Nassim Taleb: Prophet or Publicist?

Nassim is a controversial figure and following my recent post I was contacted by an American across the pond who is not at all a fan of his and who made some quite damning accusations. Check out the row here, here, here, here.

At the seminar itself I may have missed the remark about being a "climate change denial" but Nassim did make it clear that as a derivatives trader in the past he did find ways around regulations and did think that (non global threatening) economic crashes were a good thing that he was in favour. He now appears to deny this.

Nassim has taken a lot of stick while in the UK and this should be worrying to his co-panellist Cameron. My American hat-tip thingy person thinks that with regard to appearing with Nassim that “Perhaps Cameron doesn’t read FT Alphaville, which caters to the financial community, but had he done so, it might have given him pause”.

Yep.

Nassim Taleb and the Black Swan Cameron

On Tuesday I went to a breakfast seminar at the Royal Society Arts to hear Nassim Taleb (left) speak for the first time recently in London about the current worldwide economic crisis. He was here 30 months ago when he ridiculed by some for his predictions of a pending financial meltdown. Now of course he is the “hero of the hour” (as was Shiller).

Nassim is “Mr Interesting” personified. Check out his website “fooledbyrandomness”. He has a very high opinion of himself and a somewhat lesser opinion of those who don’t totally agree with this former opinion.

The panel comprised of Nassim, chair Danny Finkelstein from the FT and David Cameron - Conservative Party leader (check out Tuesdays post).

Nassim was very good value – provoking, entertaining and very personable - who spoke without any notes. His most famous work is “The Black Swan” which he explains is about “high-impact but low probability events”. Wikipedia explains further:-

The term Black Swan comes from the 17th century European assumption that 'All swans are white'. In that context, a black swan was a symbol for something that was impossible or could not exist... The main idea in Taleb's book is not to attempt to predict Black Swan events, but to build robustness to the negative ones, while being able to exploit positive ones. Taleb contends that banks and trading firms are very vulnerable to hazardous Black Swan events and are exposed to losses beyond that predicted by their defective models.

Nassim described himself as being in the “preventive business not emergency care” so he was uncharacteristically uncertain about what do next in the UK. He did convincingly argue that the big banks and financial institutions that are “too big to fail” must be broken up or they will just eventually repeat the same mistakes since they know that the authorities will not allow them to go bust. Check out similar argument here.

He also suggested that there is too much specialisation in financial services and too much debt. We need more generalist institutions which should have greater levels of deposits and lend less. (Not rocket science then?)

His solution to the current mortgage debt crisis is that Banks should stop sending “hate mail” to those in arrears and instead offer to reduce repayments in exchange for equity in these properties (good idea which is starting to happen in the UK). If there is cancer in the housing sector you don’t just offer pain killers.

Nassim actually likes economic crashes – he thinks they are good thing but they should not be big enough to be able to threaten the entire economic system as has recently happened.

He is very skeptical of “regulation” - he pointed out that he was a derivatives trader for several years and when he was a trader, give him a regulation, he would just find a way around it.

Regulations only benefit regulators and lawyers (workers capital argument?).

The bonus system in Banks definitely needs reforming. If Bankers are fooled by the randomness and give loans to black swans then they should not get any bonuses. (But who and how will they enforce this?)

I thought that Nassim ideas were really interesting. I was not able (despite trying) to ask my usual question to Nassim and Cameron about the role in the economic crisis that poor governance of workers capital played. Which is a pity - but there you go.

On the night before I read about Nassim’s proud boast that he always replies to short emails from people so I emailed him the question “Did Gordon Brown save the World”. He didn’t respond to this but to be fair he did actually email back and ask “Are you john Gray the author, my friend, or another one? “ I responded that “we are all Spartacus” but I was in fact “another one” to which he did not reply.

I suppose I hope he meant the highly regarded philosopher John Gray as a mate rather than the “Mars and Venus” John Gray. But somehow I have my doubts.

David Cameron and the Labour Trade Union blogger

Picture is from this morning’s breakfast seminar at the RSA. The main speaker was Nassim Nicholas Taleb author of “Black Swans” who famously was one of the few to “see it coming” and predict the current economic crisis. David Cameron was also part of the panel. I will post separately on this seminar which appears to have picked up quite a lot of negative (and inaccurate) comment.

I thought it was really interesting even if the dastardly chair Danny Finkelstein from the FT didn’t choose me to ask a question (not from my lack of trying).

Now this is the first time I have ever seen “Just call me Dave” up front and I will admit I am just a teeny, tiny bit biased against him, but I honestly didn’t think he came over that well. He seemed to me to be a little tense and even very, very slightly annoyed all the time. Not that he was at all rude or abrupt, just a little testy. It is ironic that to me he comes over well on the national TV but in such a relatively small gathering (75 of us?) he is a bit, well, plastic. While “our Gordon” comes over as a person much better in similar gatherings.

There seems to be some discussion why he was there and was it some attempt at the rebranding of his image as an intellectual heavyweight?

To be fair as I came out of the RSA he was chatting to people (aka being lobbied) as he was getting in his car. I went up to him and said “David I am not a supporter but could someone take a picture with the two of us”. He immediately agreed and for the first time that day gave a lovely relaxed tanned smile for the camera... Such is the prospect of appearing on John’s Labour blog!

I know I am setting myself for some stick by publishing this photo - but why not, it is after all the silly season.