Nassim is in Belgrade to speak at LibertyCon 2019

Nassim’s Lecture is titled Fractal Localism: On the scale and dynamics of bottom-up societies (conversation with Branko Milanovic)
5-7 April 2019
Belgrade at the Kolarac Concert Hall
…Link to more details

Medium Post: The Merchandising of Virtue

I will always remember my encounter with the writer and cultural icon Susan Sontag, largely because it was on the same day that I met the great Benoit Mandelbrot. It took place in 2001, two months after the terrorist event, in a radio station in New York. Sontag who was being interviewed, was pricked by the idea of a fellow who “studies randomness” and came to engage me. When she discovered that I was a trader, she blurted out that she was “against the market system” and turned her back to me as I was in mid-sentence, just to humiliate me (note here that courtesy is an application of the Silver rule), while her female assistant gave me the look, as if I had been convicted of child killing. I sort of justified her behavior in order to forget the incident, imagining that she lived in some rural commune, grew her own vegetables, wrote on pencil and paper, engaged in barter transactions, that type of stuff.

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Randomness of Correlation & Its Hacking by Big Dataists

This tutorial presents the intuitions of the randomness of sample correlation (spurious correlation) and the methodologies in derivations. Some later sections are somewhat technical as Nassim rederived an old equation with more precise functions (in order to apply to fat tails) and showed the distribution of the maximum of d variables with n points per variable.
This paves the way to the real scientific work on random matric theory under fat tails and the failure of Marchenko-Pastur.

Medium: Peace: Neither Ink nor Blood

One of the problems of the interventionista –wanting to get involved in other people’s affairs “in order to help”, while genuinely wanting to do good, results in disrupting some of the peace-making mechanisms that are inherent in human’s affairs, a combination of collaboration and strategic hostility. As we saw in the prologue, the error continues because someone else is paying the price.

I speculate that had IYIs (intellectuals yet idiots) and their friends not gotten involved, problems such as the Israeli-Palestinian one would have been solved, sort of –and both parties, especially the Palestinians would have felt to be better off. As I am writing these lines the problem has lasted seventy years, with too way many cooks in the same tiny kitchen, most of whom never have to taste the food. I conjecture that when you leave people alone, they tend to settle for practical reasons.

People on the ground, those with skin in the game are not too interested in geopolitics or grand abstract principles, but rather in having bread on the table, beer (or, for some, nonalcoholic beverages such as yoghurt drinks) in the refrigerator, and good weather at outdoors family picnics. Also they don’t want to be humiliated in their human contact with others.

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Nassim: “Trump makes sense to a grocery store owner”

While in Jaipur, Nassim was interviewed for The Hindu. In that interview, he explains his support for Trump:

In Skin in the Game, you seem to build on theories from The Black Swan that give a sense of foreboding about the world economy. Do you see another crisis coming?

Oh, absolutely! The last crisis [2008] hasn’t ended yet because they just delayed it. [Barack] Obama is an actor. He looks good, he raises good children, he is respectable. But he didn’t fix the economic system, he put novocaine [local anaesthetic] in the system. He delayed the problem by working with the bankers whom he should have prosecuted. And now we have double the deficit, adjusted for GDP, to create six million jobs, with a massive debt and the system isn’t cured. We retained zero interest rates, and that hasn’t helped. Basically we shifted the problem from the private corporates to the government in the U.S. So, the system remains very fragile.

You say Obama put novocaine in the system. How will the Trump administration be able to address this?

Of course. The whole mandate he got was because he understood the economic problems. People don’t realise that Obama created inequalities when he distorted the system. You can only get rich if you have assets. What Trump is doing is put some kind of business sense in the system. You don’t have to be a genius to see what’s wrong. Instead of Trump being elected, if you went to the local souk [bazaar] in Aleppo and brought one of the retail shop owners, he would do the same thing Trump is doing. Like making a call to Boeing and asking why are we paying so much.

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Foreword to Ed Thorp’s Memoirs (A Man for All Markets)

Nassim has written the foreword to Ed Thorp’s memoir A Man for All Markets:

Abraham de Moivre


Ed Thorp memoirs read like a thriller –mixing wearable computers that would have made James Bond proud, shady characters, great scientists and poisoning attempts (in addition to the sabotage of Ed’s car so he would have an “accident” in the desert). The book will reveal a thorough, rigorous, methodical person in search of life, knowledge, financial security, and, not least, fun. Thorp is also known to a generous man, intellectually speaking, eager to share his discoveries with random strangers (in print but also in person) –something you would hope to find in a scientist but usually don’t. But he is humble –he would qualify as the only humble trader on planet Earth –so, unless the readers can reinterpret what’s between the lines, they won’t notice that his contribution is vastly more momentous than he reveals. Why?

Because of its simplicity. Its sheer simplicity.

For it is the straightforward character of his contributions and insights that made it both invisible in academia and useful for practitioners. My purpose here is not to explain or summarize the book. Thorp –not surprisingly –writes in a direct, clear, and engaging way; I am here, as a trader and a practitioner of mathematical finance, to show its importance and put it in context for my community of real world scientists-traders and risk takers in general.

The context is as follows. Ed Thorp is the first modern mathematician who successfully used quantitative methods for risk taking –and most certainly the first mathematician who met financial success doing it. Since then there have been a cohort, such as the Stony Brook whiz kids –but Thorp is their dean. His main and most colorful predecessor, Girolamo (sometimes Geronimo) Cardano, a sixteenth Century polymath and mathematician who –sort of –wrote the first version of Beat the Dealer, was a compulsive gambler. To put it mildly, he was unsuccessful at it –not least because addicts are bad risk takers, and, to be convinced, just take a look at the magnificence of Monte Carlo, Las Vegas, and Biarritz, places financed by their compulsion. Cardano’s book, Liber de ludo aleae (“Book on Games of Chance”) was instrumental in the later development of probability, but, unlike Thorp, was less of an inspiration for gamblers and more of one for mathematicians. Another mathematician, a French Protestant refugee in London, Abraham de Moivre, a frequenter of gambling joints and author of The doctrine of chances: or, a method for calculating the probabilities of events in play (1718) could hardly make both ends meet. One can count another half a dozen mathematician-gamblers, in a line that include the great Fermat, Huygens — who were either indifferent to the bottom line or (for those who weren’t) not particularly good at it. Before Ed Thorpe, mathematicians of gambling had their love of chance largely unrequited.

Thorp’s method is as follows. He cuts to the chase in identifying a clear edge (that is something that in the long run puts the odds in his favor). The edge has to be obvious and uncomplicated. For instance, calculating the roulette momentum with the first wearable computer (with no less of a co-conspirator than the great Claude Shannon, father of information theory), he estimated a typical edge of roughly 40% per bet. But that part is easy, very easy. It is capturing the edge, converting it into dollars in the bank, restaurant meals, interesting cruises, and Christmas gifts to friends and family; that’s the hard part. It is the dosage of your betting –not too little, not too much –that in the end matters. For that, Ed did great work on his own, before the theoretical refinement that came from a third member of the Information Trio: John Kelly, of the Kelly criterion, which we discuss today because of Ed Thorp made it operational.

A bit more about the simplicity before we discuss the dosing. For an academic judged by his colleagues, rather than the bank manager of his local branch (or his tax accountant), a mountain giving birth to a mouse, after huge labor, is not a very good thing. They prefer the mouse to give birth to a mountain; it is the perception of sophistication that matters. The more complicated, the better; the simple doesn’t get you citations, H-values or some such metric du jour that brings the respect of the university administrators as they can understand that stuff but not the substance of the real work. The only academics who escape the burden of complication-for-complication’s sake are the great mathematicians and physicists (and from what I hear this is becoming harder and harder in today’s funding and ranking environment).

Ed was initially an academic, but he favored learning by doing, with his skin in the game. When you reincarnate as practitioner, you want the mountain to give birth to the simplest possible strategy, and one that has the smallest amount of side effects, the minimum possible hidden complications. The genius of Ed is demonstrated in the way he came up with very simple rules in Black Jack. Instead of engaging in complicated combinatorics and memory–challenging card counting (something that requires one to be a savant), he crystallizes all his sophisticated research into simple rules. Go to a Black Jack table. Keep a tally. Start with zero. Add one for some strong cards, minus ones for weak ones, and nothing for others. It is easy to just increment up and down mentally, bet larger when the number is high, smaller when it is low, and such a strategy is immediately applicable by anyone with the ability to tie his shoes or find a casino on a map. Even while using wearable computers at the roulette table, the detection of edge was simple, so simple that one can get it while standing on a balance ball in the gym; the fanciness resides in the implementation and the wiring.

As a side plot, Ed discovered what is known today as the Black Scholes option formula, before Black and Scholes (and it is a sign of economics public relations that the formula doesn’t bears his name –I’ve called it Bachelier-Thorp) . His derivation was too simple –nobody at the time realized it could be potent.

Now the money management –something central for those who learn from being exposed to their own profits and losses. Having an “edge” and surviving are two different things: the first requires the second. As Warren Buffet said: “in order to succeed you must first survive”. You need to avoid ruin. At all costs.

And there is a dialectic between you and your P/L: you start betting small (a proportion of initial capital) and your risk control –the dosage — also controls your discovery of the edge. It is like trial and error, by which you revise both your risk appetite and your assessment of your odds one step at a time.

Finance academics, as it has been recently shown by Ole Peters and Murray Gell-Mann, did not get the point that avoiding ruin, as a general principle, makes your gambling and investment strategy extremely different from the one that is proposed by their literature. As we saw they were paid by administrators via colleagues to make life complicated, not simpler. They invented something useless called utility theory (tens of thousands of papers are still waiting for a real reader). And they invented the idea that one could get to know the collective behavior of future prices in infinite detail –things such as correlation, identified today, would never change in the future. More technically, to implement the portfolio construction suggested by modern financial theory, one needs to know the entire joint probability distribution of all assets for the entire future, plus the exact utility function for wealth at all future times. And without errors! (I have shown that estimation errors make the system explode.) We are lucky if we can know what we will eat for lunch tomorrow –how can we figure out the dynamics until the end of time?

Kelly-Thorp method, requires no joint distribution or utility function. In practice one needs the ratio of expected profit to worst-case return — dynamically adjusted (that is, one gamble at a time) to avoid ruin. That’s all.

Thorp and Kelly’s ideas were rejected by economists — in spite of their practical appeal — because of their love of general theories for all asset prices, dynamics of the world, etc. The famous patriarch of modern economics, Paul Samuelson, was supposedly on a vendetta against Thorp. Not a single one of the works of these economists will eventually survive: your strategy to survive isn’t the same as ability to impress colleagues.

So the world today is divided into two groups. The first method is that of the economists who tend to blow up routinely or get rich collecting fees for managing money, not from direct speculation. Consider that Long Term Capital Management that had the crème de la crème of financial economists, blew up spectacularly in 1998, losing a multiple of what they thought their worst case scenario was.

The second method, that of the information theorists as pioneered by Ed, is practiced by traders and scientists-traders. Every surviving speculator uses explicitly or implicitly the second method (evidence: Ray Dalio, Paul Tudor Jones, Renaissance Technologies, even Goldman Sachs!) I said every because, as Peters and Gell-Mann have shown, those who don’t will eventually go bust.

So say you inherit $82,000 from uncle Morrie: now you know that there exists a strategy that will allow you to double the inheritance without ever going through bankruptcy.

Some additional wisdom I personally learned from Thorp. Many successful speculators, after their first break in life, get involved in large scale structures, with multiple offices, morning meeting, coffee, corporate intrigues, building more wealth while losing control of their lives. Not Ed. After the separation from his partners and the closing of his firm (for reasons that have nothing to do with him), he did not start a new mega-fund. He limited his involvement in managing other people’s money. Most other people do reintegrate in the comfort of firms and leverage their reputation by raising monstrous amounts of outside money in order to collect large fees. But such a restraint requires some intuition, some self knowledge. It is vastly less stressful to be independent –and one is never independent when involved in a large structure with powerful clients. It is hard enough to deal with the intricacies of probabilities, you need to avoid the vagaries of exposure to human moods. True success is exiting some rat race to modulate one’s activities for his peace of mind. Thorp certainly learned a lesson: the most stressful job he ever had was running the math department of the University of California Irvine. You can detect that the man is in control of his life. This explains why he looked younger on the second time I saw him, in 2016, than he did the first time, in 2005.

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Nassim: We Worry about Terror, But Disease is the Black Swan of the World

Nassim appears on Sophie Shevardnadze’s talk show on RT. The transcript of the interview is below:

Sophie Shevardnadze: Professor Nassim Nicholas Taleb, it’s a real pleasure to have you on our show today.

Nassim Taleb: Thank you, I’m honoured to be here. Thanks for inviting me.

SS: You’ve said that there’s no way to control economic cycles and prevent crashes, right? So, basically, I quote: “what we need is citizens to become robust to them and to be immune to their impact”. Now, how does that happen in a real world? How can you make yourself immune?

NT: So, before that, let’s talk about the error of trying to control economic cycles. It’s sort of like doctor trying to micromanage your body temperature. If you take anything organic and you try to control its variability, you’ll end up with less variability than you started with but the system would become more fragile. Take a forest. If you micromanage a forest to try to extinguish every single fire, you’ll end up with a lot of flammable material and you’ll have a forest with no cycles and the first fire you can’t control will destroy your forest. The same thing will happen with the economy. In order to micromanage the cycle… if you have no volatility for a long time, you never have a dip in economic activity – what happens to businesses that are around? You’re going to have a lot of fragile businesses, and so a lot of flammable material, so to speak, and these businesses… we will have more and more of them, okay, and the first crisis that you can no longer control will be vastly deeper than otherwise. So, a little bit of variability in the economy is very healthy.

SS: So, basically, not ever trying to control or prevent a crisis is what makes you immune to the next one?

NT: Exactly. So what do you do is, maybe, manage a big crisis, but the small ones – let things take care of themselves.

SS: Do you have a precise example of, like, when that happened in a country?

NT: Okay. We can talk about the U.S. There’s a fellow called Alan Greenspan, who discovered the business cycles and discovered monetary policy on the job. He came to the Fed in 1980s, around 1987, right before the crisis, the Crash, and he realised that, hey, you can lower rates and inject funds in a system to prevent crisis from happening. In 1987 it was very useful and allowed us to recover from the Big Dip in the stock market – it was the biggest crash ever, a one-day crash. We came back and it was good. So he thought he had the magic formula, and had you given him nature he would eliminate seasons. So he tried to do the same thing – every time the first sign of a problem, he would lower rates. So what happened is that he lowered rates so much that now we have rates at zero, we can no longer lower them, so we lost the effectiveness of that monetary policy. So, not only that, but we can’t bring rates back to their original level because the whole thing may collapse, and everybody is extremely scared of raising back rates. So, here you see what happened – 1987, 1991, 2000, again, 2002, and then again, I think, a couple of times, you know, micro-times after that. So he tried to manage a cycle. The way you should do things is be there for big problems, and let small things to care of themselves.

SS: I just came out of your lecture and you’ve said something very interesting that if you had a choice, you’d rather invest in Russia than Saudi Arabia. Now, for many that sounds odd. Can you explain why?

NT: Let me explain that idea. The first thing, I’ve always hesitated to talk about the investments I don’t have.

SS: But you’re a philosopher, so you can talk about that.

NT: My scheme in the game ethics force me to have something at risk – and currently I have nothing at risk in Russia, but thank God, nothing at risk in Saudi Arabia. Let me explain the point – if you look at history, you’ll realise that companies, countries, entities -let’s call them entities – that have sustained more trauma in this recent history, like a stock that bounces back, goes through hell and comes back, generally have given us information about how much heat they can sustain. So, on that account, the fact that Russia went through the problems of early 1990s shows that the system can handle a huge drop in economic activity, a huge rise in unemployment, severe disruptions in the institutional structure without falling apart. Now we have that, okay. We have that evidence. Russia has things that Saudi Arabia doesn’t have, okay. Iran, for example, compared to Saudi Arabia – these countries can take a lot of volatility. So, I’m much more comfortable in a place like that because I know that social order is not likely to collapse, no matter what happens. Saudi Arabia – I don’t know if SA can go through the dip in oil prices, I don’t know what would be the catalyst, but I know that eventually something is going to collapse.

SS: But then there’s another problem – Russia, like you’ve pointed out, has gone through so much chaos and crises and volatile situations that we really built our anti-fragility gene and we have a very high ability to adapt.

NT: I don’t think Russia is antifragile, yet. I think it is robust.

SS: Let’s talk about that, because I feel like we know how to adapt but then this sort of high-ability to adapt has in some way turned into…

NT: Complacency.

SS: Indifference, yeah. Like, instead of tackling the problem you’re just accepting it, basically. How do you overcome that?

NT: It is a problem of Russia. If you take countries like what you see in South East Asia and places like that, these countries went through shocks and they bounce back with a vengeance. They came back with a vengeance. We know that China will have a problem, it will be some kind of economic problem that will lead to some kind of restructuring, maybe organic restructuring, and China will bounce back and impress everyone again. Now, Russia, you have two or three things hindering Russia. Let’s talk about them. When people talk about Russia – I don’t care about geopolitics, geopolitics has absolutely nothing to do with anything – what matters are two things. First one, you need a huge pool of middle-sized companies. You can retain your structure, you need a lot of small companies, the middle market that really made Germany. The second one you need to find ways to stop your brain-drain. In my field – probability theory – out of the 20 top names maybe 14 are Russian – I mean, this is mind-boggling. No field is dominated by any nationality to that extent. So, you don’t see that many Germans, you see few French people, you don’t see that many people from the UK. So where’s that talent? That talent is being exported, right? So that’s the problem of Russia, Russia needs to deal with its brain-drain and with middle-size companies. Now, maybe they’re connected, maybe you can find ways to encourage people to stay, I don’t know, give them some emotional support – whatever. I don’t know how these things are done, but I am saying that this is a problem of Russia.

SS: We keep bringing up China – is it a worrying sign that there are some real problems in Chinese economy, what would that mean for the world economy?

NT: What you’re saying is journalistic, and let me explain why. I’m going to give you a bit of hard time.

SS: Please.

NT: You can frame things the way you want – I can look at the story of China, I don’t have the exact numbers, and I can tell you “Well, in the past 10-15 years it rose by that amount”, but I can look at the losses of the past two weeks – right. So, it depends on how you frame China. You’ve got to see where they started, where they’re now. If you frame it journalistically, people are going to take the most sensational. But journalists don’t invest, and investors don’t work for newspapers… So let’s frame it properly – I see zero problem in China so far. I am much more worried about things that have been fuelled by low interest rates, like the U.S., where we created inequality with economic policy that lowered rates monstrously, so assets went up disproportionately, stock market, real estate and luxury areas, and not for the regular American family. This I am more worried about and I am more worried that we may have a more severe effect from a drop in asset prices in U.S. Plus, we have to realize that the Chinese stock market is huge and the other thing for the rest of the world is that the Chinese don’t buy stuff from the rest of the world.

SS: We buy from them.

NT: I mean, I computed that the entire U.S. export to China is less than what’s sold in Walmart – I mean, it’s still substantial, but it’s few points, one point of GDP or two points… It’s more of a psychological thing than a practical thing. On the other hand, a slowdown in the U.S. would affect the Chinese big time. So you’ve got to worry about the U.S., not about China, if you’re concerned about China.

SS: I want to talk to you about debt. You’ve said that debt actually causes wars, it’s never good, it’s never accumulated in moderation – well, today the world is suffering from vast debt. If you compare it to 2007 it has accumulated $57 trillion. Countries like China and America that we’ve been talking about – how are they going to deal with their debt? Austerity, more borrowing, maybe defaulting? What’s your take.

NT: That’s what worries me. Governments engage in debt. Why? Not because governments ever say “okay, economic policy means we going to have to borrow” – the point is that, the French government, for example, I think when I wrote “The Black Swan” I looked at 53 out of 54 years – they’ve underestimated their deficit, okay. That’s where debt comes in. So it’s something that civil servants who don’t understand, who underestimate uncertainty, have to face, when they raise what they can’t raise via taxation they raise via debt, and try to inflate things out of the system. So this is why debt is not very good. Now, if you read economic textbooks, they give you some models in which debt works, but then if you put the meta-model on top, much more rigorous analytically and takes into account model errors, then you realise that debt compounds all these problems that you have, beyond certain small amount to help families. This is why debt is not a good thing. Where we are now today? The crisis, the debt crisis, had the huge rise in debt, again, for businesses that do not necessarily need that debt, that’s a speculative thing, and they kept going. After the crisis we had a lot of borrowers who were not… you know, shouldn’t be borrowing. Who paid the price? The taxpayers. How? Because private debt was transformed via magic wands into public debt. That’s not good, you see.

SS: So what now?

NT: Now that we have a lot of debt, we’re facing situation where shrinking the debt would cause a huge contraction of economic activity. That is where we’re facing problems, so my point is that we should educate people, to undo all this debt we need education, we need to send the message that debt is not good. We can give them examples that Microsoft wasn’t built on debt, Apple is not built on debt. Name a company that is successful and let’s look at its debt history, and name a country that was successful, or the phase when it was successful and let’s look at its debt history , and you can realise that debt is something that economists like to promote simply because it’s good for civil servants, that’s it. So educate people to avoid debt.

SS:You have a recurring theme of forecast and how it’s silly to actually base your predictions analysing history or economics because it gives you a false illusion of knowing the world that you live in today. So, if you can’t really analyse your mistakes, right, you can’t analyse history – is there really no effective way to measure risks to predict the outcome, ever?

NT: Of course, you can. That was my lecture, that’s my last book, that’s everything I’ve done – I keep explaining that, this, I know, is very fragile, I know what would break it, but I cannot forecast with precision when it would break. But I know this is breakable, much more breakable than a styrofoam cup. So, we know that, we know which companies are likely to go bust, so we can measure fragility. You cannot predict the event, but you can say that company with debt for example cannot sustain the stress that the company without debt would be able to go through. Decentralised system can withstand shocks a lot better than a centralised system. Organic, self-organised system – and that’s complexity theory – let’s take the restaurant business, which is the ideal business. Have you ever had a restaurant crisis in the West?

SS: Nowhere, not only in the West.

NT: Nowhere. So, government doesn’t have to bail out restaurants. Why? Because it’s… it seems disorganised, but it’s very well organised, a self-organised system, in which people make their mistakes and go bust early, you see. And then they can start again, and consumers have the optimal price almost all the time, except in form of a payup, and you don’t have bailouts, you don’t have a generalised restaurant crisis, not like the banking crisis or not like a car-maker crisis. This system is not based on prediction, this system operates in a way that is organically very stable. Nature does not predict, what nature does is focus on robustness, and the metaphor I’ve used in the past is that nature or God – depends on your theology – gave you two kidneys. You don’t need two kidneys, you can operate perfectly on one, except that second kidney allows us to not have to predict the environment, so you don’t have to know exactly what will cause you to lose the kidney. So, it’s the same thing with corporations. If you have a buffer, some layers of redundancy, you can withstand economic shocks and you don’t have to hire some economist. And then let’s look at the track record of people in prediction – zero! Let’s go back to the point of forecasting, let me summarise – forecasting is the province of the charlatans. Unless it’s done properly. You can say rigorously that “this is fragile”, “this bridge is going to collapse”, instead of predicting what and where and who. You can build a better bridge. And forecasting makes you fragile because those who forecast develop overconfidence about the future and start to engage in debt and other risky activities. Look at track record of forecasting – pitiful.

SS: Can I ask you something – to what extent should we be accepting our fate?

NT: I’ve spoken to a lot of people. A lot of people, a lot of successful people, a lot of unsuccessful people. It seems to me that those who have the best control of their environment are those who think that the environment is more random. And those who think that it’s all, you know, we can get the cause and effects and we can see everything, there’s no opacity – these people are the ones who fail. It’s very strange that those who succeed are those who control randomness the best by accepting that it’s there and working the best around the corners of things that are predictable and that other people are not predicting. You see, because, there are some pockets of predictability, I know that something very fragile is going to collapse. If you accept that unpredictability, then you engage in tinkering, so that when you’re wrong it will cost you little and when you’re right, it will make you a lot. It’s not what happened to the world that counts, it’s your strategy of minimising shocks from random events and opening up for the good randomness.

SS: Talking about “Black Swans”, I mean, we live in a very fast-paced world, and it’s very unpredictable. Do you feel like because everything’s happening so fast, there’s going to be more and more “black swans” to come? Are we to expect more of them?

NT: The only thing that’s happening today in our world is that we have more connectedness, therefore things can happen much faster than before. I wouldn’t worry about one central thing, because it’s not just money, it’s viruses, viral bacteria, germs.

SS: Ebola?

NT: For example. I was very depressed when I saw reaction to Ebola.

SS: Because that’s more dangerous than spread of ISIS, in your opinion?

NT: That’s much more dangerous than anything because it multiplies, it multiplies very quickly. The world has had one plague and today  everything seems under control. ISIS is definitely not the danger. They’re good on Youtube, but it’s not… the Millennials, if you’re talking about indigo generation, the millennials seem to care more about what happens on Youtube than reality, alright, and hopefully that would change through selection, but the worry is not Al-Qaeda, it’s not these guys. These guys are less dangerous than… it’s a fraction of suicides in the West, it’s a fraction of people killed falling from ladders – it’s nothing. The point that you have to worry about is the fact that the plague was travelling at the speed of 30 miles a day, maximum speed. Today, what is it?

SS: We don’t know, where’s Ebola now?

NT: Tomorrow I go back to New York and I’m going to be travelling several thousand miles in 10 hours… So, you realise, it will multiply much faster. So, Ebola was not the problem, but something similar… And what depressed me was the reaction by people, the complacency. They don’t realise that something like that needs to be systematically stopped at its source. You see, you don’t wait for things to multiply. Lucky countries like Singapore, places like that, they understand the point, but we need a little bit more active management of… you know, we need to sit down and say – ok, what if we have another ebola, how do we manage it? The journalists are using what I call “naive empiricism” of comparing it to other bigger diseases – yeah, but cancer is not doubling every week. You don’t have to worry, it’s not an epidemic, it’s just something that we have. Diabetes kills a lot of people, but the odds of that number changing hugely from year to the next are very small. These things are locally predictable. But Ebola has much higher degree of unpredictability because of what I call the “extreme strain” the “fat tail”, so this is a Black Swan domain, the Black Swan territory and we have to take it seriously. So, not Ebola, other things like that, we’re not equipped today. Tomorrow, if there’s an emergency like Ebola, you know… We have a very well organised system to prevent terrorists from travelling, you know, everybody’s blocking them and cooperates, but we don’t have the same level of cooperation to immediately stop the spread of something of this sort. That worries me because, one thing, antibiotic resistance is serious.

SS: Do you have power in you for one more question?

NT: Yeah, of course.

SS: I know that “Black Swan” has been huge. A lot of world leaders love your book. If politicians were to embrace your thinking, what would that mean for politics?

NT: I don’t pay attention to politicians. I am blunt about it because I think that politicians play a smaller role than you think. Politicians are more like actors put on a job and then they respond via polling, the environment and stuff like that. I don’t pay attention to politicians, I pay attention to… the structure of political life, unfortunately, has not been very adapted to the nature of the complex system that we have. So, I don’t pay attention to politicians at all. For me they don’t exist. It’s a parallel world and I don’t want to be part of it, I don’t want to go to Davos, I don’t want  to do this or do that, I don’t want to advise anyone, I don’t want to be advised by anyone. It’s a separate world for me.

SS: Alright, hopefully, they will listen more to you, because I still live in a world where politics decide a lot of things. Thank you very much for this interview, it’s been a pleasure.

NT: Thanks.