
July 16, 2018
The Likeville Podcast: A Celebration of What Works with Nassim Taleb
Intro
- Nassim (@nntaleb) is the bestselling author of:
- Nassim groups the above books together, calling them “The Incerto”
Skin in The Game
- “The west is presently committing suicide”
- Some people are so naive that they think religions are like colors, making them easily comparable
- This isn’t the case, because some religions are full blown political systems – they don’t have a distinction between the sacred and the profane
- Christianity does have a built in separation of church and state
- “In the West, because we’ve been managed more and more by a bunch of nerds who don’t have a grasp of reality, we’re in trouble”
- Why is this just now the case? – The GDP that is attributed to government is between 5-10x higher than it was a century ago
- Thus, bureaucrats command 10x more control of your life
- Check out the book Bullshit Jobs: A Theory by David Graeber
- The premis – The number of bullshit jobs in government has grown just as fast as the number of bullshit jobs in big corporations
- This is why big corporations just don’t last as long nowadays
- The survival of a large corporation in the S&P 500 used to be around 60 years (its life expectancy), today it’s around 10
- “Corporations are, luckily, like governments that go bust every once in a while”
- However, with governments, this isn’t a bad thing, as you want governments to reset every once in a while, or you end up with a metastatic bureaucracy
- The premis – The number of bullshit jobs in government has grown just as fast as the number of bullshit jobs in big corporations
- “At no point in history have people taken risks killing others, harming others, bankrupting others, and milking others, without themselves being subjected to at least the same risk”
- Some people are so naive that they think religions are like colors, making them easily comparable
- The Green Lumber Fallacy, a story:
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There was once a successful trader of green lumber (described in the book What I Learned Losing a Million Dollars) who thought “green lumber” was lumber painted green, rather than freshly cut lumber (that is, not yet dried). A talker would dismiss him as an idiot, whose success must be luck. But the trader learned what he needed by doing – he didn’t need to know what green lumber was.
- What’s key here – this successful trader, never realized that green lumber = freshly cut lumber
- “What you need to know in a profession, isn’t what people from the top think, it’s a bottom up thing”
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The lesson – You have to play the game to know what you need to know
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Being in the game, you see things differently
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- Things driven by survival do not have rationalization
- A profession where you have to please the boss – you’ll play actor, dress nicely, write complicated articles etc.
- In a profession where you have to perform – it’s very different
- Ask – Who would you rather hire as a surgeon?:
- Someone who looks like the Hollywood version of a surgeon – they look the part, lots of diplomas on the wall
- The second guy, who looks like a butcher, who has no diplomas on the wall
- Answer – #2 – Where people are judged by performance, they don’t need to look the part
- It means you know your stuff and succeeded despite not looking the part
- Very often, in any industry or profession where you’re judged by your peers (not by the end users) – eventually you’ll rot or go bust
- Example – restaurant awards for the best sushi, best etc., in a certain city … these are very often voted upon by restaurant owners themselves and often quickly go out of business…
- Restaurants judged by customers, don’t care about the opinions of other restaurant owners
- Example – academia
- The more something is built around people being judged by their peers, the more likely the system is to be gamed
- Example – restaurant awards for the best sushi, best etc., in a certain city … these are very often voted upon by restaurant owners themselves and often quickly go out of business…
- “Survival is the only metric that you cannot game”
- This is why, often, people who do a shitty job at work, but have good relationships with their superiors, often do well
- “The only virtue you cannot fake is risk taking”
- We need risk takers more than ever, but risk taking is becoming more frowned upon
- The difference between courage and recklessness
- “Embrace risk, but be averse to ruin”
- Recklessness is NOT courage/risk taking
- Risk taking for the sake of risk taking is foolish
- Anyone who risks something to protect others, is doing a good thing
- It’s dishonorable when you transfer your risk to others
- “Society needs you to take risks”
- Right now – we have very few risk takers, and a lot of actors
- The main idea of Skin in the Game
- “I don’t really care about what you think, I care what you do”
- For this reason, it doesn’t make sense to ask a person how much they like a restaurant. Instead, ask how much they spend there yearly.
- Talk is cheap
- People respect risk taking, not talk
- “Life without risk taking, is like a video game”
- Jesus had skin in the game – he died for an idea
- “I don’t really care about what you think, I care what you do”
More Skin in the Game
- Skin in the Game is an evolutionary argument
- “Without skin in the game, we cannot have evolution”
- Scaling – a large town is not like a village
- They have different properties depending upon the size
- Example – if you saw one particular guy walking by you in the park, you’d say “hi”. However, if while walking on a crowded street, you saw that same person, you probably wouldn’t even bother to look at them.
- Static vs Dynamic Risk (Risk and Time)
- Over estimating risk locally, means having the right assessment long term
- If you take the a deathly risk many times over (say jumping in a tiger’s cage) , over many generations, you end up dead
- So, it’s wrong to look at risk as a static thing, you should have more of a dynamic view (think about risk in the long term)
- Ask – If I had to take this risk 1,000 times, what would I do?
- Think dynamically – You’re seeing someone at a particular point in time – Someone may be rich now, but 5 years ago they were poor.
The Media
- Why does Nassim not read the paper?
- Think about it – journalists are writing those articles, why would he take advice from a journalist?
- Bigoteering – accusing someone of something, when it’s unjustified, to gain advantage over someone
- Anyone can bigoteer anyone, so it’s dangerous
- “Ignore the media”
- The media started in the 1960s, it hasn’t stood the test of time
- At no point in time before today, were people recipients of information without being creators of information
- Social Media
- In the markets, the price is not determined by the loudest information, but by the most reliable
- Nassim pays particular attention to how reliable a person is on social media
- “Never judge someone by what they say, look at how they act, or have acted in the past”
- “Never judge someone by what they say, focus on what they meant” – to get what they mean, it may require some homework
- Book reviews
- Nassim doesn’t read them
- “I have other things to do than worry about my previous books”
Religion
- “Religion prevents you from thinking you yourself are God”
- It also forces you to follow rules you wouldn’t follow otherwise
- “So long as religion doesn’t harm those who bear it, or others, it’s okay”
- For these reasons, Nassim sees no problem with religion
Jordan Peterson and Burn Out
- Nassim recalls that after the success of the The Black Swan, he became “commodified”, and did way too many TV/radio interviews, which burned him out
- “You lose control of your life, your ideas, and your activities via success”
- After 6 months of constant interviews, Nassim said enough is enough, and decided to draw a line
- After that, he promised himself he’d only do a few lectures/talks/interviews a year
- Perhaps Jordan Peterson is going through the same thing now after the success of his book, 12 Rule for Life: An Antidote to Chaos
Nassim’s Next Project
- Nassim is working on The Technical Incerto
- The first portion is called – “The Statistical Consequences of Fat Tails – Volume 1 of the Technical Incerto”
- Volume 2 is about fragility and antifragility