Global Crisis Blog

Black Swan Society: Nassim Taleb’s 10 Principles, or

“In French socialism 1980’s, the government takes over the banks; in the U.S. 2000’s, the banks take over the government….” – Nassim Taleb 

By Shlomo Maital

 

 

 

Nassim Nicholas Taleb is the author of The Black Swan: The Impact of the Highly Improbable, a New York Times bestseller published in 2007 just before the onset of the global crisis.  Taleb has now done a second edition with a new section titled “on robustness and fragility”.  It includes “The 10 Principles for a black-swan-robust society”, originally published as an editorial in the Financial Times in 2009.   In a footnote, Taleb notes that the FT editor changed his own original title to “Black-Swan-proof”, something which he says does not exist.

    Here is a brief version of his 10 principles that can help societies cope with the aftermath of crises that are inevitable and always will be:

  1. Let what’s fragile break early, while it’s small.  “Nothing should ever be too big to fail”.
  2. Do not socialize losses and privatize gains.  “Whatever needs to be bailed out should be nationalized”.
  3. Don’t let people wearing  blindfolds drive buses ever again.  “The economics establishment should be ignored [forever]”.
  4. Forbid people with ‘incentive’ bonuses from managing your financial risks. “Odds are they will cut corners to show ‘profit’ in order to gain the bonus”.
  5. Compensate complexity with simplicity.   “Complexity is a form of leverage”. Avoid it.
  6. Do not give children dynamite sticks.  “Ban complex financial procedures that nobody understands”.
  7. Governments should never ever need to ‘restore confidence’. 
  8. Don’t give addicts more drugs if they are in withdrawal. “Using leverage to cure excess leverage is pure denial. The debt crisis is not temporary, it is structural and requires rehab”.
  9. Citizens should not use financial assets as a repository of value and should not rely on fallible ‘expert’ advice for their retirement. “Economic life should be definancialized”.
  10. Make an omelet with broken eggs. “Remake the system before it remakes itself (through crisis).”