Nassim Taleb is the celebrity author of the book “The Black Swan: The Impact of the Highly Improbable” which has stormed the barricades of conventional investment wisdom over the past 2 years since its just before the current “Great Depression 2.0” started.
Incidentally, he also wrote the book “Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets” which is an excellent read for the would be trader. In addition to this Taleb was no mean trader himself, and is involved in a successful hedge fund called Universa Investments.
Today, Taleb proposed “Ten principles for a Black Swan-proof world” in the Financial Times (also referred to in Clusterstock at “Nassim Taleb: How To Make The World Black-Swan Proof“).
Below I list a summary bullet list of the principles (you’ll have to read the article to see how Taleb elaborates on them).
1. What is fragile should break early while it is still small
2. No socialisation of losses and privatisation of gains
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks
5. Counter-balance complexity with simplicity
6. Do not give children sticks of dynamite, even if they come with a warning
7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”
8. Do not give an addict more drugs if he has withdrawal pains
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement
10. Make an omelette with the broken eggs
Taleb finished off by saying that he hopes that these suggestions would make our economic world more similar to our biological world.
I must say that I do find Taleb’s work fascinating in the sense that he has taken concepts that were known amongst a small circle of experts and explained them to the masses. But I do not agree with all of his points above.
We will never make our economic world similar to the biological world. That is because the economic world involves the human mind and emotional psyche – elements which do not work according to sets of biological equations. Also, I’m not sure I would want our economic world to match the biological world – the biological world is a harsh place at times where species are exterminated, the law of the jungle prevails, and environmental catastrophe happens often without the help of humankind.
However, I do have an 11th rule that I would like to add to the list:
11. Get everyone to learn how to invest well using the medium of poker and the Texas Holdem Investing method. It will help investors to make better decisions, and will also help entrepreneurs create new businesses more efficiently. And it might allow us all to have some fun!
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