Ten principles for a Black Swan-proof world – Nassim Nicholas Taleb

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

Global Dashboard: Ten principles for a Black Swan-proof world

(Via Chris Arkenberg)

2 Comments

  1. #6: “Citizens must be protected from themselves.”

    I’d have preferred something like ‘citizens should know how to protect themselves.’ Which isn’t the same as being able to protect themselves but which is a far cry better than Taleb’s suggestion.

  2. Would you give dynamite to a child? Most of us wouldn’t. Not just because we’re afraid of what they might do to themselves with it, but because we’re afraid they might take us and anyone else in proximity down with them. (Notice Taleb didn’t use cigarettes or heroin or whatever for his metaphor).

    The problem with complex derivatives isn’t the damage they do to individuals who deal in them – it’s the way the damage ripples out to everyone else.

    What we need are better ways to insulate individuals and communities from the bad judgment of others – and for people to suffer the consequences of their own bad decisions.

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