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Thread: Nassim Taleb: my rules for life

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    Nassim Taleb: my rules for life

    Nassim Taleb: my rules for life
    The controversial thinker who predicted the 2008 financial crisis hates bankers, academics and journalists. He's also a man of mystery – he eats like a caveman, and goes to bed at 8pm. We took the risk of meeting him
    http://www.guardian.co.uk/books/2012...ance-interview

    How much does Nassim Taleb dislike journalists? Let me count the ways. "An erudite is someone who displays less than he knows; a journalist or consultant the opposite." "This business of journalism is about pure entertainment, not the search for the truth." "Most so-called writers keep writing and writing with the hope, some day, to find something to say." He disliked them before, but after he predicted the financial crash in his 2007 book, The Black Swan, a book that became a global bestseller, his antipathy reached new heights. He has dozens and dozens of quotes on the subject, and if that's too obtuse for us non-erudites, his online home page puts it even plainer: "I beg journalists and members of the media to leave me alone."
    [...]
    In print, the hating and despising is there for all to see: he's forever having spats and fights. When he's not slagging off the Nobel prize for economics (a "fraud"), bankers ("I have a physical allergy to them") and the academic establishment (he has it in for something he calls the "Soviet-Harvard illusion"), he's trading blows with Steven Pinker ("clueless"), and a random reviewer on Amazon, who he took to his Twitter stream to berate. And this is just in the last week.
    [...]
    But then, having read his latest book, I actually know an awful lot about his diet. How he doesn't eat sugar, any fruits which "don't have a Greek or Hebrew name" or any liquid which is less than 1,000 years old. Just as I know that he doesn't like air-conditioning, soccer moms, sunscreen and copy editors. That he believes the "non-natural" has to prove its harmlessness. That America tranquillises its children with drugs and pathologises sadness. That he values honour above all things, banging on about it so much that at times he comes across as a medieval knight who's got lost somewhere in the space-time continuum. And that several times a week he goes and lifts weights in a basement gym with a bunch of doormen.

    He says that after the financial crisis he received "all manner of threats" and at one time was advised to "stock up on bodyguards". Instead, "I found it more appealing to look like one". Now, he writes, when he's harassed by limo drivers in the arrival hall at JFK, "I calmly tell them to $#@! off."

    Taleb started out as a trader, worked as a quantitative analyst and ran his own investment firm, but the more he studied statistics, the more he became convinced that the entire financial system was a keg of dynamite that was ready to blow. In The Black Swan he argued that modernity is too complex to understand, and "Black Swan" events – hitherto unknown and unpredicted shocks – will always occur.

    What's more, because of the complexity of the system, if one bank went down, they all would. The book sold 3m copies. And months later, of course, this was more or less exactly what happened. Overnight, he went from lone-voice-in-the-wilderness, spouting off-the-wall theories, to the great seer of the modern age.

    Antifragile, the follow-up, is his most important work so far, he says. It takes the central idea of The Black Swan and expands it to encompass almost every other aspect of life, from the 19th century rise of the nation state to what to eat for breakfast (fresh air, as a general rule).

    As you might suspect, it's a great, baggy, idiosyncratic doorstopper of a book. Reading it, I spend the first 200 pages or so mildly confused. "I couldn't figure out what genre it was," I tell him. "Forget the genre!" he says. I'd been expecting a popular science-style read, a Freakonomics or a Nudge. And then I realised it's actually a philosophical treatise.

    "Exactly!" says Taleb. Once you get over the idea that you're reading some sort of popular economics book and realise that it's basically Nassim Taleb's Rules for Life, it's actually rather enjoyable. Highly eccentric, it's true, but very readable and something like a chivalric code d'honneur for the 21st century. Modern life is akin to a chronic stress injury, he says. And the way to combat it is to embrace randomness in all its forms: live true to your principles, don't sell your soul and watch out for the carbohydrates.

    What's more, for all the barmy passages involving an invented character called Fat Tony engaging in a Socratic dialogue with another invented character called Nero Tulip (a very thinly disguised Taleb), and the fact that at one point he does actually seem to compare himself to Jesus – they're both prophets who came from the east – he does talk a lot of what I can only describe as sense.

    His justification for all this is that "experience is devoid of the cherry-picking that we find in studies". More than anything else, he believes in having "skin in the game". When, for example, he warned about the fragility of the banking system in The Black Swan, "I was betting on its collapse". His point is that he's always put his money where his mouth is, and it's this principle – and the lack of it – that is still, he believes, the fundamental problem with the entire banking system.

    In the book he calls this "Hammurabi's Code", a 3,800-year-old Babylonian law that stipulated that if a building collapses and kills someone, the builder should be put to death. Whereas, for bankers, "there is no downside". The bonus system means that "they're paid billions in compensation". And if their bets lose, it's the taxpayers who pay.

    He cites, not unadmiringly, the tradition in Catalonia where they would "behead bankers in front of their banks". So, what's changed, I asked, since he wrote the book, and the system collapsed?

    "Nothing. Nothing has changed. Zero. Now I switch to writing technical papers. There is some hope, the Bank of England wants to implement antifragility. Mervyn King [the governor of the Bank of England] spoke about it at the LSE. And I've done work for the IMF…"

    But nothing's changed?

    "I no longer care about the financial system. I gave them my roadmap. OK? Thanks, bye. I've no idea what's going on. I'm disconnected. I'm totally disengaged. People read 3m copies of The Black Swan. The bulk of them before the crisis. And people love it. They agree with it. They invite me to dinner. And they don't do anything about it.

    "You have to pull back and let the system destroy itself, and then come back. That's Seneca's recommendation. He's the one who says that the sage should let the republic destroy itself."
    [...]
    And have they done anything about it? "I don't know. I don't read the papers… I provide intellectual backing for some principles, taking into account bigger risks with size and debt. With debt they have the arguments, they don't need me. For size, I have the arguments."

    The "arguments" are that size, in Taleb's view, matters. Bigger means more complex, means more prone to failure. Or, as he puts it, "fragile". It's what made – still makes – the banking system so vulnerable, in his view. It needs to be more "antifragile". This isn't the same as robust, he explains, which means it can simply take the knocks. "Antifragile" is when something is actually strengthened by the knocks.

    He gives all sorts of examples of this in the book. A clerk in a large company is fragile as he has only one source of income. A taxi driver is antifragile. A banker is fragile. A prostitute is antifragile. General Petraeus is fragile: a single indiscretion was enough to destroy his career. Boris Johnson is antifragile: a whole string of scandals has actually enhanced his reputation. "He's smart enough to present himself as sort of 'This is how I am'," says Taleb. London, too, seems to be antifragile. The global financial crisis was just another boost: a safe haven for foreign real-estate cash.

    In Taleb's view, small is beautiful. Corporate mergers never work. "It's not a good idea being large during difficult times." And, when companies think otherwise, it's the "hubris hypothesis". After reading this section of the book I flick to the cover to check who printed it: Allen Lane, an imprint of Penguin. Which has recently merged with Random House to create one big mega-publishing company.

    "Your publishers haven't actually read your book, have they?" I say. "If they're smart enough they can keep the companies separate," he says, not very convincingly. And anyway, there's really no evidence that they are smart enough.
    [...]
    When the financial journalist Michael Lewis profiled a collection of individuals who, like Taleb, saw the crash coming and shorted the market, he described them as "social misfits". It takes a certain sort of personality to stand apart from the herd. And Taleb's cantankerousness, his propensity for picking fights, and for taking stands does also seem to be the source of his greatest triumphs. It was horrible, though, he says.

    "Really horrible. Between 2004 and 2008 were the worst years of my life. Everybody thought I was an idiot. And I knew that. But at the same time I couldn't change my mind to fit in. So you have this dilemma: my behaviour isn't impacted by what people think of me, but I have the pain of it.

    "People made fun of me. I don't know if you can still find it on the web but you would not believe how much crap was written about me. The finance industry hates me with a passion."

    You must have felt incredibly vindicated?

    "Vindication doesn't pay back. Nobody likes you because you were right. This is why I'm glad I made the shekels."
    Based on the idea of natural rights, government secures those rights to the individual by strictly negative intervention, making justice costless and easy of access; and beyond that it does not go. The State, on the other hand, both in its genesis and by its primary intention, is purely anti-social. It is not based on the idea of natural rights, but on the idea that the individual has no rights except those that the State may provisionally grant him. It has always made justice costly and difficult of access, and has invariably held itself above justice and common morality whenever it could advantage itself by so doing.
    --Albert J. Nock



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    I look forward to reading his new book:




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