Mr. Nassim Taleb Goes to Washington: A black swan meets some ugly ducklings.
Found this Via Big Money & Money Science. I like the article because it talks a little bit about the Washington consensus. Although Taleb’s message is not new he does make some interesting comparisons to the current economic situation.
Click Here To Read About Nassim Taleb Going To Washington
Article Introduction (Via Big Money & Money Science )
So Murray invited Taleb to the Future of Finance Conference, where 100 grandees of the financial world, ranging from Steve Schwarzman and George Soros to Meredith Whitney, Peter Fisher, and Nobel laureate Myron Scholes, got together to outline some principles for rebuilding the financial system. The conference opened with Murray interviewing Treasury Secretary Tim Geithner fresh from his 497-point victory lap after the announcement of his plan to deal with the toxic mortgage-backed assets. It closed with a field trip to the White House and an audience with Lawrence Summers.
We cannot have both debt leverage and a hyper-efficient system—the volatility is just too great. What Taleb explains—which no one else does—is that efficiency is already a form of leverage. A highly efficient system removes slack and magnifies small changes. Think of the efficient system as a high-performance aircraft. Each minute of steering input creates a rapid and violent shift of course, speed, or altitude. The system itself is souped up even before you add the debt. Once you do, the pilot is equally jacked up and twitchy, creating an explosive combination. Now imagine that fighter jet trying to fly in a 1,000-plane formation, and you get an idea of the world financial system in the 21st century.
Additional Article Excerpts (Via BigMoney & Money Science)
In normal times, the conferencariat are an arrogant bunch. This is something Murray knows well from his travels on the conference circuit, which begins each year with the World Economic Forum in Davos. “Davos is usually filled with people who have all the answers,” Murray says. “What was so striking about Davos this year was all these people, for once, didn’t have all the answers. No one could tell you with certainty what was happening or what needed to be done.”
No one but Nassim Taleb. Before Davos, Murray read The Black Swan. At the conference, the newspaperman and the trader had many conversations over the course of four days. Murray came to the conclusion that Taleb was the iconic figure of Davos in 2009. “In my mind, he had the perfect message for the moment.”
