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You mean... life is NOT like a fountain?

By Owen Paine on Thursday April 9, 2009 01:46 AM

"An economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news."
Sound nice? Not to all of us, I suppose, what with our squadron of hardened property-is-graft set ever a-hovering near. But that's Mr Nassim Taleb, the bright-looking gent pictured above, probably at a $50k lecture engagement.

He's the Frank Perdue of the great financial reformation now under way on planet earth. For plumper chickens, just substitute black swans; the ceaseless self-promotion is identical.

Sometimes Nassim turns his attention from the swans and peddles stuffing. Here's a sampling of his current stump-standard Gibran-ish gourmet fillers:

"What is fragile should break early while it is still small. Nothing should ever become too big to fail.

"[in our present system] Evolution... helps those with the maximum amount of hidden risks, hence the most fragile become the biggest

"It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards. hence the most fragile become the biggest.

"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.

"Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.

"Using leverage to cure the problems of too much leverage is not homeopathy, it is denial.

"Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

"Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties."

What do you think? Agree with too much of it for your own comfort?

Never fear -- it just goes to show ya, critiques even coming from opposite directionss often look alike. Its only in the solutions where the differences come out (echo of Tolstoi here?).

Let's get back to the lead-off quote: "an economic life closer to our biological environment."

What shameless pandering -- and what hubris, this hollow anology between Mother Earth's living skin and bourgeois society.

"Smaller companies, richer ecology, no leverage." Nassim is speaking for mother Earth again: smaller is beautiful, he hears her saying. (But who came up with the baluchitherium?) "Richer ecology" presumably means greater diversity -- of something -- afforded no doubt by the Lebensraum created once we outlaw limited liability titans. But diversity of whats, Nassy ole boy -- whats? Proudhon-ite cobbler shops? High-tech garage ops? Or is smaller only operationally defined here, as built with "no leverage"?

On the face of it, that seems to imply no credit system for business firms beyond equities.

"A world in which entrepreneurs, not bankers, take the risks" If this doesn't mean no bank loans to business -- then what are banks for? Just the depository functions of the payments grid? And of course the locus classicus of loans -- usury DBA household credit. You know, ARM mortgages, zero interest car loans -- death on the installment plan, in short.

Proudhon redivivus, or just a shameless flatterer of sensible Babbits like Paul Dombey of Dombey and Son?

I find this all "very figmentary", as my younger sister, ten-ton Patty Paine, once said after first reading the Communist Manifesto.

Comments (15)


You are much too severe on dear little Patty, whom I remember with great affection.

Al Schumann:

Taleb breathed life back into a major truth with his findings on the mark to myth models. The discomfort he caused was amusing. He hung a black swan around the necks the LTCM-style academic charlatans for rent. When the data they have doesn't fit the model, they dissolve the data and elect a better set. When that doesn't work, they make the model more obscure. Taleb nailed them, like a righteously risk-bearing Proudhonian shopkeeper collaring shoplifting frat boys.

Owen, it looks like he was set up—suckered into prescribing, in order to discredit his diagnostics. Those bromides are the end of him as a threatening gadfly.

Al Schumann:

There's something else. The moral component to a rough equalization of risk is creepy. Why not a rough equalization of security? The possibility that everyone, no exceptions, can be punished in good measure is poor comfort. It's the wholesomeness of egalitarian floggings.


Here we go again! I actually do believe that small is beautiful, though I have no idea or only the foggiest of how it translates onto the scale of 280 million people.

It appears that Taleb is saying prohibit every way that wealth can pile up at the top (and influence policy), and perforce it will be distributed more evenly all around. So what's not to like?

Could capitalism survive if it wasn't allowed to be. . . capitalistic? Wouldn't they all just kill us if they saw this coming?

Hey, let's ask Van lingle!


Super al
Fair enough
I must admit its his toothless internet echo chamber that annoys me not this
One hit wonder god bless him
his fame turned him
I suspect it would turn me too
In this squalid post party discipline epoch
Of ours


My point would be
Is small sustainable

The commodity production system
On its own inner
Motions heads back toward the large joint stock company
And ever more entanglements thru credit obligations and credit sources

Taleb is throwing the star child out
A"ong with its mundane burgerbeast
Of a frat twin

Ever onward and upward sin
That's socialization of production
The credit webs obligations are
The gropingly blind sketched of the future outline of the planned economy

The Swanmeister forgets something rather basic: Capital itself is leverage, is it not?

Meanwhile, I see only Mad Max in a "small" world. The infrastructure, skills, and culture required to make small beautiful will require a rather lengthy period of big state promotion, if they are ever to come into existence.

I'm with Chomsky, the anarchist who says we'll need to get much bigger before we can get smaller.


Michael -- I've heard all this before, and half believe it. But I also resist the idea that PGE is the only entity that can deliver electricity, or GM the only one that can make things that move on wheels.

But first, i hve to ask OP what this means:

"The credit webs obligations are
The gropingly blind sketched of the future outline of the planned economy."

To quote Eddie Izzard, "is this good?"

Al Schumann:

HCE, I think what MD is getting at is that it's perfectly possible for Small Is Beautiful G&E to deliver power, right up until either stealing it or killing it becomes attractive to Transnat Parasite, LLC. The same thing is played out with neighborhood restoration projects and developers. They work very well, but community enterprise "crowds out" the efforts of real estate developing welfare queens. Both have thousand legalisms to throw at the community and when that doesn't work, they turn violent. Sometimes they skip right to violence.


some where along the way
a couple of my phone based comments hit the void button

i can't always read the comments

but sin first lets remove my usual blisterish typo

"The credit webs obligations are
The gropingly blind sketch
of the future
a bare wobbly outline of the planned economy"

now the perhaps missing second shoe

the socialization of risk
is the security in stability we need
i agree noam has it right
capital totalization before sublation
though i think he's talking maybe gotta get much worse before barcelona
for 30 days or paris or shanghai for 60 days
can't become earth for a millenium

i suspect his intuition conflicts with his
very reified notion of hierarchy
as the devils jungle gym


Taleb is a joke, a perennially money-losing hack. His appeal seems to lie in providing a sort of Socratic "you know nothing" authority for libertarian nutbars to reference in the face of any rational argument. If they actually understood his books they would see that his (wrong) ideas are in direct conflict with the (wrong) central tenets of the modern goldbug worldview. It's a contradiction that always seems to escape them.

Don't get my wrong- he's a smart enough guy, but nowhere near as smart as he thinks he is. This leads to all sorts of hilariously hypocritical tirades about the hubris and hackery of money-losing quants who are exactly like him in every way, except that they have the decency not to torture the world with cringe-worthy attempts at erudite philosophy. His investment record is just a more pathetic version of LTCM.

Taleb's investment strategy in practical terms:
1. round up some money from anyone stupid enough to invest with you.
2. drive to convenience store
3. fire up Mathematica on the old laptop, run proprietary fractal based lotto scratch ticket choosing program in order to identify tickets which are likely to be underpriced by those Gaussian fools who run the lottery.
4. Repeat until all the money has been lost.
5. Raise some more money and try again with a new fund.
6. Repeat steps 1-5
7. eventually when one of the funds wins, pretend that it is the only fund you have been running and publicize the returns without any reference to all of the losses and failed funds that proceeded it.
8. sell book, do interviews


"Taleb nailed them, like a righteously risk-bearing Proudhonian shopkeeper collaring shoplifting frat boys."

No he didn't actually. You must be thinking of Andrew Lahde.


Good stuff, bob.

Al Schumann:

Taleb's claim to fame is demonstrating that the "certain return" modelers achieve certainty by shoving relevant but inconvenient data into the category of excludable outliers. It's a mundane truth, which for dramatic purposes I put into florid language; not a wise choice, clearly.

I wasn't thinking of Lahde at all.

If Taleb's investment strategy is relevant to the strength of his critique, and I don't think it is, necessarily, it appears to be doing okay at this point.



None of that changes the worthlessness of his bromides.


I don't think that is actually his claim to fame. It is well-understood by pretty much everyone that models exclude data and offer a false appearance of certainty, by their very nature. It's basically the old Borges map-that-covers-the-world point. Some people used the models to justify reckless fleecing, but IMO the top dogs were quite cynical about it, and did so out of greed, not naivete.

His main point is a crankish 4 decade old mathematical theory that he thinks is a better prediction model than the existing models (I think he is wrong), although it suffers from the exact same illusory certainty that he criticizes in other models. He's so deep in the "quant-wars" worldview, that he can't comprehend that most people do not actually share the same uncritical belief that models can or should provide certainty. It's an opinion that only he and his opponents seem to share in their small, cloistered world of autistic math geeks, an opinion which he hypocritically chides them for. They're the only ones who are left scratching their heads over the volatility smile (the reason why Taleb's investments were so stupid is pretty clear to anyone with the slightest bit of sense, like Warren Buffett who made a fortune off the volatility smile by taking the opposite side of Taleb's bets). The quants like him were just useful idiots in a larger shell-game run by smarter worldly people who made off like bandits.

Re: his strategy & the bloomberg articles, I think I explained pretty well why they are a poor indicator of the long-term efficacy of his ideas

it takes a while to get into all the details, but this article more or less covers my opinions on Taleb:

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