Please find below our key points from Google talk of one of best thinkers Nassim Nicholas Taleb. He has written five books on the most fascinating topic of Uncertainty. He wrote books like Fooled by Randomness, The Skin in the Game, Antifragile, The Black swan, etc. The key theme that originates from all the books is that, “How we as human beings underestimate the role of randomness in our daily lives”.
He talks about one of the important concepts in his book by the name of “Lindy Effect”. He takes the example of a Restaurant where the unemployed actors discuss something about the lifespan of plays, they say that if a play is there for around 200 days it will be there for another 200 days, same way if it stays for around 1000 days it will stay for another 1000 days.
So Taleb talks about how he uses Lindy Effect in his own life, he asks himself, “How should he write his book in order for the book to survive?” To which he says; the old technology has more lifespan than new technology. The new technology gets very swiftly substituted by another new technology. So the same way he says he writes his book in a way that even the generations before the current generation would read it.
He says it is difficult or next to impossible to predict the future. Nobody predicted Google, Microsoft, Berkshire Hathaway, etc. That’s why it makes it makes sense to go back in time and understand ideas which have stood the test of time.
He says kiddingly and somewhat in disdain that academicians and theoreticians are absolute baloney. They prepare models and representations which are devoid of reality. The work is judged by other peers and not by clients. He says that there is no positive feedback loop associated with academicians and thus the theories they form are absolute bullshit.
He says that people have an illusion that technology comes from science rather science comes from technology.
He says that those who became practitioners after studying theory always blew up. It should be the other way around where you develop theory after undergoing practice. There was something in the mindset of economics that made them blow up.
He talks about another concept which is known as ludic (Ludic comes from a latin word which means games) fallacy. He says that the situations and uncertainty that we encounter in real life is different from the encounter in casinos and games.
He says that the more uncertainty there is - the more certainty there is in how to respond.
He talks about his friend who got a bad idea to invest in restaurant business. He says that the one advice that he would give will be don’t invest in the restaurant business. He says that in a restaurant business there are prices listed. Those prizes are decided by the journalists and peer review magazines. There is a gala dinner where they give these prizes.
Any business that is judged by some peers and not in contact with some reality is going to rot eventually.
He says that people in policy and financial economics are not experts. It is very easy to Bull shit at a macro level than at the micro level. He gives a term to this so called pseudo experts, “Intellectual yet stupid”. He says Academics who have absolutely no touch with reality will sooner or later fail.
He moves on to telling us about Hammurabi’s rule. But before he goes on to explain the Hammurabi’s rule, he talks about a situation by the name, “Global financial crises”. He says during the financial crises, a top level CEO from Citibank said that the situation should be named after a Black Swan because nobody could have predicted such event.
To this Nassim Taleb says that you enjoy the gain when there is a bubble in the market but you don’t hold yourself accountable for the losses you generated. He takes the example of a person who works religiously in order to make his/her ends meet and he has to bear the brunt of the so called mistakes done by this CEOs.
He now defines Hammurabi’s rule. He says that, “If you build a building and then there is a collapse to that building than you should hold yourself accountable which means that you should own the risks that you created”.
From this he tries to connect the concept of symmetry. Symmetry means that there is a linear punishment of the act that you took. Just like the example of Building a home which collapses, there is a symmetrical punishment of death straightaway; he takes the example of a car driver who drives at 150 miles an hour and violates traffic all the time will have a symmetrical punishment of death.
He talks about another concept by the name “Silver Rule”. Silver rule says that, “don’t do to others what you don’t want them to do to you”. You cannot have a civilised society without a silver rule. Silver rule applies to every aspect of society to which he calls an idea of moral symmetry. It applies to International affairs where you don’t take advantage of other countries just because they are weaker.
He talks about two crucial ideas which nobody discusses at the moment; one is dynamism and other one is scale.
Dynamism calls for a change in rules with a change in the dynamics of society. Scaling is in a way exponential rise in a population when population reaches a certain amount.
He talks about the dynamics and scalability achieved by the Tribals. He says that the Tribals were conscious of the limited power a large town possesses. He says it was easier to love and care for a small town rather than a larger one.
He talks about a concept of “Risk as virtue”. He says that in the earlier times when there was the English feudal system in which the Emperors were entirely responsible for the decisions they took. Emperors traded social status for risk. But in the modern lingo the so called leaders would do financial harm but still get saved still because of their financial powers.
He talks about how there was a law that was supposed to be passed in Switzerland which called for limiting the income of CEOs; although the law didn’t pass he says that such limits don’t apply to entrepreneurs. He says we respect people who have scars i.e. who takes risks. We don’t limit the entrepreneurs in any sense.
He takes the example of Christ and Socrates who took risks at every turn which make them more respectable. He also talks about cheap virtues wherein he gives the example of an ad which motivates to save environment but in a way there motive was to save costs but not environment.
He says that public intellectuals take risks at every turn no matter what. He calls it signaling. Signaling is when you take risks by out-rightly calling out persons who do wrong in some way.
He talks about how it is important to start a business when you are in your early 20s. When you start a business you are not rent seeking but risk taking. If you take risks and reach up the order people don’t insult you in a way. The position also hangs in the balance. At one point you may be at the top but on the other hand you can go down too.
He says inequality is good when there is risk taking involved. He says that we need higher bankruptcies to place order in the society.
He talks about another example of “The Green Lumber Problem”. In the Green Lumber Problem you get deluded by what’s on the outside rather than going ahead with what’s on the inside. He gives the example of a surgeon wherein he has a good track record but looks like a butcher, because surgery has an element of skin in the game it was easy to look ahead of the perception bias and get to the track record. He says beware of the cosmetics.
Lastly he says when you want to give funding, don’t judge by the business presentations but rather whether they have earned money for themselves.