Interview

Epiphanies from Nassim Nicholas Taleb

Epiphanies from Nassim Nicholas Taleb

Nassim Nicholas Taleb has made a career of going against the grain, and he has been successful enough that the title of his book The Black Swan is a catchphrase for global unpredictability far beyond its Wall Street origins. Born in Lebanon, he weathered the first few years of the civil war in the late 1970s reading philosophy and mathematics — from Plato to Poincaré — in his family’s basement. War taught him how quickly fortunes can change, an insight he soon applied to derivatives markets. For Taleb, investing is about “hyper conservatism,” which includes making lots of tiny bets on wildly unlikely events — like a currency crisis or the banking collapse, on which he made tens of millions of dollars. His newest project is helping governments get smarter about risks, and his fervent anti-euro message has helped win him the ear of British Prime Minister David Cameron.


There are three categories of things: Fragile things that break, like the financial system; robust things that don’t break easily but don’t improve, like the Brooklyn Bridge; and my new category, “antifragile” things that gain strength from stressors and get stronger from failure, like evolution. The fundamental problem in foreign policy is that people shoot for stability rather than antifragility.


The most stable country in the history of mankind, and probably the most boring, by the way, is Switzerland. It’s not even a city-state environment; it’s a municipal state. Most decisions are made at the local level, which allows for distributed errors that don’t adversely affect the wider system. Meanwhile, people want a united Europe, more alignment, and look at the problems. The solution is right in the middle of Europe — Switzerland. It’s not united! It doesn’t have a Brussels! It doesn’t need one.


I just came back from Lebanon, which I feel is the most stable place in the whole area. Every risk is visible to the naked eye there; you can’t be harmed by something like that. The homicide rate is much lower than that in the United States. The media says it’s chaos — but it’s not. In the end, it’s stable because Hezbollah and the Shiites know that they have to live with the Sunnis and the Christians. It can’t fall apart because it’s a perfectly controlled mess.


We need smaller, more decentralized government. On paper, it might appear much more efficient to be large — to have economies of scale. But in reality, it’s much more efficient to be small. An elephant is vastly more efficient, metabolically, than a mouse. It’s the same for a megacity as opposed to a village. But an elephant can break a leg very easily, whereas you can toss a mouse out of a window and it’ll be fine. Size makes you fragile.


The European Union is a horrible, stupid project. The idea that unification would create an economy that could compete with China and be more like the United States is pure garbage. What ruined China, throughout history, is the top-down state. What made Europe great was the diversity: political and economic. Having the same currency, the euro, was a terrible idea. It encouraged everyone to borrow to the hilt.


The U.S. government should have no deficit. There’s way too much debt. It is inexcusable when you have the highest standards of living in the nation’s history! When you get rich, you should have less debt. There’s a vicious element to borrowing when you’re very rich, and having a deficit is an extremely dangerous game.


I have a negative approach to democracy. I think it should be primarily a mechanism by which people can remove a bad leader.