy." I don't see the
connection with my work and my word, the ludic fallacy. But let me explain
the ludic fallacy. And I hope it's not
as ugly as this. Ludic Fallacy is that the
probability or the risk and uncertainty that we
encounter in real life has very little to
do with things you encounter in casinos and games. And ludic is coming
from games in Latin. That's why I called
it ludic fallacy. So this is sort of like,
preparing the background for "Skin in the Game." And incidentally, the main
idea of the "Incerto--" the "Incerto" if one
asked to describe it, I say it's a series of fables-- what do I call it? An investigation of opacity,
luck, uncertainty, probability, lalala in a form
of personal essays with autobiographical
sections, stories, parable, philosophical, historical,
and scientific discussion. So basically, it's a mishmash
of things that turn out to be reasonable for some. Or at least they pay the price,
whether they read it or not, it's not-- I get the same. The money doesn't change. But there is one point about
the "Incerto," pervading the "Incerto," and I realized
too late to put it in the book, that there's a lot of
uncertainty in the world. There's a lot more uncertainty
than you think there is. But the way to deal with
such uncertainty is unique. So in other words,
there is a lot of certainty about how
to act under conditions of uncertainty. A very simple example. If you receive from Ar Raqqa-- which is in Syria-- and ISIS, an ISIS thing, a
package, and written on it, originates in Ar Raqqa. This is a package. What do you do with it? Do you open it? No. So you have a lot of certainty
what to do with that package. So the more uncertainty
there is, the more certainty there is in what to do. If you really don't know
if the plane is robust, you don't get on it. So the more uncertainty
about the plane, the more certainty
about not getting on it. And this is sort of what
permeates the "Incerto," but I couldn't put
it in concise terms, because it takes a while. It takes me 25 years to bring
an idea to its summary, you see? So maybe if you invite me
to give another talk here, in five years I'll be
explaining "Skin in the Game." So now, simple application of
"Skin in the Game" to make you really realize what's going on
with our knowledge of the world without "Skin in the Game." Haven't explained yet
"Skin in the Game." This is commonly
known as a restaurant. A friend of mine,
who like me was a trader-- he was a
former partner at Goldman Sachs, an oil trader, so
he talks like oil traders-- had gotten a very
bad idea to invest in a restaurant business. And if I have one piece of
advice, in case I die here, just don't invest in
the restaurant business. Don't open a restaurant
unless you really want to lose your money
slowly, or sometimes quickly in New York City. So he discovered the following,
that the restaurant business has a lot of prizes. The best sushi in
lower Manhattan, the best sushi with music,
best sushi without-- whatever. So we have all these
categories, OK? And then there is a best
restaurant in that category. The best rare steak, the best
T-bone west of the Hudson, you have all these categories. And they're prizes, actually. Now who decides on these prizes? Journalists and other
restaurant owners. There is a gala dinner where
they give these prizes. And guess what? Most restaurants who got prizes
were closed, were shut down, were shut down out of business. So it tells you the
following, any business where you're judged
by your peers and not by some
contact with reality is going to rot eventually. That's why companies go
bust, this is what happens. Now this person, I think
is a plumber, right? Are plumbers judged
by other plumbers? Or are they judged by-- OK, they're judged by
other plumbers, no? No, they're judged by you. You're the client. OK, very good. So if you-- they may love you,
other plumbers, but that's it. So any business where
you have contact with reality in the form
of your client judging you, has fewer what I call
expert problem, which I outlined in "The Black Swan." And expert being-- I used to
call an expert an empty suit until I discovered
that a lot of them actually don't
wear suits anymore. Times have changed,
so I have to rename it to something else
that's not Lindy. So there are classes
of people, there's a tableau in "The Black Swan." So who's an expert? Weather forecasters,
they're experts. Climate, we don't know. All right? Accountants, they're experts. If they can add
and subtract, you can have the evidence
that they're pretty much-- and follow the rules of
various accounting rules, so they're experts. How about financial economists? Not experts, OK? So you have-- and very simple. No contact with reality,
no feedback from reality. So that's "Skin in the Game." That's the epistemology
of "Skin in the Game." And you can apply it
to a lot of things. People in policy making,
they're not experts. Anything macro, it's much easier
to macro BS than micro BS. And that's the
motto of the book. So in macro BS, you
don't see the feedback. You know a dentist
will be an expert, but an epidemiologist
will not be an expert because there is no feedback. That's "Skin in the Game." And this is very simple
Darwinian survival. Simple. I mean it's not too complicated
that it's Darwinian survival. Because it's very simple. You have a selection
process, you survive. Like in nature,
you have fitness. So we have all of
these people who reject the idea of intelligent
design, which they interpret say, in a naive way, first
order way, not as a metaphor. But they want to
be-- like academics, they want no contact
with reality. They want just rationalism
to make things work. It doesn't work that way. I mean, you cannot believe in
God when it comes to academia but disbelieve in God outside. You have to be consistent. And this of course, you
remember this cartoon which violates my idea
of the pseudo expert. Because they say,
"These smug pilots have lost touch regular
passengers like us. Who think I should
fly the plane?" So the point is, what
we're observing is not a riot against experts. It's a riot against a
certain class of experts. I call those IYI,
Intellectual Yet Idiot, because of lack of
contact with reality. Anything, like academia doesn't
have contact with reality, collapses. Academics-- are you
judged by peers, Pasquale? Who judges you? You're not going to--
are we in the same-- we're not in the
same department. Who judges you, your
peers, other academics? Well, there's an expert problem. So if you're not
judged by PNL, we say, or reality, or
something like that. So the pilot definitely
has to be an expert. And there's a very
simple reason. What happened to pilots
who were pseudo experts? AUDIENCE: We die. NASSIM TALEB: There we go. There we go. They died and their
passengers died. So basically, we
have Darwinian-- it's called Darwinian, the
school athlete, survival of the fittest. Or survival of the non-experts. And then of course, you end
up having fields such as-- this is the mind
of an economist. [LAUGHTER] That's a clarity of mind on
a good day of an economist. Why? Because there's no
contact with reality. You don't have to be consistent. So you can have the
Nobel Prize given-- the pseudo Nobel in economics-- given to two people
saying opposite things. You can't say-- I mean, you
can't do that in physics. We say, you throw the ball it
goes up, and then it goes down. Let's be hedged, let's
give the Nobel to both. Because the problem is, you
end up with a mind like this if you're judged by your
peers, not by experts. So now the concept of symmetry. So let me do the following. Before I get into Hammurabi,
let me describe Wall Street. Hopefully this will
have a pointer. No, no pointer. OK. So there's something
I call the Bob Rubin trade, the absence of symmetry. And again, "Skin in the Game"
is about certain classes of symmetry. And we're going to see
where the name comes from and the link to
the pseudo expert. The fellow was chairman-- now to be called chairperson-- of Citibank or Citicorp. Spent 10 years there and
he received $120 million in compensation. And when the crisis
happened 10 years ago-- I don't know if you were-- many of you were born. Many of you at least were
conscious of what was going on. So 10 years ago,
there was a crisis. And then he said,
"Some very unfortunate, highly unexpected event, often
called "Black Swan," for which we apologize profusely but we
are excused as nobody could predict these things happened." Very nice. He acknowledged that it
was a black swan, named after a very, very stubborn
author, but sometimes pleasant if you have coffee with him. But stubborn definitely
intellectually. All right, so what's
the problem there? Let's think about it. You make the upside
when you're right. And when you're wrong,
who pays for the losses? Sorry? AUDIENCE: We did. NASSIM TALEB: You did. The Spanish grammar
instructors-- a recurring person
in the book who pays for losses made by others-- yoga instructors,
Google sushi chefs, and so on, they paid the
price directly or indirectly. So what we have
here is a violation of a law that effectively
is the first law extant, Hammurabi's rule. And it says the following,
if the architect builds a building
and the building collapses and kills the
owner of the building, what should happen to the architect? He should be put to death. I mean, it was Babylon 3,800
years ago, so they were not-- didn't have a very
sophisticated legal code. And then of course, if
it kills the first born, the first born son of the
architect is put to death. So they're really, they're
looking for symmetry. Now what was the idea
of Hammurabi's code? It was not eye for eye, eye for
eye limiting damages and making things balanced, no. It was that you cannot walk
away from risks you've created for others. You should own your risks. That's the idea of
Hammurabi's code. You cannot have civilized
society unless those who create risks aren't also
aware of the risk. So when you get on a
highway, on the Hudson, you can get drunk,
whatever is something that people do when they
want to have fun or want to become reckless drivers,
and become a reckless driver. The best way if you want
to kill a lot of people, is you go against traffic. 150 miles an hour
against traffic. Why is it that we don't see, we
don't hear about these people? AUDIENCE: Highly
symmetrical punishment. NASSIM TALEB: It's a highly
symmetrical punishment, they're already dead. Visibly, if you have these
traits, you're more exposed-- you're exposed or even more
exposed than regular people. So at all times
in history, we've had that symmetry prevailing. We can look at it
operational symmetry. But let's first look at it
from a moral standpoint. You've heard of the
golden rule, do unto others what you want
them to do to you. Which I, in fact, I
find a little intrusive. Because say I like raw Lebanese
meat, Lebanese could be-- I'm not going to
force you to eat it. So there's actually--
say I'm a bureaucrat and like this kind of
stuff, I'm don't force you. There is a much more
robust silver rule, don't do to others what you
don't want them to do to you. And effectively, you
can't have civilization without the silver rule. And also, and
unfortunately, people don't understand, it extends
to international affairs, the silver rule. How? Treat other
countries the way you would like other countries to
treat you if you were weaker. And there is a fractal
aspect of the silver rule. Countries should treat other
countries the same, and so on. So that kind of symmetry. That's a moral symmetry. And of course, it kept going. That rule kept going
and evolving, sometimes in the wrong direction. Kantian. I talk a lot about
Kantian Universalism, it's not practical. Because the universal kills
the particular and it's not fractal. It becomes anonymous. You have to layer it. And if we have time,
we can say why. So this is-- the golden rule
came across ethical systems, religion. And the last iteration
is with Kant. But basically the most
robust is the silver rule. You want as a
business and anything, to treat others as a way-- you don't want to
harm them, you want to treat them-- not
treat them the way you wouldn't like
them to treat you. It's called the
negative golden rule. And of course, it
has a lot of-- we can talk in the small and large. This is called hidden
symmetries in daily life. And something quite obvious,
as obvious as the cook should eat his or her cooking. It needs to apply everywhere. And these rules did
prevail until recently. And we're going to see where
they stopped prevailing. But they prevailed
for a long time, until say, maybe a
generation and a half ago, two generations ago. And it was quite sophisticated,
how merchants should treat other merchants,
how you should have stiffer ethical rules, more
equity within a group, in group then outgroup, but still
have the same outgroup. And actually, it's much more
workable within communities, outside communities. Now one thing about "Skin in
the Game," "Skin in the Game" is interested in two
aspects of social thought that are not discussed. The first one is dynamics,
and things happen over time, how systems-- what rules should be
applied over time. And we'll take a snapshot
and we'll see how, why, and the mistake. And the second one is scaling,
that things change in scale. A small hamlet will not become-- you cannot turn the dynamics of
a hamlet into a small village. And a small village cannot
turn into a very small town. You have some kind of
a scale transformation that happen when
groups become larger. And that's mathematical
and at many levels. For example, I can predict
how each and every one of you behave, assuming
I could do that. But as a group, I can predict
the behavior as a group, because a group is
a different animal. Likewise, we know that if people
have all these ethical traits individually, when you put
them together in groups of 250, they will be very ethical
in preserving the commons. Like fishermen not
overfishing, because harming future generation. But when the group becomes
200,000, it doesn't work. So that's one aspect
of scalability that has a political
implication and [INAUDIBLE] It is very, very compatible to
be a communist in your village, and libertarian at
the federal level, and Democrats for the
county, while being a Republican for the state. It's perfectly compatible. You cannot have a political
opinion without attaching a scale to it. So communism can
work in Singapore-- because it's small--
much better than China. Look at the success. Or that form of socialism. Or you can-- you cannot-- you should separate the
political label from the scale. And likewise in
commerce, if you don't have ingroups and outgroups
of different layers, things don't work. Because you don't have
individual and then the rest of the world,
you have layers. You have the visual,
the family or whatever, the finances of her
family, the tribe, whatever he or she
defines as tribe, and then you go up the layers. And that works a lot better. Because the tribes
deal with one another, the dynamics of tribes
dealing with one another need to mirror
the same symmetry. And it looks like the
ancients were conscious of it. They understood scaling. They understood that you
can love your town when it's a small town, but
it's not the same love when it's a large town. The ancients knew that. So this is the idea of
scaling, particularly with skin in the game changes. Now, risk as virtue. I don't know how many
Roman emperors we've had, close to 300. How many died of natural death? Assuming those really
died of natural death. I mean, we don't have
modern autopsies. How many? 1/2, 3/4, 100%? AUDIENCE: [INAUDIBLE] NASSIM TALEB: No more
than a third, all right? And we're not sure
about that third. And of course, had
they lived longer, had they not died of
pneumonia or something, they would have been
killed by someone. And then, this is a picture of
Valerian, the Roman emperor who was captured by the Persians
and used as a footstool. So these are the risks you
get for being a Roman emperor. It's risky to be
a Roman emperor. Julian, who's my hero in a book. Julian the emperor was
known as the apostate. He died at the Persian border
with a spear in the chest. He didn't even have an armor. Now this contrasts heavily
with warmongers today, war mongers who are sitting
in an air conditioned office in Washington. Can we name names
on Google thing? They can sue me directly, OK? In the book, I name names. Like Thomas Friedman
and all these neocons, they can cause wars in
Iraq, devastation's, hundreds of thousands of
people killed, maybe more, financial trauma. What price did they pay? Zero. So let's merge ethics
and epistemology. If they had to pay
for their mistakes like the driver who
disappears, the system don't learn because
people learn. Systems don't learn-- system
learn via the survival mechanism by eliminating those
who don't have that trait. Actually in biology, systems
learn at a cellular level. It's not like, your
knowledge that changes. So of course you're going to
have a lot of warmongers today. This is a danger for humanity. Now that-- and they're going
to use any excuse to become warmongers and then even
will get leftist ideas, because our merchants know how
to play the system and can-- or humanitarian war. Humanitarian war, like in
Libya, change of regime. Oh yeah, but look,
we have democracy. You kill everyone
and say, well look, their cholesterol
level improved. So if you use those metrics. So the point is, that
this is very recent. Hannibal, first in battle. Napoleon had to be more
exposed than other soldiers. And the English feudal
system, the lord, you're a lord because you're
a lord, because you take risks for others. You trade risk
for social status. Very few societies had
people of rank make decisions without being,
themselves, exposed to the harm from the decisions. At all levels, economic,
financial, everything, physical. Now comes the notion
of risk as virtual. We're not stupid. We have some organic
understanding of these things. And the peacock, the
[INAUDIBLE] peacock story is that the peacock, why does
the peacock has a big tail? They're useless. It's precisely
because it's useless. And the peacock can
maintain such a tail, it shows some kind of
biological fitness, to be able to carry such a tail. Now the peacock, the
[INAUDIBLE] peacock is a nice framework, what
we call a [INAUDIBLE] trait, a superfluous trait, but that
gives you definitely some kind of fitness. People who have scars, people
who have scars command respect. People who take risks
command respect. People don't realize it,
but that's what's happening. It's a very bad idea
for political parties to propose candidates who
are lifetime bureaucrats. You see? And people detect it. Like in Switzerland,
they try to pass a law to limit the income
for chief executives. But nobody thought of limiting
the income of entrepreneurs. Why? An entrepreneur takes risks. Chief executive is
someone who works for the system and making 75
times what an employee makes. The law didn't pass, but
that's the idea behind it. And this explains Christology. Think about it. Why is it that we have the
Trinity, which absolutely makes no sense to anyone
outside the Christian religion? Why is it that we had to keep
going back to the Trinity? Fights, arguments, debates
in Greek that nobody can understand because
translated into Latin be the same word? They kept going back that
the Christ cannot be God. Think about it. If this person had a parachute,
if an acrobat walked in with a parachute,
would you pay for that? It'd be like a video game. So the whole thing is,
you signal by risk taking. And the idea of Christology
is, to really put "Skin in the Game" in a deity. So he's not God, because
he had to suffer. If he didn't suffer, it
would be like a tomato for an actor in a movie. It's not tomato sauce,
that doesn't work that way. So that's the idea
of signaling via risk taking, that you are in fact
exhibiting virtue via risk. And again, now comes virtue. Every time I get into a
hotel room, I get into-- I don't know if you've
seen me angry on Twitter, I'm like that in
person when I'm angry. What sets me off is going in,
save our planet, the Earth [INAUDIBLE]. What is-- is this virtuous? I think it would make much more
sense if they told us, listen, it's good for us if you save-- if you saved on towels, it's
good for us, bottom line. So it's like, don't
invoke the planet as a-- you see. So this is cheap--
cheap virtue signaling for the self-serving way
is what we're getting into. True virtue is risk
taking, Socrates. That's what we try to
impart to the Christ. He really suffers, he can't be
God, had to be human to suffer. Socrates, standing
up for your ideas. Journalism, when you
have an oppressive regime like in Argentina
or in Latin America, during these dark periods,
that is risk taking. And effectively,
the only way I can claim that a public intellectual
is not a BS vendor is he or she takes risk
with every statement. So people ask me, why am I
insulting people directly in my books? Risk taking. I want them to sue me. That's simple. It's not like I have nothing. I've never met Thomas Friedman. Actually, I did once-- I had already insulted him-- in Davos, and it was an
eye contact that was-- but never met many
of the people I-- Rob Rubin, had never met him. But I want to take risks. This is the idea. I'm signaling. Why do I curse on Twitter? Not in my books, because I don't
like the aesthetics of a curse. Because risk taking. You see? So that's simple. Now let's continue. People ask me, what
should I be doing? I'm 20 and I'll go somewhere. Start a business,
take risks now. Because everybody wants
to work for [INAUDIBLE] and improve the world. And you end up like
the UN, offices, manufacturing problems. So you hire more staff,
or fly business class and have an apartment in
Geneva, that kind of stuff. Start a business. Because we're tired of people
who want to work for NGOs. Start a business,
create jobs for others, and do not rent seek. Do not be in rent seeking. Have some skin in the game. Just like your
grandparents probably-- one of your grandfathers was at
age 18 disembarking enormity. They took a lot of risks,
these kids, 18-year-old. Take some risk,
start a business. Now finally, when it
comes to inequality, there's something about
inequality that's measured. And I said, we have to
use dynamics not statics. People tolerate inequality
if the person at the top got there via risk
taking not rent seeking, and more significantly, if he
or she has a chance to collapse. Bad news for Google-- I mean, Google is definitely
[INAUDIBLE] good news for humanity and
bad news for Google. When I was an MBA student-- I'm very, very old as you
can see, I had hair then-- the company spent about 50,
60 years in the S&P 500. So it was stable at the top. How stable is it today? AUDIENCE: Less than 30? NASSIM TALEB: Less than? AUDIENCE: 30 years. NASSIM TALEB: Keep going. Less than 30? Keep going. AUDIENCE: 10 years? NASSIM TALEB: Sorry? AUDIENCE: 10 years? NASSIM TALEB: 10 years. AUDIENCE: Is this all? NASSIM TALEB: 10 to 12 years. I think maybe even dropping. AUDIENCE: It is
dropping, but I do think [INAUDIBLE] a little bit. NASSIM TALEB: You can measure,
but there's a standard error in measurement. We have a big
statistical expert here, my co-author who will tell you-- but we know that it's
definitely much lower. And you can't take fluctuation. But that basically tells
you that the way from dorms to Google can only be short. These guys were in dorms, no? To Google can only be short if
the road from Google to dorms is equally so. You need short
route from the top. And in fact, if you have a
short route from the top, it doesn't take long. Sears, OK? And so I don't mind
inequality, this measure. And actually, even
in inequality, people say, oh look at Europe,
they have less inequality. Fuck. What do you mean
less inequality? Sorry, I cursed in the clip. So they have in
Europe, if you take-- OK, let's take a new s. 1982 versus 2012, Forbes 500
billionaires, or rich people, the richest, 10% of the
families across the list. In Europe, someone
did Florence 1580. That's the same
families as today. And in France-- have two
more minutes for lecture-- and in France, if you study
say the equivalent of Harvard or something like
that, then you're done. You're going to run
a big corporations. And they have a low
bankruptcy rate. So you need a high
bankruptcy rate in a system. Don't shoot for equality shoot
for a high bankruptcy rate. So people have
also, the illusion that you want opportunity means
people to be able to go up. No, you want people to
come down from the top. This is what you've got
to focus on in society. This is an approach,
a dynamic approach. We spoke about scaling,
this is dynamic approach to social problems. Now epistemology, experience. To explain-- I'm
going to explain a couple of weird things. We have a minute. There is a story in
both "Antifragile" and "Skin in the Game" of
a fellow who lost a million dollars trading green lumber. He knew everything about lumber,
green lumber, everything, the economics, the mathematics,
the statistics, collected data, everything, and lost
a million dollars. And wrote an account, "What
I Learned Losing a Million Dollars." And he reports that there's
a fellow, a pit trader. I don't know if you
met pit traders, but they look like pit traders
and they act like pit traders. And the fellow is making tons
of money with green lumber and had been doing
so consistently. Now the narrator discovers that
the fellow made a lot of money on green lumber. Didn't know, he thought it
was lumber painted green. He didn't know it was
freshly cut lumber. So is it that that person-- this is very high
econ argument-- knew nothing about the green? No. He knew a lot of stuff,
but not necessarily what you think from the
outside is valuable. So with that one, you
have skin in the game, you tend to know a lot of stuff
about business, about things, that you wouldn't guess you
need to know from the outside. And this is very
hard to explain. This is why machine
learning is successful, because machine
learning has no ideas. It learns from the inside,
not from the outside. And then finally--
we have one minute-- when you have in
a business where there is skin in the
game, say surgery, you go to a hospital to
install the-- you want a brain surgeon to install the next
Google product which helps you solve differential equation. You install it, you
put it in your brain. It's a very delicate
operation, many people have died during it. So it's a very
dangerous operation. There's a choice
between two doctors. One doctor who looks like
the Hollywood version of a doctor, of a surgeon,
well mannered, well educated. And then the other person
looks like a butcher. And these two have
the same track record, have the same rank
at the hospital. Which doctor would you pick? AUDIENCE: Butcher. NASSIM TALEB: Sorry? AUDIENCE: Butcher. NASSIM TALEB: The one-- because
this person had to overcome-- because not judged at
all by anything external. [INAUDIBLE] and
also peer reviewed, judged entirely by the track
record, by the performance. You have to overcome all this
perception bias to get there. So this is the
point, a field that has skin in the game,
beware of the cosmetic. Likewise, you want
to fund people? If they know how to
write business plans, no. If they make money at something
and you don't understand how, hire them. It's a green lumber problem. So I'm going to stop
here, because we can keep going forever
and for the Q&A. So thank you for listening to me. And I'm honored to be, again,
here at Google six years later. And hopefully in six years
you'll still be around. All right? Thanks, [APPLAUSE] AUDIENCE: Do you want
countries to force mandatory participation in
armies like conscription so will be less wars? NASSIM TALEB: OK. Exactly the other
thing, is people thought that it's
a pacifist approach to not have mandatory service. It's the worst possible
thing you could do if you want to avoid war. Because you want people who
vote in Congress for wars to have children, or
grandchildren, or themselves as part of the-- be the danger of themselves. Definitely, it would make
people a lot more peaceful. A lot more peace seeking. AUDIENCE: Do you have
any practical tips for the individual
investor for creating a sort of barbell
strategy in a portfolio? I know and like buying T-bills
and tips are maybe a good idea for the conservative
side, and maybe bankrupt-- NASSIM TALEB: OK, I have-- OK, so the whole thing
is, there's a slide here, I'll talk about path dependence. To make sure that survival
comes first and everything else later. Take all the risks
you want but make sure you're there tomorrow. It's a different
class of risk taking than the one that takes
risks for small return but can blow you up completely. It's [INAUDIBLE]. So last chapter of the book,
The Logic of Risk Taking, it's actually should
be a book on its own. But because there's
the "Incerto," I kept it in there,
because of fractal nature of the "Incerto." If you don't want to read the
book, you don't like reading, just read that chapter, the
last chapter of the book. AUDIENCE: Thank you. NASSIM TALEB: Yes AUDIENCE: Thanks for coming. And thanks, because of you,
I started doing deadlifting. NASSIM TALEB: Oh, OK, yes. AUDIENCE: So I have been great. NASSIM TALEB: For the
skin in the game, yeah. So skin in the game, let
me tell you something about deadlifting. I have this motto,
"Skin in the Game," that you should
never tell people what they should be doing. You should tell them
what you're doing. And I had a back injury when
I was writing "Antifragile," about seven years ago. And I cured it by deadlifing. And then I started
discovering the value of intense heavy
weight on humans, like the bone and
stuff like that. And the reason I talk
about my own deadlifting is only to say that I
have skin in the game. I'm telling you I have the
injuries of a deadlifter, I'm telling you. So I bear the risk of my advice. Great, thanks. AUDIENCE: Yeah. So I had a question actually. NASSIM TALEB: Yeah? AUDIENCE: What happened--
you said a generation or two generations, since last
couple of generations, we've seen this prevalence
of BS vendors perhaps? NASSIM TALEB: Yeah,
BS vendors, yes. AUDIENCE: What exactly happened? Like, what-- NASSIM TALEB: Well, I mean, this
may be a transitory phenomenon. It's very strange,
because people don't realize that I'm
writing "Skin in the Game" now is an outcry
against BS intellectuals who actually are
pseudo left, typically. When they're on
the left, they're pseudo left, because
they really have all the traits of non-left. They want identity
politics, it's actually a form of racial
segregation in a way. The way they define
themselves as, it's a white
supremacist type thing. Well, whatever, that everything
they do is backwards. But then there is a real left. So there is a book that came
to that effect in France in the 1900s, early 1900s. And it's called "The
Betrayal of the Clerks" by Julien Benda who really
said the same thing. And I realized that
for a long time, people kept citing
Benda about what they call faux
un-sincere intellectual, faux intellectual. And insincere intellectual for
me, I say, I name Susan Sontag. Susan Sontag as an
insincere intellectual had-- one day I was-- the
first time I was ever interviewed in my life. "Fooled by
Randomness" was out, I was in a radio station at the
BBC in the office in New York. And she had developed interest,
this book writes on randomness. Oh, very interesting. Oh, you're in the markets? I hate the markets as explosive
whatever-- this is going on, and on, and on, and on, and on. So I tried to explain to
her it's not rent seeking, but she treated
me like I was crap and she left as I
was mid-sentence, as I was mid-sentence
just to humiliate me. So I said, OK, so she
probably lives upstate New York, Woodstock, and the
farms are all vegetables and she wants to live
outside the market system. And then her obituary came. She lived in a $17 million
mansion around here, in Chelsea. So you realize, that's the
absence of skin in the game. It's fine to be against
the market system, but please live in
a commune somewhere on a kibbutz in upstate New
York eating radishes and stuff. And that's fine, I
have respect for that. But I don't have respect
for the caviar type. And then you extend
the caviar intellectual to many, many, many things. AUDIENCE: Thank you. NASSIM TALEB: You're welcome. AUDIENCE: Hi. I really like this idea
of skin in the game. I think we should
all adhere to that. And so as an
example of that, you mentioned the save the planet,
save the Earth with the towels thing? NASSIM TALEB: Yeah. AUDIENCE: So indeed, that could
have been put there for one of two reasons as I see it. It could be that they had
nefarious reasons for doing so, they actually knew that
it didn't work like that, but they put it there
anyway because it might help their bottom
line, appeal to hotel guests and so on. But it could of course also
be because out of ignorance, right? It could be that
they didn't know. Many people don't know
the details of this. And as another example
of that, the peacock. And I say this as an
evolutionary biologist. The peacock's tail
is not useless. I just want to say
this once and for all, because people always bring
up this damned example. The peacock's tail
is not useless. If you see a peacock in a zoo
and a little child runs over, a dog runs over, they
might lift their tail-- it's not a tail-- but they
might lift those feathers and that scares off everyone
from dogs to children. That's the purpose of that, OK? Just wanted to point that out. NASSIM TALEB: OK, so yeah. But let's say the
peacock tail is useless, but there exists something
called the [INAUDIBLE] signaling, which is this thing. AUDIENCE: There is
lots of signaling that is caused as signaling. NASSIM TALEB: Exactly, yeah. AUDIENCE: And sexual
selection, indeed. Also in this case
of the peacock, does have a large effect. But it is not a useless thing. It is not something
that only inhibits it, it actually scares
away predators. NASSIM TALEB: OK, all right. AUDIENCE: Thank you. NASSIM TALEB: Thanks. Yes? AUDIENCE: Hi. I am curious about how
you synthesize ideas. Like, are there any personal
habits that you could share? I don't know, like
how do you decide say, what to read to
broaden your horizons, especially when there is
so much noise out there? NASSIM TALEB: Basically,
there is a simple rule. There is a simple rule. If something bores
you, close a book. That's it. Go to something else. It's not that-- if you have to
also say if you want to read a lot of stuff-- it's not that you need to stop
reading because you're bored. You're bored that
specific author. And then little by
little, you figure out how people get bored with-- most books are boring and
most books don't survive. And you can tell that books
that are boring don't survive. I mean, people may buy
them for a while just to show off with them. So if something
bores you, skip it. Don't do anything boring. And after a while, you
develop a technique to read a lot of stuff. AUDIENCE: If I I can
ask a quick followup? NASSIM TALEB: Sorry, because
there are more people, yeah. But go ahead. AUDIENCE: If you have a group
of experts or pseudo experts that has no skin
in the game, do you have a rule of thumb
on how long they can last before it collapses? NASSIM TALEB: Definitely. This is an excellent question. Because no system--
as I was saying, those people for example trying
in universities now to create all these-- recreate classifications
that didn't exist before, can it survive? No, because you cannot-- sometimes you read something
that's completely BS, that it takes a lot more energy
to displace BS than truth. It's the opposite. Truth is a basin of attraction,
it has been over history. So eventually things
will revert to the truth. There is also a mechanism,
I call the minority rule, that make things
revert to the truth. But in history, unless the truth
is not helpful for survival, you see, unless it's
really not helpful, it's guaranteed to
prevail eventually. Yes? AUDIENCE: This is sort of
a follow up on the question which was just asked. But you're not a fan of academia
because of all the programs it has. But if you applied the Lindy
effect, look at Harvard right, it is 300 years old. NASSIM TALEB: Yeah,
but Harvard today-- so I'm shortening
to explain this. Harvard today as Lindy
has survived so long? Several things. Number one, Harvard
today is not the way Harvard was in the past. And the purpose of going
to Harvard in the past was not the same purpose
of going to Harvard today. People have the illusion
that universities started as a place for people to
go read interesting books and then go home. That was university, the
free peoples liberal arts, free peoples art. So it was organized not
as a professional thing, like medical school,
like a county school, like vocational
school, but it was organized as a place for
people to seek knowledge. There was maybe some of
the ideology, but not much. But look at universities today. Universities today, I
mean Google no longer hires from universities, right? And in the past, most people
didn't go to university. People went and studied
a craft or a trade, typically via this Lindy-- via
the apprenticeship mechanism. And this is the
apprenticeship mechanism. And still in Germany
today, half the people go through some kind
of apprenticeship. So we have enough money
to maintain prestige goods like Harvard and [INAUDIBLE]. But it's not-- society doesn't
need these universities. And they themselves are pricing
themselves out of the market because they're turning to
selling ideology rather than selling [INAUDIBLE] theory. For example, to
give you an idea, I've run into professors
of French literature who spoke broken French. Because they speak-- and then
they have prestigious position because they write on
some post-colonial aspect of the identity
of this, of this, and the French [INAUDIBLE]. And that's how they
judge one another. Two more minutes, OK. Two more questions. So this is why we've got to
mutate to the apprenticeship model, back. Yes, go ahead. AUDIENCE: Sure. I heard you criticize the
Iraq war as well as the Libya intervention. So I'm curious to find out
from you when intervention is justified and your position
on the non-interference like in Rwanda. NASSIM TALEB: OK. If you own it-- very simple. To shorten, it is justified
if those who advocate for it are willing to pay the
price if they're wrong. If you want you settle in Iraq
in case something goes wrong? Be my guest. Go ahead and we're going
to listen to your opinion. But you've got a price to
pay if things go wrong. You want to settle in Libya? Go ahead. Today Libya has a slave market. Don't tell me that your
thing was harmless. It's called iatrogenics. People should always
pay for the iatrogenics. AUDIENCE: What's
the price though? NASSIM TALEB: Some
kind of price. For now it's zero price. Yes? Last question I guess, because-- yes, go ahead? AUDIENCE: Thanks NASSIM TALEB: Yeah. AUDIENCE: If you read things
like the Federalist Papers that framers go out of
their way to talk about. Sort of decentralizing power
and how important that is, and that's a big reason
why the US is still around. Do we need something
similar for corporations as well, because they have a
tendency to really centralize their power? Or do we just need to leave it
to markets to kill companies that [INAUDIBLE]? NASSIM TALEB: Corporations, no. It's best for corporations
to die and be replaced. I mean, you're not going to
die if your corporation dies. Or it mutates into a
different group, or spin-off, and stuff like that. But visibly, if you want
to come back to this world, come back as a decentralized
system of cockroaches rather than elephants. Your survival as a species it's
going to be longer, you see? So the corporations,
basically the minute a company joins the
S&P 500, it looks like it started committing
the suicide process. And of course, companies
that don't join the S&P 500 have a huge survival advantage. What shows from the data, family
businesses, stuff like that. So it looks like when
you join the market, become large enough
to have investors, your policy is
going to be driven by the 28-year-old journalist
major who joined at the Wall Street Journal who is
going to comment on you and call up Steve Jobs and
bully him, for example. This has happened, OK? So this what's going to
happen, all the analysts, the MBA from Wharton-- some of my classmates became
analysts at Goldman Sachs and then call up the
chairperson of a company and bully him or her. So this is the-- so the stock market
accelerates the process. And then we have
no evidence, we've seen no evidence of economies
of scale for being large. As a matter of fact, there
are economies of scale that are discussed in "Antifragile." Thanks for inviting me back. [APPLAUSE]
Watched it, it was interesting. He has some good points, but not that related to algotrading though?
There's a video of him in which he explains why the Covid-19 situation is not a black 🦢 event
Was this guy actually successful at trading/investing? I've heard wildly different things, all believable.
I am a fanboy.
However, I know I know more about powerlifting and strength training than Taleb and can tell when he gets on the topic in Skin in the Game or or Anti Fragile that he is makes it sound like he knows much more about the subject than what he really does.
I assume he is kind of bullshitting in many aspects and domains he touches on then.
The statistical properties of fat tailed distributions though I am pretty certain he is not bullshitting.
In general, I wish there were more people like Taleb.
That badass Incerto book collection is sitting on my bookshelf. It’s worth it just for decorative value, yes, but I’m gonna finish reading it... someday, I swear!!