A Celebration of What Works with Nassim Taleb

  • Big corporations commit suicide eventually. The survival of a large corporation in the S&P 500 used to be something like 60 years. And today it is around 10 years. [11:00]

  • You want institutions to reset. Otherwise you end up with metastatic bureaucracies. [12:00]

  • At no point in history have you had as many people taking risks that kill others, harm others, bankrupt others, milk others —without themselves being subjected to the same risks if not higher. [A core tenet in his book Skin In The Game: Hidden Asymmetries in Daily Life.] [13:05] 

  • A lesson from The Green Lumber Fallacy: What you need to know in a profession isn’t what people from the outside, or people from the top think. It is a bottom up thing. [17:45] 

  • Any profession where you are judged by your peers — and not the end users — will eventually rot. You will eventually go bust. [21:49] 

  • Survival is the only metric you can not game. [23:08]

  • We need people to start a businessThat is what we don’t have. We have very few risk takers and a lot of actors. Practically in every field. [28:13]

  • The idea of Skin In The Game is I really don’t care what you think. I care what you do. [Revealed preference] [30:30]

  • Cheap talkers want to be intermediaries between me and Seneca. . . I want them out of the way. I want to directly read the text and get the message. I don’t need intermediaries. I don’t want a broker. [32:38]

  • Things change with scale. A large town is not like a village. Risk taking for my own sake is different from risk taking for the collective. [Or why we need more entrepreneurs and less bureaucrats.] [38:02] 

  • Goldman Sachs is 150 years old. Why? Because they have a rule: We don’t want a small tail risk. We want zero tail risk. A tail risk is the risk of ruin. [43:26] 

  • Ingrained in every trader: Take all the risk you want but avoid ruin. [44:00]

  • They want you to believe paranoia is irrational. We have survived 300 million years thanks to paranoia. Paranoia is built into nature and all sorts of animals. [44:41]

  • All these economic models are completely flawed but academics keep using them because they don’t have skin in the game. When you have skin in the game you know survival is what comes first. [46:33]

  • I had Skin In The Game reviewed by exactly zero people in the media and it opened #2 on the best seller list. Explain to me why I need the media? [1:01:41]

  • Full podcast here.