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Before my hands start shaking the miles you a personal question. Now it's a cybernetic organism living tissue over metal endoskeleton.
Hello boys and girls ladies and germs. This is Tim Ferriss. Welcome to another episode of the Tim Ferriss show where it is my job to deconstruct, world-class performers to tease out, the lessons mental models. And so on that you can apply to your own lives. This podcast episode is a rare treat. A rare appearance by at least one of two guests. And in combination, I think the conversation provides a lot of insight related to uncertainty related to markets related to how to think about risk how to think about tail risk, how do
About silent risk and also how to take advantage of some of these things and how you plan your life, your finances. And so on, there's a lot to it. A lot of Concepts that you can apply in many domains in life and let's move on to the BIOS showing. The first guest is Nassim Nicholas, taleb, who spent 21 years as a risk taker, that is quantitative Trader before becoming a researcher in philosophical mathematical. And in his words, mostly practical problems with probability table, is the author of A
A multi-volume sa the insert. Oh, and within that you find the Black Swan, Fooled by Randomness anti Fragile the bed of crusties and skin in the game. Thanks to Matt. Mullenweg for first, introducing me to the Black Swan, these all cover broad facets of uncertainty. His work has been published in 249 languages. In addition to his Trader life Talib has also written as a backup of the insert. Oh, more than 70 Technical and scholarly papers in mathematical statistics, genetics quantitative Finance statistical, physics medicine.
In philosophy, ethics economics and international Affairs, around the notion of risk and probability. These are grouped in the technical insert to insert. Oh spelled I ncert. Oh table is currently distinguished, professor of risk, engineering at nyu's, Tandon School of Engineering believe he's retired. His current focus is on the properties of systems that can handle disorder. In other words, the properties of systems that are in his phrasing anti fragile, you can find him on Twitter at an end table
And that's nnt. A Leb also Fooled by Randomness.com. The second guest is Scott Patterson. Scott, Patterson is an investigative reporter for the Wall Street Journal. Currently based in Washington, d.c. Working on climate and energy policy. His new book is chaos. Kings subtitle, how Wall Street Traders make billions in the new age of Crisis. A profile of the Rise of Black Swan Traders such as Nassim taleb, and Mark Spitz Nagel, as well as a survey of the many perils. The world faces today and how we might fix them. Scott has covered a lot. He's
Everything from Berkshire, Hathaway to stock exchanges, to high-speed traders to financial Regulators. His first book, The quandt's describes the rise of mathematical finance and delves into its role in the 2008. Financial blow up dark pools. His second book tells how computer Traders took control of the US Stock Market starting from the birth of computer trading in the 1980s, to the explosion of high-frequency trading in the late 2000s, and you can find him on Twitter at Patterson's Scott. And on his website, Scott, Patterson book,
X.com and lest you think this conversation is only about Finance? I want to emphasize that very refined thinking in the world of markets and investing really reflects Clarity of analysis and Concepts that then lend themselves to a very clear scoreboard. And for that reason, it is a fascinating Arena within which you can refine your thinking toolkit for many, many, many other things.
We talked about many of these other areas where these things can be cross applied and now, without further Ado, please enjoy a very wide-ranging conversation with Nassim Nicholas taleb and Scott Patterson.
Well, I'm thrilled to have both you here, Scott, thanks for making the journey. I can't believe we have the shared history of Hoagie Haven. We might provide that context of people later and iconic landmark of a spot in Princeton New Jersey and the seem nice to see
you, that's finally to be on that side of the microphone.
Yeah, definitely man, and I thought we would start with just providing a bit of context for listeners as to how the two of you connected. So Scott, how did the two of you end up meeting?
So this is the mid-2000s I was a reporter at the Wall Street Journal. I still a reporter at the Wall Street Journal. At the time I was covering hedge funds and among the hedge fund Community. There is this book that a lot of hedge fund managers, like, to talk about, you know, the secret book that they were passed around that they said was really great. It was called Fooled by Randomness. So I read that book. I thought it was amazing but a rumor among these hedge funds managers.
Ours, was that the hedge fund that the author of that book, Nassim taleb had run a hedge fund, but it had shut down. But nobody really knew the truth of whether it shut down or not. So, as a reporter that intrigued me, I think it was actually meal. Chris, a very well-known Quant, hedge fund manager, who put us in touch, I talked in a seeing him, I got him on the phone and he said, yeah, we shut down a couple of years ago, but there's a new hedge fund that starting.
By my former colleague Mark Spitz Nagel, maybe you want to write about that. So I had a story that came out in the summer of 2007 that broke the news that empirical had shut down at least for the broader public. Also broke the news that a new hedge fund was launching called Universal, a similar strategy. And also that the author full By Ramen has had a new book, coming out, the black called Black
Swan, which explained, you know, the transition from
the author was trying to Transit. I kept begging in the thumb. No, I don't want to be known as a hedge fund manager. Yeah, I don't want to be famous. So I don't want to talk to you, except if she talked about my ideas said, okay, we're going to talk about your ideas. This is why. I mean, I was, I said, okay on My Grave. I don't want to be known as a traitor, but as a scholar and I remember, he was, so, he's bringing back portion as life but it was at the right time because he contacted us right before the explosion.
Of 2007. And there's a weird connection right there that the mentioned later to you, right? There is a very weird connection to me
and let me ask you Naseem, what prompted you to make the transition. Maybe it was a long time in coming but to decide ultimately to step out of trading or being active as sort of a playing field. I know I'll
never stop and I still in my
Late 30s, early 40s. I had time to really do something else, and I realized the following that when I had the position, I could be involved in trading, but I didn't want to be the one flying the plane as a passenger or as a co-pilot maybe at a time I said, okay, Mark is much more capable of running this because he loves doing it, okay? And I like the concepts and the ideas within like to follow positions and because it was the minute, I would be
involved in the trade.
It would inhabit me. So I felt like it was there something in my brain? That was slowed down by the fact that I had to worry about something else, out of a sense of responsibility, so Mark didn't have that. So Mark had good compartmentalize. It's not in combat, he said nothing else. He, and he was in this Heist other things, of course, on the side of the structure. So he was very fit. So I wanted to try it out. So I said, okay, I'll take some time off to finish a Black Swan which I couldn't finish when I was training which
I started before Fooled by Randomness. So naturally I started Black Swan and then I said, okay, I'm going to talk about Randomness. So I got diverted into Fooled by Randomness. And then I finish the Black Swan, it was almost a 20-year thing. And I realized that I'd like to be a scholar who eats wild oat raised once in a while with a sense of it was like a military person who has an honorary discharge to do other things and of course, leaves the battleship to those who live for the battle.
Okay, so that was what happened and of course, the rest is history as, you know, but let me mention one thing that probably your listeners and viewers don't know, is that of all the people they've been on his podcast? I bet you. I'm the first one you've met.
It's quite possible.
Okay. So, um, first one I met you before I met him in, probably 2001-2002 around that, around that time. And and the first time we met, we correspondent
So this guy is very interesting, ideas about hacking things. And then we went to a restaurant thing on Madison Avenue and who ate every single EX ahead in the store.
I was a good deal larger. The time I was growing up
all the eggs of for some reason, I mean they were worried about us how could people to human being eat so many eggs. So that was my first physical and character, a corresponding before, and came friends. And there's an interesting scene that we had that have in my mind when Lehman Brothers,
Went bust. Basically after our, you know, we haven't connected and then you followed our trade and he wrote about it, actually about the quality of the trade and the promise of the street that were betting on tail events before the Leavin crisis, and on that day, that one of the day Lehman went bust. I was on a plane incommunicado I land. And the first thing I got is an SMS from him because I was meeting you for dinner. And the second thing I got is news that Lehman one
Just so from news, from marks leaving what. Bust, it was the two messages and that night, I think they ran out of pink champagne in the house we were with, says Robert. The late says robbers a very interesting person who also was studying hacks. Hmm. Fascinating a really genuine, lovely human being, and we did consume vast quantities last about local time before Romania. We met was at his funeral when he came in and paid for the bill surreptitiously. And I
want to retaliate tonight,
you'll have the comeback opportunity with the bill this evening and you're right, I mean they're very few, maybe no other guests who've been on the podcast to predate ask meeting in 2001, which is wild and I was probably 30 to 40 pounds heavier in terms of muscle mass. I also know that Hoagie I was all that Hoagie Haven. I was a lot bigger at that time. I've many questions about Black Swan. Also about the
Trading career. But actually a letter which I'll come back to, I think you'll get the reference. But first I want to ask just for a backdrop for people who may have no familiarity with quants with betting on tail events and you have this book, which covers a lot of these topics in depth, we have multiple books. But in the case of betting on tail events, what is the tell event, broadly speaking. And then what are the different ways? One can bet on.
Events and you guys can of course, pass the mic back and forth but what are the different styles or approaches to betting on televisions?
The thing I would say before he launches that's the point is not to bet on Taylor vas. The whole idea of the Black Swan, everything I've been telling everyone every person I meet that on disruption on no unforeseen to not be harmed by silent risk. That's the idea. The first thing is don't be harmed by it, but of course, you know, given that when we study televised you say this,
People are ignoring these risks so therefore their risk in the system that people generate and don't see hence, you can trade on it.
Yeah, I mean, there's all sorts of different approaches and I think it's when you talk about betting on a tail event, I would say that what universe is does and empirical before that is, I wouldn't call that a bet. I would call that a risk management strategy and that in a way that is what differentiates
She hates them from other hedge funds and Traders who who do what I would call bedding. You know, or taking positions based on a belief that something is going to happen. What university does is they are constantly taking off positions that will pay off massively in a tail event. So their clients are constantly protected. They don't need to make predictions. They never make predictions. It's something that Martz pastega little
Casually says, is that he is shit at forecasting. He's been forecasting. A gigantic bear market for decades. He's been right a couple times but he, you know, he will admit, you know, I can't predict the timing of it. It's going to happen. One of these days and that's what they provide for their clients. Is that constant protection and they do it by buying far out of the money put options. It's pretty simple, not easy to implement, I think which is why
I don't see a lot of hedge funds doing
this, then after they do it.
But then they go Bust
or they, you know, what happened to the seam. It's very stressful because you can go years without making money in that strategy, because it's waiting for, in extreme events. If very extreme event, their strategy is betting on a 20% decline, in the S&P 500 in one month, which I think may have happened once or twice it happened on Black Monday in 1987, and one day, but they don't actually need
To have that happen to monetize the strategy. They just need to have a very big decline, very rapidly. So, that happened in 2008 happened. A couple of times in the 2010s and 2020 and that was big time. So imagine, I mean it's for somebody who's running a fun like this for you or Mark that there's the watching the numbers and maybe that form of bleeding chips stress over time. But there's also you have investors who probably in theory are very comfortable.
The strategy, but who also
Panic or have other issues. The Genius of universal is that the manners to package the product as insurance? That allows the investors to increase their exposure to the market. So think about it is a strategy and invite self positive, huge return. But more interesting is that it was a hedging, something that one up, we'll see.
What the stock market do since then? I mean we're not like 30 people. No. No to Total since a 19 2007.
This is 2007.
Yeah sure when I will say to fall maybe and it allowed people to have a larger position larger exposure to the market than they would otherwise and also there's a cocktail of other strategies that definitely then farewell because the entail diversification away from stocks
This one allows you to have stock so it's very weird because Mark is always bearish on the market, but he provides people a product that couples very well with a very long stock position. That was what was the secret, so given that it's packaged that way.
Investors.
Tolerated some drawdown, not too much on the insurance, you see what looking at it either? Look at you, sure, exactly versus the insured for versus I mean, hey, this is my differential PL and it's the same thing. When I started trading option to have an option hedged by stock and sometimes people only look at the stock performance and some people only option performance LL, notice Inseparable, you see you got. This is called the Delta, right? So that was how they manage, it has understand.
That we are one trick or me intellectually. I'm one-trick Pony, I think of nothing else, but tail Risk. Everything is packaged round, tail risk that I do intellectually, but Universal is the one trick. Pony only does won't trade. So if you do only one trade and for a couple of decades believe me, you know, the tricks, you know how much to put on not too much, not too much. You see the idea if you do just what trade and then people come to University say no that's what we do, want to do this for us know.
No, it's like you're making Maseratis, right? And someone comes to you say hey won't you make trucks? We don't do trucks want to make bicycle, we don't know why, it's all we make is one single item. That's it, one single size and that is the main criticism one-trick ponies and that's what we're proud of us.
That's the selling point is that we
are one-trick ponies and whether in my work intellectually was worried about tail risk or whether the implementation of universal of their ideas.
Mark's ideas and one thing just one single thing. So when I do one thing professionally is develop some
Edge. Well makes me think of I'm going to butcher it but there's a Bruce Lee quote, which says fear. Not the man who has practiced 10,000 kicks, but the man who has practiced one kick 10,000 times, there you go. And let me come back to something that you said let's see which was that a lot of these other shops who may be attempted something they thought was similar went bust. What were some of the Fatal flaws are mistakes? That was
The
other one. Okay, that measures, the first flaw. And this I noticed in our days, a lot of clients that had initially. When we started a car or diverted into other funds, who were actually mitigating the strategy, by instead of saying you can't buy puts on the S&P 500, you buy puts that are cheaper in some other commodity, you see? And hope that they would correlate. So it was there was a dependence on correlation, so I know someone who actually went bust his
An overriding, the strategy buying puts on the S&P 500, and something puts on the German index to collect more cash out of Tracer. That way, is they all have more staying power and his investors were proud, they'll guess what happened?
The German Market point, the US market, the thing exploded and they're out of business in Insurance. Okay, so a lot of our competitors try to mitigate the strategy we were absolutely first, that's the other thing is that you notice was players in Reverse. If you see if you met Market understand it, there's no question that's what we're going to do. We're not going to mitigate no correlation nothing. Just what we do is artichokes it's that's it little nothing that's it. We don't cook anything else. We don't know really
Edmund, is we don't admit mr. Marshall, not administered are strong. And in a way I told you the Log Road, not the hack. We don't have to trade the long road is the best. So in a way, I started liking your idea of hacking and until I discovered over time that basically all the things I've enjoyed doing or the things I reversed act. So in other words, take the long road like right now last week at the 17 hours of cycling. So that's the long road that's not a short road. Whereas when we met
I was looking for shortcuts. The University have no shortcuts then he takes no shortcuts. So I mean, I've known you now for 15 years and I met you in for 15 16 years and think that shortcuts and it was very good that he wrote that book for one reason to put some story and narrative around the idea of precaution and Taylor is for society in general and also because the fact checking the documents a lot of these stories are legends of this happens and then happen it was a perfect perfect because it fact tracking
Thing audited results and stuff. Like that was fact tract. So, sort of fact checking the importance of Dale hedging for society. And that's to me is greater than that details. Is like having finally a document, someone who bothered to look at the details and went through a rigorous
many hours of interviews. He was sound like going to be using documents and double-checking the fiesta vs. Anecdote. So what what compelled you to write this book?
Of all the things that you could write on. Why did you choose to write this one? The birth of the idea of the book was in early 2020 and we all remember what was happening in early 2020, the world seemed to be unraveling, you know, we had Cove ID, we had, you know, protest in the streets. We had extreme political uncertainty in this country, lots of things going on. So, the first thing that,
Happened was in April of 2020. It came out that Universe had posted a three-month return of more than 4,000 percent on their positions, which was quite eye-catching and got a lot of news. I reached out to Mark and was like, holy crap, what? You know, how do you guys do that? So that happened. And then I came across a paper that Nasim had co-written in January of twenty, twenty about David,
It was a glaring warning to the world that this virus was very deadly and people needed to take extreme precautions against what was coming. You know, by social distancing other things advice to politicians that they needed to be very aggressive about this. And it kind of occurred to me, I'd known as semen, mark for a long time. And I thought we were in a period of extreme duress, where lots of people are just kind of looking really
Add, they're collapsing, they're losing money, they're making really bad decisions about Cove identity is confused. These two guys seem to be coming out of this insane period looking very smart. So I thought, what is it about their world view that allows them to go into a period that makes a lot of people look dumb look very smart. There's something about that can map from what university does to what Nasim does.
And it's this view of the world of, you know, black swans of extreme events of being prepared for
them and know what class of events.
You should be prepared against another.
We need about four years.
So and and pandemics for me was something I was working on since 2007, even discussed it on the Black Swan that pain. That way you have to worry about is a pandemic, the for financial meltdown because of connectivity, we no longer, like, in the 1800's, where, you know, you can have a crisis here and not there, everything so
connected, and it's exponential,
and the financial world. And as,
Same thing in the physical world. You see the the plague, the Great Plague took something like 300 some years to go from Constantinople to the northern England. 300 some years today, it's the weekend for the whole thing to spread through the entire
planet. Flying on Lufthansa and
Justinian plague, cannot come to the Americas. There were no Air France or no chips at a time and now visibly it can't. So what I'm saying is that we are in a different environment just like culturally things can spread
The Google affect the same thing, should apply to pandemics. So this is why we were working on your near and I and other people
only like Darion
and particularly a fellow who is probably one of the smartest people I've ever met. Who's ahead of civil service and Singapore at a time and then retired later and we're all obsessed with a great kinda me. That would come and we thought it was going to be Bola. So I mean, you have to worry about Dynamics and later on.
On I wrote scientific paper. Scholarly paper on pandemics that I didn't really finish. And when in fact them extract, we put it in nature physics and it when counter nature physics is a very prestigious guests, scholarly publication and it silence. A lot of the epidemiologists who were, like, nitpicking, like the similar to economists, like nitpicking. When you have the, what I call Extreme
properties and I have the time in early 2020.
Had a lot of epidemiologists, even the who saying we don't understand the nature of this pathogen. We need to wait and figure it out. The advice was kind of like the what's the movie about climate change? Don't look up where the president is saying, let's sit tight and assess. That's what the message was. We're getting from our health authorities and early 2020 was sit tight and assess and that's a recipe for disaster Nassim and his
Grouper saying take action. Now if you wait around to sit tight necess you're screwed
exactly panic panic
early and eagerly. If you
must panic panic now, black and finance and everything you got. Get out. Now when it was easy, for example, to limit the flights out of on or it was you didn't have to do a lot of balance you could do lockouts, I mean, and there are methods used by the Ottomans.
The Ottomans, yeah, to install the Alpha and the austrians had, you know, the world was separate but they had a lot of traffic and went through what they call quarantine spots. So you would go into a sort of hospital has quarantine and it's seven days. One way in nine days the other day and they will Implement that the minute they smelled anything. All right? And they had rules, if you come from India, has more days, the ottoman has. These rules didn't come from the ottoman. This long experience dealing with
We spend that makes and how you stemming by stopping them at the border. These things were called lazarettos and towns that did not have Lazaretto, Savannah Strasser Maritime power, the head lazarettos they did very well but Marseille France.
Was decimated because they didn't have letters. So, the lessons we need to learn repeatedly. Do we have to learn from history? How people handle that? They cut it in the egg, that's it. Yeah, and it's easier to track people as a moron. You don't need to have Corner time, you can just test at the border. We didn't test the United States at the border until a year and one month into the pandemic. I don't understand. You have lockdowns, but you don't have lockouts. I mean it just test out the motor just best people in the world that would probably use the fellow from
Singapore was testing at the border. He said the only way to control it is by knowing, especially testing people with that. They've been aware of it and they started. The first thing we detect temperature before, everybody has one of these temperature things secretly at Singapore. So it was a really had a warm-up with SARS so they had the thermic. Exactly. They had them but they, he's the one who started and they were doing a secretly before he became public. So people who take antipyretic drugs before landing. So, whatever it is. The whole idea is that you have to
Fixes and they're not complicated and one analogy. I'm going to give this is the banking system is that the banking system Banks, monstrously profitable Enterprises, they make money off of your, the float, the money, you have left their the track, you didn't cash, all right, or stuff like that, to make tons of money and guess what? They blow up on the risk that bring them tiny amount of money. You see, selling that option that explodes every 10 years by saying, oh no word on different environments will never happen. So sitting on Dynamite. So,
That tiny, tiny, tiny tail option is what cost effective system. They lost more money than ever made in history. Making that you need to Money Center, banks, that is and the same 2007, okay? And The Business of hugely profitable except for that tail event. So I'm saying that if you just remove that Banks would do well. It's the same thing in society. If you figure out how to remove that tail risk, sometimes not complicate. Well let me ask a standard for the
audience and also for myself and not to throw my audience into the bus. But what are the incentives
Or the circumstances that prevent them from taking a certain percentage of their assets and allocating it to something like a universe, so that they are less at risk in that
way. They don't have to do that. They could just avoid some trays. But let me explain to you the Dynamics of the bonus system, this led to my books going to game later on. If you have skin in the game, you're going to worry about low up because it's your money. If you don't have skin in the game, your CEO of a company or your fun man.
Age, or any kind of financial Venture? What is your incentive is to print? Good numbers? Because you don't pay for the downside. So you put good numbers. You collect money on the nonprofit's, annual bonus, and annual bonus. So, this I call the generalized Bob Rubin, trait, generalized, Robert Rubin trained. He made a hundred million dollars at Citibank or city khorsandi. Something over 10 years about 10 years, he collected hundred million dollars in compensation the bank was insolvent in
It near and solvent along for the taxpayer. And it was a last-minute, all you had to do is, you know, write an apology letter. We didn't see these events as was a Black Swan named after book by a very, very stubborn man. So something like that. So that's the only have to do is say, I'm sorry, right? You keep your bonus at work. So this, you have generalized supply chain with a supply chain, lot of firms, concentrated everything on one supplier instead of being Diversified,
What did that lead to? All right, okay, better bottom line. But what I call pseudo efficiency because they're short that option and it so happens that if their supplier is in Wuhan, guess what you got a problem. All right, that problem was not doesn't show Numbers, it shows, after it happens
to the dark side of
optimization. That exactly what I call pseudo optimization. Like, if you drive a Ferrari 500 kilometers per hour, you're not going to get there faster than if you ride a bicycle,
Tell us how you are going to get there.
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Naseem. I have a question for you about a letter and then I have a question for you about personalities, Scott's. So temperament, may be another way to put it. So is it true that you wrote a resignation letter your first day at a trading job and put it in your desk drawer? I read this on the internet, I don't know if it's true. You can't believe everything you read that, it was from the guardian, so I thought it might be
credible. One thing is actually, as I said, I recommend people do that. I wrote that but not on a day, I started. But I recommend
And that people because you feel relief, only do it because then you can continue on your job without feeling like someone's controlling. You you've got the gun loaded, the whole idea of plan. We have you thought about another problem. So you write the resignation letter and you don't date it. Yeah.
I'm very fascinated by your ways of thinking the way that you've embraced different philosophies and you emailed me and
I'm in 2010 and you can correct me if I get any of the wording wrong. But it stuck with me. This is in 2010. Here's the aphorism of the quote robustness is, when you care more about the few who liked your work, then the multitude who hates it. And then in parentheses artists fragility is when you care more about the few who hate your work than the multitude who loves it and then quotation marks politicians, have you always had that type of
Robustness or resilience against criticism. Is that something that is in Born?
Maybe because I was never really someone who took in established ideas at face value. So you necessarily have, you don't violate some Norms. So I'm thinking norms and often people protect those Norms by, you know, attacking a reputation. And I realize that what writing Fooled by Randomness as hey, saying that what I'm doing is right.
And amusing wrong models, you don't work, so they attack your reputation. So I realized quickly was time that my reputation was going to be under some kind of fire. And I decided that no, my reputation is how few important people or people who know something about the subject.
You me? And it's not like, I don't care my rotation only care about reputation and some circles and it was people, I can talk to, to try to explain what it's about and has worked out. So, but if you have to go defend your reputation and you're doing the right thing, it's too much energy wasted and it's not going to help haters are going to hate this resemble. Another effort is MM inspired by Charlie munger's show and Charlie munger's. Is that you
Be the most ethical person. When people think that you're corrupt or even is the most corrupt person, what you think that your ethical make your choice and users guide line. It's the same thing. So except that the user something in between is as there's some people I care about and I want to, you know, to not lose respect for me, of course you start with your mother. Have you heard children ordered, whatever your family members but there are also a lot of people on planet
Janet and I care about my reputation, but in these circles not with the general public, so it allows you to take much, much more aggressive positions, which I've done over a long life and Mark, for example, has a lot of enemies and they're going to pick on something and we don't care. So you don't the right things and how do you know you're doing the right thing? If people you respect approve of Your Action.
Not as the general public
does. So then segues to my question for you Scott which is in the process of doing all these interviews and interacting with these various players on the field at these sort of practitioners is investors. And so on, have you identified any patterns that you think whether nature or nurture that seem to recur in people who are
Good at what you described in the book. I would say, I mean across all three books that I've written, which are generally focused on Wall Street trading hedge fund managers. I've met a lot of hedge fund managers over the years. None like this guy I have to say, will probably come back to that, but
I don't want to be identified
as a manager. That's
the thing.
Many are very focused on making a lot of money that's a very common trade. I mean Mark he talked to me about how you grew up in the 80s he identified with the Reagan Era it was a time of you know Wall Street greed is good. He told me he's like that. I have a little green to me. Yeah I did. It was the 80s and he grew up in a family. That was his father was a, he was a minister and a church, he was sort of a hippie didn't
Believe in pursuit of wealth, marketed the exact opposite view that that was constantly. Something driving him was the desire to make money. A lot of other hedge fund managers have met over the years, just they have that drive and it's something that many people. Look at these guys and think you're worth a billion dollars, you're worth 2 billion dollars. And yet you're a maniac, he's you go into work every day and just go crazy. You
I have all your employees crazy because you want to be richer than the next guy. I don't think Mark has that, quite that sort of insane level of grade as some do. I've met Ken Griffin found her Citadel. Disciple of Ed Thorpe, who we talked about, my talk about later. Cliff asness, who is a stark enemy of my friend through?
Additionally initially a friend?
Yeah, and I have say Cliff, is it as a nice guy, when you meet
a nice guy, but is it that friends? Why not
Guys, he's also got a dark side also. So many extremely focused on being wealthy, very smart, they're all extremely smart. And I think that's in personalities, that's I think. One of the things that has helped drive my books as these are interesting people. You know, a lot of them are mathematicians, scientists. They come out of University with a different expertise and making money, but then they apply that on Wall Street, to making money. So it's a combination of, they have to be leaders, they
are extremely driven, it baffles me because I'm not like that, you know, I have a degree in English and I think that's actually why I sympathize with Miss Eames writing so much is I came out of a tradition that you know I love the works of Dostoevsky and existentialism and you know one of my favorite books is irrational man and I came into Wall Street and started reading about how there's this belief that people are rational
Rational and the markets are rational, and they are predictable because of this and I thought that is just crazy, you know, to me, I look at financial markets and I see black swans, I see fear and greed that to me is what drives markets, not rational Behavior rational expectations. What are some of the things that make the same different or unique in those? You've interacted with? I've some of my own questions and thoughts on this, but I want, I would love to hear yours.
He mentioned his contrarian nature.
It's not a complicated nature is Independence. So you already, amassed and lines of people say, I'm contrarian. I'm with a conspiracy theorist on many of the things I'm against Oman many other things. Some are just contrarian because they have a father problem. Okay, so to me contrarian is an explicit exception rather than attribute. Some of the other thing is that sometimes got to be about me, should be about the idea that precaution
and he's a lot more interested in.
The chur and philosophy and not financial markets and drives him. He doesn't look at the stock market page, you know, every day, like some people do,
he's gonna to have to figure out, talk people envious off. So, you know, if you're in a hedge fund business and you have five hundred million dollars in the bank and someone else has six hundred million dollars on be envious of that person. I was always envious of people had more additions than me. Okay, so more erudite
You realize that's what makes me tick. Being envious is not good, you see? But at the same time, if you figure out who attempt to Envy, it's not, I don't believe in that. I say, oh, people having enough. There's someone you're from East Hampton, the fellow who wrote Catch-22. Lot of interesting folks out there. Yeah, he met financier at the time for hedge funds and the finest. You said, what is it that about you? Because he was an author, very successful on.
What is it that distinguishes you from me? You know, look he told on I know the meaning of enough. So in other words you know, your upper bound and effectively, I don't play that game. I say they don't there's a meaning. I'm am literally, and I say, envious of people who are erudite like, if someone knows Latin very well, I'm envious. Someone knows Sanskrit, I'm envious. All right, so that's the and I discovered that early on. So
Made money on Wall Street because I wanted to make money on Wall Street, but I didn't think it was worth the effort and luckily, he was a combination with Universe are. I had so much leverage, you know, was marked on all the stuff that's at the spill over on me was more than satisfactory. So I have knock on wood a lot more than than I wish to
support reason I'm asking, we're talking about the ideas but the person who's acting is the vessel or Communicator of these ideas. The developer of these ideas is integrally related to I think
The sort of totality that I want to explore. So part of what interests me about your story and your thinking is how various inputs have impacted your thinking around, not just markets, but other things. So, for instance, like the stoics and the Seneca, the younger and so on or other philosophical inputs, did those come early and then Aid? You, you think in your career when you're active in the markets or did those come later?
And you sort of always had a deep interest but we're able to explore
them at a little. It's actually I was I started liking the stoics and other people have talked about the like them much early on, in my life, but I went overboard for every idea. I've had I did the exact opposite of what one should do is like, if you had an idea say, oh, I had this idea. All right, let's go look because I don't consider myself so different from others. And then particularly, when you look at history of, you know, so many times,
7,000 survive, it was Scholars, surviving works. So, I went back and figure it out of the scholars of these Scholars who had similar ideas or who preceded the ideas. So on, who starts things like that. So I went into the empirics, the Eastern Mediterranean Greco levantine Greco-Roman mostly using Greek language thinkers, and then of course, until others about this fundamental skepticism because I noticed a lot of people
Skeptical, particular conspiracy theories. They're skeptical of small things but not about big ones. All right, they got taken for a ride. It's a find me. A conspiracy theorist or find me. Someone who's naturally? Skeptic of all things. I'ma show you a turkey. So I wanted to find people who are fundamentally skeptic being skeptical. Are you skeptical about important things? Not about small things because would be an example, of a big thing, a big thing, like, let me give you an exam. I wrote a paper paper shredder.
Never ended up in a book on the stock market and religion or it's called the bishop and The Economist. And I said that those who are skeptical about the existence of God and I was somewhat are skeptical about religious matters typically tend to be complete suckers when it comes to stocks, they believe in a stopwatch or believe in some kind of pseudo scientific theory on whatever it is. Okay. So but they don't believe in religion and the reverse. All right? And
World religious, technically, they're harder and under some. I don't research on that. There's a guy called, Amar love me or love me barthélémy. I think who did some studies about skepticism people? Go to religion, but Affairs scriptures were married and I wrote about it. I think, in the black swans of skepticism where it matters, and I noticed that a lot of these big Skeptics were not skeptical of God and things. Anyone can do anything about they were skeptical of the charlatan, the skeptical of things of someone
trying to take advantage of you. That's where his exercise, your skepticism. Among the great Skeptics. There is a bishop you a, he would probably remove one of the second, most erudite person of his time. Second was this guy Coast College? ER, he'll guys phenomenal, he could Translate into Arabic. He was a Roman authors, land authors and vice versa. Okay. Scavenger scary, scary, Jerry there. A lot of the spear bailed Pierre Bayle, has a lot of Works. He is
Those Skeptics Hume was one of the Skeptics but these people proceeded Hume Hume is known because he wrote and a language of a country that had a lot of ships and a lot of trade, you know, across the world. But a lot of these ideas came from a groups of people in France or among Protestants in France, and it was called a on the fittest originates of course in the Levant. And of course, you have the great, Al gazelle, the Islamic Theologian, Iranian origin, who definitely?
He was showing you how all these arguments are weak, you know, could dismantle arguments by showing it would be skeptical about the human arguments about God. Okay. A
lot was the nose is coming out of that.
Same thing knows that became very sick but he was skeptical about the text. That was these people say, okay, try Sundays, thanks, okay, A bit, skeptical about things that really matter and there was actually skeptical School of Medicine, practicing medicine. So, what I went back through history.
Tom of had an idea, I would go back and see in history who preceded, me and sure enough. I haven't done enough because every year or so I got a letter from someone. Hey, how come you missed? So and so, all right, okay, and I'm sure. Now, I go back to the insert, oh, and I add that person. And this is why it has survived the five books, the insert. Oh, but we're not here to talk about these five books with this book.
Well, they're going to talk about whatever comes up, but
It's gonna hop over to you, Scott and maybe discuss something that you had shared with me as a possible bullet in the prep stages for this conversation, which is related to poly crisis. And the new age of Crisis, what does this refer to its the subtitle of my book, most people have focused on the first part of the subtitle is, how Wall Street Traders make? Billions? Second part is in the new age of crisis.
I feel like that hasn't gotten that much attention, but part of what I'm trying to argue is that we are seeing a magnification of extreme events, accelerating and overlapping. There's a economist Adam 2's whose coined phrase called the poly crisis, which he says these crises that are happening on a global scale are interacting and ways that the whole becomes greater and worse than the sum of the parts.
So you've got pandemics, you've got economic instability financial crisis, climate change, which is a big focus of mind and my daily job at the journal which I think is sort of the big one in terms of the ever magnification of crises that we're seeing. We're seeing in news every day. And what I wanted to do in the book is look at Several of these crises and
Think about how we should be approaching them and report of a risk mitigation standpoint using ideas from people like Naseem. I think that this central idea was as it was talking about the germ of the idea the book was can you take ideas that were created on Wall Street for risk mitigation and borrow those and apply those to other forms of risk management and what Nassim and
Mark do is they think about the extreme events and how to protect against them. Nassim Co wrote a paper about this exact issue called the precautionary principle. It delineates specific categories of risk that you should take the precautionary principle apply to. He has some specific ideas and he can talk about a way better than I can. But, you know, these are things that can be Global that represents systemic risk to humanity. Things that can
be
Triple tail. Must be fucked. A Laura.
Yeah, actually exponential thing things that have these properties that you need to take extreme precaution and not take that risk. Basically don't play Russian roulette with these risks and that's kind of how the book was structured was first looking at the growth of the strategy with Mark and seem and then moving on to these other things that the world is facing and seeing if we could think about ways to protect against these risks.
Things like climate change. You don't really want to mess with that, you know. It's a bit too late. We still have but there's still lots of things we can do. And that's I think the book in a nutshell. It was going to mention earlier when you asked me about the birth of the idea of the book when I first suggested it to see him in Mark. Naseem said no way I'm not have no interest in doing that with you. It took a while and then you're like I have these black and white photos, you might want to take a look at, so how'd you guys have to do it?
It was warm down at. Yeah I think it was more Mark put the screws on. No, no let me tell you what I actually don't know. I know that the
promise from him to not be portrayed to mention that I don't self-identify as a finance person. And once he made that promise, okay said okay now we can talk because Finance represents a significant part of my life.
But
I don't want in a theme with Naseem ever since I've known him. So to me it was like the identity piece. Yeah, that he's not. That gotta figure. And I thought I agreed because it's true, it's he's not been a traitor for a long, long time. And it's obvious where, you know, where his interests are and what would it? I have to ask who, what would it mean, or feel like for you to be broadly identified as a finance person, but to think of yourself more as a
scholar, I wrote about it and
And Fooled by Randomness George Soros and I Met George Soros, one of the persons on the planet, who impressed me the most one of those. And I realized that George Soros
Missed his career, he wanted to be a philosopher and thinker, okay? He ended up making money and spending too much time in it and wrote Drunk articles and books were written one book. We also hear it was that it was not as, you know, it was it was it was not that what he wanted that life, okay? He's a middle European intellectual. Who would have liked to be remembered as someone for when ideas and he and of course called pop.
Or who he claims was it Professor but it was beyond. So I wrote one for my regulars. I said here's his fellow who was say, okay, but he also does to distinguish himself from other financiers. He's also orbital has intellectual aims as I want to be mmm. I want to be someone who produces.
It's an actual work and what happens to have had contact with reality, thanks to training and thanks to Mark the guys, I'm still have some contact with reality but I'm not cut for that when I was ready for my relatives 2019. That I realize I was not I don't want to be like Soros because unlike Buffett and the other people Source had an identity crisis, he wants to be known as the Philosopher's. Okay. That's not you know,
Oh, and a life is a life to control of them. Hidden.
Buffer told me, he wanted to write a book but I I used to cover him and I was leaving the Journal of the time to write my second book and he was like, oh I really always wanted to write a book and you never got around to it. So there you go with you know the Oracle of Omaha. Yeah he wants to be thought of as an intellectual to
what I mean, he's just not the same but the that essentially has some things that I didn't.
Don't be cautious in principle but that's probably very inspiring to hear, understood the asymmetry. And if you say no a thousand times, he says, know if you doubt and that's the precaution
principle, could you give people the precautionary principle one. I wasn't just a backup. Okay, let
me ask you, you're a flying to go to Mexico, you go to JFK and they tell you they have uncertainty about the skills of the pilot but we think he's good.
Good. But there's a certain what you do you not get on that flight like an okay life is too important for me. Hmm, you'll take a train, you'll take you walk. Maybe you ride a bicycle, you know, take a few months but you're not going to get on that plane. Okay, you change your plans and say, okay, there are other plants or other countries too and other planes though that's Warren Buffett with his Investments and that's my craft ocean principle. The idea that there's a symmetry is that there's uncertainty about certain things. It's not
So the climate, for example, if you have uncertainty about the climate stop these models, all right just don't pollute, you got it over or try to use something else try to mitigate so that's the first part of it and people get it right away when I give them a story or plane or I take water. So this is last one on the table. There's no evidence that it's poisonous.
Would you drink it now in the wording with? Yes, book me. There's no evidence that so but when you tell him hey you know you should worry about GMOs. This is there's no evidence or harmful there you have it. There's no evidence that they're not harmful. Okay, so the asymmetry where you put the burden of the asymmetry on, that's the precautionary principle but then what we did is we've noticed a lot of people. In fact, it was a counter precautionary principle with a lot of people invoking it for nothing to say. We're going to have a non knife because in principle by deleting. Yeah.
Eating the areas.
Where you will exercise that we Horsham systemically as a planet or as a communal group and what are the number one?
You need fat tails now, what does that tell mean? Let me explain to you let's say, you go to planet Mars, okay? Elon would help you get in there. You have connection and you have no news from Earth. And then on the way back, you hear that a billion people died.
Okay, which one is more likely to be the cause Ebola or car? Accidents Ebola, no man on a given day if you hear Joe, Smith died today, what's more likely Ebola or a car accident car accident, car accident, that's what dance fact is you have to identify you things backwards. If you hear the big thing, when it come from and you have, you can see
He's okay. So they have different Dynamics because of scales, the scale differently. So in the Black Swan, I show the difference with the following metaphor, they are environments where you may have a large deviation, but it's not going to be consequential because can be very big. So, if I take a thousand people and put them on a scale and add to that sample,
The largest human being can find on the planet. How much of this total will he or she represent?
Tapes, 30 basis points, nothing. Okay? And then if you go from 1,000 to 10,000 downloads completely. So you can have a tail event that's not going to be consequential. Extremist an is different extremists and if you gathered thousand people and add to that sample, the wealthiest person on the planet,
How much of the total will he or she represent all of it, they'd be raining, are basically running. I mean, the the be on average on the planet Earth. All right? They'd be in total. Maybe they have 23 million and total and then you have hundreds of billion right next to it. So this is where you have to focus on environment that produces fat tails. And this is what Mark, did we Versa in versus named after the universal mechanism that generates fat tails? Okay. That was, that was the name of. So everything, we're in
Basically intellectual everything all details. So we have to identify what produces fat cells and financial markets and why it's getting thicker fat tails means that you have the greatest contribution comes from smallest number of events, so concentration, like for example, you have a lot of people, all the words come from one person. It so happened that on their fat tails, the models that we use for risk management on Wall Street. RBS, this is why I have a lot of enemies. This is why I had to protect myself.
Myself against reputational damage. All right, so it because all you call me, save me. Older models are based on on that. So what is that? They are practically everything. The socio-economic life is fat-tailed, what is not fat tail. Number of calories were going to eat tonight. How many calories going to heaven? One day tonight?
We can only go for the gold. I'd say I'd say we could each down few thousand calories. A
peaceful thousand, two thousand a I got 3,000 for me. All right, because I can play with fat and stuff 3000. That's
Think how many calories are consumed a year? Yeah. It's not a single day's going to make a difference. Hmm. Can you lose all your money in a single day? Yes, there we go. So you have to environment and their separable. So this is why the universal approach that makes things, separable, right? In fact that you can identify, what is fat tail. You identify where models don't work and can identify where you have to understand, and we have to use more refined tools to figure out stuff. And then also in fatness of tales, number one,
Pandemics number two Wars, I've closed. Plus s wasn't pandemics, okay?
And so you can use that to prioritize application of the precautionary principle or
Bingo. And let me tell you how. For example, if cancer is thin Tails, nuclear then tail. If you could diversify its entails, if you can have a thousand nuclear reactors, all right. If you can ensure it ever rather than 1, it is sent Dale. If you can measure it,
Cynthia for can ensure it uninsurable fat tails. So the lot of things that are believed to be very risky, but they're not like nuclear for me. I mean, not for my one of my co-authors but we'll settle it with him with a beer or once in English
Rupert really is a co-author of the and also a major character in the book. Yeah. He's very environmentally focused. Person is a leader and yeah, climate these days and yeah, he
He told me that's one thing that he disputed. The precautionary principle paper was missing
which was written with him first drinking you know signal Scott and an English and English pub in somewhere in northern
England, in a state where the
portions are like smaller than the what they give you for espresso in Italy. You know. There is stress do like you superb. So the so we had to have like against like with the app with you. You and the eggs, alright? So the go back to the insurable. We don't have
Worry about it and it's very simple example. I give that when Ebola started or and later on when Prophet started people using the arguments yet, you know, 3000 American's die. Every year. Drowning in the swimming pool, that was something by the guy called dr. Phil should be shut down pools. And the time less than 1,000 Americans had died of David and then I followed this present. The following argument, I said, if I die drowning in a swimming pool, my neighbor drowning in her or his swimming pool.
It has not changed. If I die of corvid, the odds of my neighbor dying of Kuwait has increased. So we had that transmission, that makes it fat-tailed that mechanism of transmission. So this is why you cannot compare as basically, the press. And the beginning, the school so-called established press was against our ideas because it was racist against try not. They could not distinguish between risks of car accidents and heart attacks, and risks of things.
Eddie. This is why. For example, I am in favor of vaccines the risks entailed and I'm against GMOs because they spread the
environment. Let me ask you a question. So I better understands what's with the precautionary principle. The example that you gave of the water, there's no evidence to suggest this water is poisonous. In my mind. I was wondering if somebody could use a similar argument against a new
vaccine. Let me tell you what the problem is. We're not with the vaccines or two things. Number
Were one. If someone had takes a vaccine and then you have part of population that have the vaccine, it's not affected, but there's something more Central here. You're comparing two risks, we have covet versus a vaccine. So you have to compare and we know a lot more about genetic stuff in an individual than we know about how Gene spread in a population. And That vaccine story basically the beginning, say, why don't you exercise a precaution principle? I say I have to worry about a pandemic, a lot more.
Yeah. In comparison comparison.
Harrison to that. Plus very quickly. After 1 billion, people had jobs, I was initially skeptical about the vaccine in the sense that let's wait and see the story is, are there other ways? Because I'm really worried about David. And people don't understand that the argument, they use x post-coitus, much more dangerous than you think. And the vaccine is, what made it tolerable. So when the had a billion jobs, I showed the following thing is that
Everything that genetic.
The number of mutations to take place to cause a problem, they have a variance, and if they have a variance is as follows, you would see already in a billion people because of someone's from a scrutiny, you will see that tail risk to give you an example, Hiroshima. Okay. They say on average took 10 years to or eight years whatever to get cancer. No, we saw it in three months, four months, if you focus on the tail, same as Kuru Kuru.
Takes a 10 years on average, the median to get Kuru from exposure. But you have what is carer, who is mad? Cow disease, things for which we have data of early exposure and then early disease, only onset of disease. So I looked at vaccines with all these conspiracy theories and everything says, the focus is enormous and you can see anything but it followed that class of risks where, you know, you have to have mistakes, going to take place in a genetic or DNA, or
This is where after a billion jobs I said, okay, I'm going to go for it, okay? And visibly, it's the risk is much smaller. So risk may exist as much more than risk of covered. And plus there's a lot of numbers about Kovac people who aren't aware of number one. Something that people don't think about immediately is that corvid raised
the risk of Death to Your multiple of death, beyond the age of 30, because we don't have much of an effect for a younger people. We always don't think. So, the fourth immortality was appropriate at all.
Cause mortality know
that it went up from covet across the board in the same way. Say for example you're supposed to cover the a 10% chance of mortality the 1.1 percent, 10 percent increase in alcohol, immortality it's the same for young people, so past the age of 30.
It's about the same number.
So could be 20% more depending on your exposure. So saying, is an old people problem they were dying as a multiple of their mortality rate. So I took the social security number just toodle here and say, okay, it's not my numbers Social Security number. Look at it, if you're female thirty-year-old, you have 1 in 700 chance of dying male 1, 400 chance of dying that goes up by 10 percent. Okay. What's going with? If you're 80 years old, you have one in whatever it goes up by 10 percent or something. If it's am, independent.
Percent depends on the exposure period but it was almost flat across the population. So I said okay do you want to increase your children's chance for young people chance of death by X percent? Plus the effect it has on years lost and Bluff expect, there's much more dramatic for a four-year-old that is for a nine-year-old.
So this is how I looked at it. And of course by then we had eight billion traps. So we had the answer.
How do you think about say GMS? This is something. I actually don't know much about but in terms of the precautionary principle and risk assessment, how do you think of a
vaccine is to counter a disease? GMO is just luck manipulation. That people said oh we've always been if related animals. All right but that's not true. It's sort of like there's a difference between flying and walking. Okay. In the risk your command counter
You see the GMO? The way towards the gene would spread through the environment and control. The spread is a fat-tailed, whereas selective reading is very slow as Rupert Reid, said he cited and know who said, then if your horse is blind, make sure you write it slowly. So, there are two classes like, major christian, extremists and mediocre stand, like calories, or extremely sound, stock market, selective reading versus GMOs,
Yes, I mean, you're jumping so, many steps was GMOs. So it's different class of
risk, right? Because of the risk of of uncontrolled
spread. Exactly. And then you have a light that spreads, like of it, did the whole planet and we're much more connected than before, plus they have never done. A proper risk study on GMOs on the environment. Not one, they're saying there's no evidence. They're harmful look before eating it. I mean I'm a scientist I like to see a randomized controlled studies. I like to see things to see.
Something a little more formal than claims and then you don't realize what happened. No matter what you say about Monsanto. I think will be a an underestimation of their angel attribute because they redirect science, because they had groups of people who would go and intimidate scientists, and people on salary scientists are fluffy. It was a job lose, a postdoc position, they would contact your boss. They would contact practically everyone. They did that to me. But visibly
Is like water on the duck's back, right?
Why'd they do it. Hundreds of letters to the university because of your commentary and GMO, because I'm proud of that paper,
paper paper. And then somehow, I use the r word in the past and French. It's it's Ezra stats. Like it says like you're slow thinking person, the Armory I gotta and then they would have significant others. Mothers of children with special needs. Yeah. Who don't like that? A professor at
Why you would use such language that's insulting to my. So the point is when they showed me the letters that different names but it was like written almost on the same letter had exactly. This is, it was descended. Language was just like so realize there was a smear campaign plus a lot of other things, they did petitions all kind of thing and online harassment, but with me, didn't work with others because the people they select for these things are usually dumb, think about it, who would engage with me?
You're campaigning the brightest person you know? No. Okay, so so we can play with them. Someone masato did is to cover up for, whatever they're doing the intimidation, they disrupted science and they made people believe that hey we have no evidence I'm doing science. This person is 250 later or whatever is called a Luddite. Okay. Yeah. You have been against the fire that's
about science.
The science or the because science anti-science and usually then
Used by scientists.
And they had a few scientists who knew nothing about risk and probability. So that was. But anyway, we had fun fighting. It was a long fight but then what happens then what by Bayer and bears are more civilized than Monsanto and all that
disappeared. So if we if we zoom out and look at the precautionary principle, how could that be applied on a policy or regulatory level? Like if someone's listening to this and they
Re with the premise and they said this makes a lot of sense. How could we implement this on a larger scale level? Such that? We are less vulnerable to say, possible risks. Well, actually in Europe, the precautionary principle is widely adapted among International agencies and Regulatory Agencies. I think that the advance that Nasim and his co-writers made on the principle is that it can be kind of fuzzy.
See so it can be seen to be subjective about how you are applying the principle. I think what they did was create a category grouping which can be used to designate things. And, you know, you could have, I don't know. You have panels that would look at it using these categories. But I think if it were adapted more widely among regulatory agencies in the United States, just as a principle as
Way to think about certain kinds of risks, then it could be more generally, applied and useful. Like I said, in Europe, they do use. It GMOs are not widely adapted in Europe and primarily because of the precautionary
principle and they have lobbyists in here, I know because they all attacked me. I mean for so yeah, I see them online, all the time. Going from Europe, Italy, for example, Italy of all places, you know. That's Place damages big times. Our reputation lie.
If you had GMOs and Italian food in Italy, it is a no tourism but they're still have people. They're trying to sell particularly that when you sell GMOs, you also can use more round up their secondary effect on the soil and as the same people who were producing both, right? So one could be an excuse to sell the other.
To me one of the really interesting aspects of the Prussian principle is the notion of uncertainty. So you know when you
Okay. Climate change. The uncertainty of models has been used as a cudgel by the deniers and by the fossil fuel industry for decades that there's a level of uncertainty in these predictions. We don't really know how bad it's going to get, you know, we really we, you know, we need to sit tight and assess the risks that were facing. And what they showed is that uncertainty is a reason for taking precaution. Because if you are uncertain about
The potential future destruction of or massive degradation of the biosphere because of polluting it with carbon dioxide and methane and other greenhouse gases maybe you should stop doing that or realize that you're actually taking a risk you don't you don't know what the risk is. So uncertainty is actually a reason for precaution rather than just throwing caution to the wind and just saying well we don't know so you know what the hell?
But Lenny thought ironically what happened to me. The first time I fell in love
The argument is actually in a Black Swan second edition and I was with David Cameron on stage and I said we have uncertainty about these models. So avoid these models. I just don't pollute in the paper. I really later we wrote with my friend, Ian ear and others. By saying the more uncertainty, there isn't a model. The more you have to be rooted. Like the more often you have about the skills of the pilot, the more cautious. Exactly. You should take another plane. So what happened? The next day? 20,
A articles in the UK, calling Talib climate and Black Swan, authors a climate denier, okay? Trying to convince Cameron probably had a concert industry of modelers who would be out of business if you follow these principles. So it's not like we got heat a lot more heat from the left then from the right. But why were they calling you a denier? If you said they used me for verbatim. Well, that follow the whole argument and they say well, he said that and I basically name them by names and I went after every one of the 20 journalists,
I wrote Every Journal explaining to them what I said and I say, the side me out of context and I wrote the chapter in scanning the game about how watch the debates and honorable debate is where you represent the person's opinion, like what called Parkwood, always very Faithfully represent, the persons that position, and then attack is where, as they were taking selected Sherry, pick anything from creating a strong man, or exactly. And that's for you would say, give me a letter written by an honest, man. I'll get him, huh.
So, the problem that you have with the climate is that lot of people have an interest and complicating the story. In fact, you just say, okay, let's forget about fossil fuel, that's pollute was other things just like a safe and drug is dangerous. I
think the dangers in the do. Sorry, the danger
is that it does is non-linearity. We put that on the precautionary principle, the non-linearity of the convexity. That's the theme of antifragile the
convexity
That
you have dosing, the atmosphere that's carbon dioxide you're going to end up with a very bad outcome
eventually, exactly. So give me, Let me Give an example to go back to before when we're talking about what I use jmo versus selective breeding, tell me why speed and fragility. And example, I use in their antifragile, if I'm Bank, a car against the wall and one mile per hour.
A hundred times, okay? It's not going to be the risk of your bunion at once at 100 miles per hour. Okay? So this is where if you have acceleration of harm like if I jump 10 feet, I'm are more than twice as if I jump five feet. So we showed we're in the presence of acceleration, what to do. And that part of the paper was never understood because people don't understand convexity although antifragile is currently my most successful book
It's read more and 2023. Then it was and 2013 second year of vacation. So as same was Black Swan neck. And on blacks one is read more and now than it was a year after publication. But in spite of all of these arguments being presented, people can grasp our paper discovered, why something I figured only recently when I talk to young people, 23 24,
They know exactly what I'm talking about. The parents are the problem,
so, what is convexity just for to refresh?
Ok, so again, we're going to talk about Universal or anything better than a universal story, but that the convexity is if the market goes down, 10% you make a million dollars. If it goes down, 20% you make ten million dollars, you have convexity. And this is what everything is based on. What let's generalize like. Sorry. Yeah. There were called convex.
And concave and probably the best illustration is how we fare in 2007, and explained in the blacks want, right? Before it happened, I looked at the risk of Fannie Mae by deserter who, you know, left Fannie, Mae and distributed risk reports. Okay. We looked at risk of Fannie Mae and notice that if some markets, a, an interest rate, or mortgage premium, or some flux at this increased by 100 basis points, they lost X
200 basis points, 20 times x, 300 basis points. I said the sitting on a barrel of dynamite in the Black Swan 2007, five months later. Okay, this tile is going on and eventually they lost the book, six hundred billion dollars losses. While they said, oh they reacted to me by saying, oh we monitor our risk. We have 15 phds. Okay, we're going to Fifteen plus fifteen trillion phds. It's not going to help you with this. So this is convexity on a
Isis. And we're doing the reverse on the profit side and the been, some lot of people got upset the way Mark presented the numbers of e rights plus investors, you know you filed with the SEC with all the numbers are available to tell them. Listen made 4,000 percent on your maximum loss. Okay. Whereas if you invest in the SP, you can lose a hundred percent of what you have. So the return that you have on that maximum possible, that's a lot. So, in other words, when you go to bed in the evening, all you could lose is that much and how
How much is optional explosive on our maximum loss. Alright.
So that was a sage. Sorry, the ASA was a
symmetry is 4000 some percent, but that's not the first time happen. No. But nobody noticed when I was training and I discovered it with before the crisis 1987, there was a plaza Accord where a bunch of people got together secretly on the Sunday. And then, I made an announcement or gonna support the currencies against the dollars a dollars too expensive.
Huge move. I was at work, we had tiny risk, don't explosion of my PL, okay? They brought detectives or inspectors to figure out why the pnl is so large for that. So little risk because you had maximum Rizzoli could losses say x thousand dollars and you know it's loaded don't that's how it works, I couldn't believe it, right? So I decided. Okay, I'm going to make a look at when you
say exploded, this is in a bad way or a good way.
Way. Good. Good way as he the piano. Yeah. So
I'm if the PML was too large for the risk. We say we're supposed to only take a
uterus, couldn't handle the numbers.
Yeah, I know. So that will for them it's like
it's high-risk. High-reward, how are you getting low risk? High
reward. No, no they said but I'm human too much money. You got to be taking risk your lights up. That's right. That's right. And the computers would take something like 10 hours at a time to compute the pl at the end of the day PML, is he?
Every time this is have go redo it and stuff like that and I was frustrated because they couldn't understand it. They couldn't understand it. But this is the same thing happens. Much rides waiting
for, you know, that's the beginning of the trade that became empirica University. Something like I remember when I was talking to Mark back in 2008 I think you back he would never tell me this now but I was trying to figure out how they had such incredible returns and he gave me an
Ample of trade that they made and I forget the timing, but it was like a July 2008. S&P, 500, put option, betting on a 20% decline in the S&P, 500 watt for two bucks.
After the crash, he sold it for 60 bucks, that's the kind of convex exponential return that you do not. Get in any other kind of trading and you take that two dollar option. You magnify it over millions and millions of dollars, you got 4,000 percent return,
Kevin Ives, even more dramatic than two dollars and sixty dollars. Because there was always look at how people have lost money because when you read,
you know, reports and stories, they hide the losses because nobody's going to write a book on how they lost all this money. As always, invariably the same, there was a story of volume investors. I think they're selling out of the money options on gold and there's something for five cents and end up. Have to win for $40 and then there is a neither Huffer story. Same story where the liquidated and what he blew up and he blew up many times at the moment, but one time work, you can see the prices is sold off for five, ten cents.
And then had to buy him back and I was mine and back to $40. This is what I
noticed was the whistling
volatility selling out of money Tails since something rare events, you know, and you don't need a large deviations of people panic. They pay anything because, or sometimes it forced to because the the, you know, the clearinghouses or common parties cannot handle the risk, so close you out sorry. And you close out his, there's not a crudite it's like the famous saying, sell everything and then the clerk I told you
Celebrity, we're not moving. So please tell me to whom sir, let's see
let me ask a question that's been sort of percolating in my mind and it may not be a good question but I'm curious, you mentioned Soros and I don't know that much about service. I've never met him but I want to say service is also known as the man who broke the bank of England writer, the the British pound. And so one of my questions is in this increasingly interconnected world where the equivalent of the
Leg whatever that might be and it could be in pandemic former otherwise instead of taking 300 years is over a weekend in terms of spread and things are so interdependent, is there the Temptation and the risk of investors catalyzing more crises or different types of crises? Not just, I don't want to say being Spectators, but there's one thing to have an investment methodology that has certain premises.
These and so on that, then results in a windfall return at a certain point in time, with tail events. But I'm wondering if I mean, it seems like there are hedge fund manager. I'm not saying this is what you are. There are investors out there and hedge fund managers, who take very active roles in companies. Let's just say that they want to take a nap position and activist investors and so on. And I'm wondering, if investors will be able to do more damage as the world becomes more interconnected, I think.
It is possible. I see the damage coming from negligence and bad risk-taking, that ends up creating a contagion effect. Just the same thing that we saw and not among investors. But, like, in the banking, yeah, banking or hedge funds or crypto, I think that financial markets over the past 20 years and increasingly with electronic trading are more and more interconnected than ever, you know. This is something I got in my second book about high frequency trading is
How you could see the potential risk of some giant move in, say, a derivative contract or an index, something overseas because trading, machines are correlating, all these assets globally electronically at hyperspeed, as microsecond speeds, that you could see something move very rapidly into all sorts of asset classes in a way that is impossible to stop, because it's so fast.
That could be triggered by a Trader or it could be triggered by a computer just going bananas.
We have noticed very early on in the 90s a phenomena that International diversification was no longer a diversification. Why? Because of that integration, the dramatization and a lot of good things for people out of poverty, but a lot of things happened with it. Number one, you kind of versafine anymore because a stocks collapse here as we saw in 87.
Laughs everywhere for large deviation and now for mile deviation starting in the 1990s and also I mean the funding disappears everywhere or the covered everywhere. So this property of globalization is similar to the one that came with it. This is that we're going to have shortages.
And I'm glad it's now in a phase of between shortage on a lot, but shortages can be very deep were containers go up 10 times and shipping container and you're going to have a lot of the reverse happening because it is a, I've never seen shortages without glutes. I've seen blast with a shortages but never a shortage of their got but they're very deep, we didn't have that before we all depend on.
On the world's getting bigger and bigger, but it's like a large movie, theater was the same door, you see? It's the size of door that matters when you want to get out. Not the size of the theater. So with the supply chain is narrow and getting narrower, and it's got an error. Now, probably will expand and Branch out and we'll have a better networks. But people would not understand that this is this is why people like to sell tail events because it cost money to diversify your sources of, you know, whatever and your
And it also costs money to hedge the risk or you think it cost money and have the illusion and sure enough, it still has that if a Hedges expensive will think of absence of hedge, how much more expensive it
is to this is, what's your perspective on the capacity of investors to catalyze greater risk not necessarily the systemic risk taking although this is certainly a factor of safety.
Say the banking sector or fill in the blank, but very well-funded investors who are looking for Black Swan or Black Swan like opportunities their ability. To create a self-fulfilling prophecy in a sense
that it's a prediction about self-fulfilling. And also self canceling, see early on the self-fulfilling, people get on the bandwagon and then sure enough this house of the glut takes place after shortage but one thing
No, this white one should realize was the structure of the world, in which we live that although history is not an indicator for anything because we live in times of different connectivity and stuff like that, the rules of what can go wrong are very simple. It's like I was by that makes the optimum's and austrians figured it out. Alright lazarettos okay. Simple right then venetians were expert at it. The rules are very simple, the not that many of them. When we talk about prakash
In principle. A lot of people have the illusion that it multiplies into zillions of regulations. No one comment I'd like to make about The Regulators like European Regulators. They're great at being regulated. Now there's a regulation or pleasure and if you put 200,000 people in Brussels, you know of course they have great french fries and beef, Tallow, whatever, duck, fat, whatever. But at the same time what comes with it as these people are going to regulate you out of
Existence on things that are trivial they like to do the trivial, because it's easier to sell. So they regulate vacuum cleaners right there. What, how much energy should be or the speed of your windshield, wiper, on a farm tractor, if it has a bunch of, that's kind of things, but they can't control the borders, and they didn't think of it of all the people we spoke to, because a lot of people try to talk to me about risk, thinking that, you know, we should talk to someone, like me about risk, okay? And usually, I got
That's because when he was the next Black Swan is usually not getting it. The Singaporean government didn't show. Everyone was covered. As much as they did before. I think maybe because my friend was gone or something, but they know they said, okay, what can go wrong? And let's reverse engineer our hedge, the reverse of what you think and build things in a way to withstand that kind of shocked.
Other other examples outside of Singapore. I'm very interested in Singapore and I guess was it Lee Kuan Yew and the entire story of Singapore is pretty wild.
And any models or leadership outside of Singapore? Not necessarily related to cover too low, it could be that you think does a good job of applying precautionary principle or working backwards in the way you described,
all traditional societies, traditional communities like Italy would resist GMOs and also people online may say hoses anti-scientific, they know it's science is not about that, for example, so it depends on which domain, there's some domain. Some people are good at some of the main on others.
Russia was very good at some classes of risk visibly that others depends on countries like Italy got paranoid. But nuclear there's one attribute of our environment that we should realize is the non-trivial effects of propaganda on a minded. People take the once. Well, organized, the KGB was not very good.
As find we discovered, but was very good at this information. So everybody panicked about the nuclear because it didn't want Reagan to put ballistic missiles in Germany and the infiltrated putting those on something about it. When he was in this room has infiltrated all these green movements by directing the greens against nuclear example. So I truly think that will suffering a lot from this information at today.
When people worry about some risk that
others, many other example, that is Germany with Fukushima. Yeah, that freaked out over something that actually didn't kill people shut down their entire nuclear program and in its place opened up a bunch of coal-fired power plants. So which is, you know, obviously much more direct risk to humanity than nuclear power. Plants that don't kill people
the
Action in Chernobyl, I knew that when I was writing the Black Swan and then talk about it because I know it was dicey was lower than that mute. Ah, but that's not the point. It's Chernobyl is too big. If you make small reactors, let them blow up. So what happened? If you can because of convexity you see, one reactor is vastly more dangerous than 10 small ones and the tens models are not like this blow-up at the same time. I don't want reacted how what's the what's the factor, you know, what's the multiplier but they are nonlinear
Charities, but definitely, when you have a lot of small ones, you can blow up at different times. One thing about our previous conversation when he says banking sector Market sector, the banking sector is very safe. For one reason, it's a utility with high-paid Bankers living around here. You see have big so Lofts ten million dollars over laughs basically the your utility because they don't let it go under. It's not the one you got to worry about its the the saving it again, they had to worry about
The effect of saving and like the, we saved it in 2008, was what the government that and we exploded. And then again 2020, there was so much commercial paper. So many things again, all these things aimed at saving the financial system. Bank wise have spillover effects but we're going to save the Magnus effect system because you cannot operate without plus. Another thing has happened is that banks used to take a lot of risk.
Since 2008, risk has migrated from Banks to hedge funds.
Now it's less concentrated but it still can be
concentrated in what way can there be concentrated?
In other words, he has a friend who has a big font that's larger than a lot of banks. I'm not mentioning names, rather see you had a lot of big hedge funds but I guess they can be Diversified hedge funds have skin in the game. In other words, the owner of the hedge fund has money in it. Unlike a bank where you just have the upside, not the
downside. First long-term Capital Management is the
Counter example? No, no, it is if people that the skin in the game is a disincentive, of course, but it also scan of the game is a filter. So where are the people from? Is anybody from long-term Capital Management? Still around
last I heard John Merriweather was 10 years ago, is trying to start a hedge fund.
No so so if you can't recover this kind of game is Fallen effect that is the reason you don't see crazy drive too many crazy drivers because they're dead because you have flick risk on others. But you
You experience the same risk, so you tend to exit the pool.
So it seems, then maybe I'm misunderstanding, but that the migration of risk-taking to the hedge funds, assuming that the GPS are the people running. The fund have sufficient skin in the game, would seem to be a net positive. The
hedge funds are okay, but we have had the risky part. The ones that most fragile the private equity and of course, by far,
People who need funding, because I don't know if you realize, but we had, since we had our three bottles of Pink. Champagne is like the for whatever lot of pink. Champagne to celebrate Lehman's departure right from this town since then we put them straight across 20. So when I was student and everything is for me an investment was something that generates cash flow to build something that generates cash flow. So you valuing cash flow and no residuals.
You are the end. Okay? And that so can have you can tolerate negative cash flow if you're going to get some later on. So it's like us a few you'll discover gold later arms. There's the so the business model was cash flow based with a short term, or long term cash, the world has changed, all right, in the funding world. What is the game now? Is who you're going to sell your company to? I see you, see you talking about startups in this case, exactly startups. Or lot of Investments, a you buy an apartment, you might house in my building by something or
You invest in some crazy idea and someone was contacted me about LM model models, you know, shattering Beauty by saying, we have this startup investing this startup and look at the rationale. And then he said, yeah, I'd be able to sell it them within two years, so it listens to the Trap, okay? So companies, say even Twitter was operating on a following modest. We go to the market, okay, as a cash machine. So now you have to generate cash. So basically everything was came from has
The characteristics, someone else will buy our company or were packaging a company to sell of someone else. Okay now that started before the great financial crisis but was very moderate and of course it took place during the crazy period of the internet bubble and then died. So we had had episodes of that effect. But now it's ingrained in people had enough for 15 years of low. Interest rates you have people in their 40s. I've never seen interest rates.
They don't know how to behave. Don't know how to invest. So, I think the most fragile part today is about the banks, of course, as we said, and it's not hedge fund because the sort of like mature adults, typically, it is those startups and end of NPCs are Venture capitalists. But Venture capitalists actually played quite a nasty game because they cashed out all the. All of them are rich on company. Never made a penny.
I know a lot of thick. How many billionaires you have and silicon from Silicon Valley, right? Whoever made a penny.
It's evaluation Ruby
as I said, yeah, yeah, there's there's lots of the game. The I will say also I think they're going to be tremendous fatalities in the next probably three quarters in the startup world because there's been a lot of contraction of funding, which I think is ultimately probably a good thing, but a lot of these companies are
racists do that is the necessary
thing. Yeah, no, that's, well right, I mean it's calling of the herd. So, I think,
when I think about it, this will finally we get, Waiters
Obviously because we have shoulders waiters. Okay we finally got wait I mean you got two restaurants and and and they can't you know they have one waiter for the whole room and take the we get more waiters we've got more people who, you know, will help you, you know, mow the grass and stuff. I mean, we're a lot of a lot of supply of
for former startup Founders serving you. Your the granny will see how it shakes out. I'm curious to
see the seam, are there
any
Ideas Concepts, you would like to discuss. Is there anything that we've missed Ed Thorpe? Could always talk about
it that these are the center of things. So I started writing on convexity or studying complexity, you know, after between of time we had the eggs in the champagne, excellent of the eggs, the eggs was 2080 scientific papers. So by my enemies,
I'll handle it because it would because they know it's not science. So, anyway, so I think that the central thing for me is convexity and it led me into papers and oncology and medicine. Because, again, colleges new stuff, doctors new stuff. But the language they use did not accommodate these notion of convexity 10 times. One the non-linearity they sort of suspected it was not formalized so just publish something in oncology. We did a lot of stuff in a pyramid ology on tails.
So convexity entails and convexity is, is the most important. For example, people don't realize that convexity means you like, volatility compared it to you don't unders on where your convex and people miss the point that was already mentioned in a paper. I wrote before Cove it on citing sources for long ventilators. If you give someone a dose of 100 percent the person may die. But it gives that person 80% 120%.
They have much higher survival rate. Why? Because I like Mortal we like heart rate variability, like however, when I wrote antifragile, I was writing them between 2009 and 2012. Nobody believed in higher ed variability. You say as I thought you needed study heart rate as a predictor of death. So it's the same thing for a lot of things where you have, that's a convexity effect. So that's sort of what I'm focusing on now is these convex responses, convex stuff applied to Fields with
Where, you know, they need to be applied like medicine, I'm sitting with nutrition the nutrition figured out early on intermittent fasting. Where's the convexity thing? Instead of having a dose throughout the day? You have it and it's a different response, but there's a limit. You'd rather have your calories. A concentration Limitless. Rather have your calories. You know, once a day is, ok, once a week, not so sure. You see. So there is an Optimum things. The same thing can be generalized to all of this is what I'm working on, and it's taken me a while.
All that comes from optionality option trading.
Does it make sense for people to become familiar? Even if they never engage with options in some basic education in options trading? Or would you say skip that instead of
group that because I got to sell options. But I would say they used to say 9/10 of option. Players will be sellers. I think 99 out of 100. It's so appealing. The someone's going to give them the story.
You sell option, you have steady income, there's nothing people like more than study income and the reason Mark the business because he's the only person I know who doesn't care about the psychological profile for having studying because everybody else has to study income, they would debase the trait to have a steady income and sure enough, you get studying the income by selling the Tails and that is generalized to give an idea. A company that have study income. I'll shorten up from somewhere, say that one more time.
Pennies that have study. Income are shortened option, somewhere. This is, so it's not trading options that will help. You is looking at optionality in business and in places who short, that optionality that you can have two funds. Don't have known same return. One font can have a lot of short options and One Fund can be robust.
You won't be able from the outside and security analyst have no
idea weapons of mass destruction. That's was learned by Ordinary, People should stay away from these derivative contracts.
It is one of the things that I had to deal with this book was, that's with my editor and people who've interviewed me since then is everybody wants to know how to do the universe of trade, you know, Mom and Pop. How how do you how does Mom and Pop protect themselves against these things? Because you know, I in the book, I warn these downturns are very bad for your portfolio. This these are things that kill you, you know if you go down forty fifty percent, you know, this is
The mark talks a lot about you lose, 50% to get back to where you were before happen, you have to make 100%. So, these are the things that you really want to protect yourself against. And my editor is like, well, you want to know for his own because he was getting scared. How does Ranieri person do this? How do they protect themselves against these
events? Might answer is an ordinary person. Should focus on her, or his business.
Dentist would focus on Dentistry, not trading gold. You see? I mean, my experience. You see people whose business is not a finance and they think that they've got to make money out of the checking account. So what happens when they have so much scrutiny by their own business? Say, they're on a bakery, they know the suppliers. This guy pays, guys, I know all the risks and then they blindly put their money into something. They, they have no idea what's going on. This is where the soccer. You know, what I'm say, is domain dependent that some people are
Skeptical in one area, but don't transfer to stock market. It's the same thing. So, there's something about the stock market, particularly with the, the weakness of religion, that makes people believe in stories of returns, but not believe in theological arguments that we've had for 2,000 years. So it's the same thing. I tell people. Listen, what do you do? Oh, I have a bakery, focus on baking, and then and use your money to preserve. That's not your business. So this is where you tell the Poppin mom. You don't tell her.
How to do Universal trade? You tell
them, they can't do it. Yes, problem is, all that mean I get to clean after being in Silicon Valley for 17 years and having some pretty good luck with startups. I get the question, how can I invest in early stage startups? When like, don't ya do not under any circumstances do that? It's like, unless you're living in the middle of the switch box and you're dedicating your time to that. Do not do it,
unless you're a traitor. Don't trade? Yeah, unless you're a baker, don't bake.
Last year a dynamite maker. Okay don't make dynamite and stuff like that but it's literally
just got the new book, chaos Kings, how Wall Street Traders make, billions in the new age of Crisis is available or all fine. Books can be found and you find you online Scott Patterson books.com on Twitter at Patterson Scott and the seam. Where would you like people to engage with you if they engage with you or with your books? Understanding that you have?
Begun work on these various exposed parts of your multi-part essay at different points in time. Is there a place where you would suggest people engage with your work first to suppose? It depends on their orientation. I
think, for by Randomness is the one that people like the most, the Black Swan, what they Slide the most and antifragile the one they misuse the most this you have because I say say say oh yeah the virus you got stronger what doesn't kill you makes you stronger. I know
What kills you doesn't make you strong me, they're not getting it right. Like the first thing to be fragile. It's we antifragile this first you have to eliminate fragilities to say that that's the first rule you leave. It, you tell risk, you don't open up. So I don't know what I would say is Fooled by Randomness is a good start, or if your lawyers Canada game, I have no idea because I'm not thinking in terms of my past books, I'm thinking about the book I'm writing now. Yeah. What are you working on now? And what had two things is a technical in search of second volume, which is all scientific papers.
Around these points and I'm working now on a book that is pretty much like structured. Like an ancient Roman Latin at reticent language practice okay with questions and stuff like that and it's liberating to be able to write without having the narrative. Just boom Point like and in it I cover all these points question. What is convexity and I've decided to do all of that in one book.
And it's going to be cold to pick up you. For example, why the risk of an individual getting? This doesn't translate into a collective risk. In the same way, right? This will level versus plenty of stuff like that. And and also why can generalize a lot of it has to do with scalability. People have the idea that we should have a virtuous individuals to have a virtual Society. Typically, if you force know, is lot of greedy individuals can build a virtual Society. That's the Adam Smith's argument or
Or actually one model Ranch. So the idea of scalability, for example, is the most misunderstood thing. Like a town is not a smaller image. I started the topic and antifragile but housing scale differently. So a town is not the large Village. A country is not the same as a municipality and why, for example, you can be libertarian at the national level and autocratic at the municipal level C or Communists in a kibbutz with libertarian said, love you
Has a lot of these relations so things are more complicated among these things. I'd amok in it. And then finally, one idea that also the exposed by structure than it on the main difference between BS and on vs well, I called verbal ISM BS is in bullshit. Yeah. Okay. Just making sure I'm understanding and nonverbal autism. What is not? Because a lot of scientific papers have BS and a lot of casual things don't have? Yes. So I'm exploring all of these
These and a volume, I may call it Suma or principia to he was an arrogant title. Yeah, yeah, you're so much or pink appear in court or room or something.
What if? So what characterizes non vs I have to ask? Or by
the rigidity of meaning, I learned that from arbitrage-free, I learned a lot of things from training and arbitration law of one price. Like, if you combine things, you should have the same price here. Singapore,
Downtown Uptown combination that you should have no. Arbitrage can't really buy a case of the Arbitrage. I started doing Arbitrage is like buy an option with this. This converted to across them and end up with something cheaper than some other one. I would short and then you get it. So we should not have a lot of One Price originality of meaning, whatever words you use, always refer to the same. Think that's what my criteria rigidity. By the way, I cite you in my new book. Hopefully it's a good one. You called retrospective
- well, you called me go tearing. Hmm. Oh yeah. Okay so in other words I have a so-called retrospectively, the theory, I have one section is on scalability and one section is on the passage of Time, how we don't get time. Right? And in it I explain why. For example it is improper to blame someone passed individual retrospectively for values. We have today where we didn't have then you see it's like for example Aristotle, the not like he was you know, male chauvinist Robin
And say, okay, is it was it is wrong, we know now, but he didn't know. Is he didn't know, it's just like saying, okay, why don't we blame it for not using a computer? Okay, this is the computer at a time. So you got to look at these terms. It should not flow back values backwards but effectively the talmud which have been studying for a while. Had a lot of things on it and don't tell me what it has on it. That it's so, for example, the same Noah was virtuous for his day at someone pointed out to me in
Ahmad Twitter is very helpful, but I like these ancient texts to see how they would judge their own effectively, when an 18th century then different values in the 15th century. And how did they judgment the same time people? The wise people know that. Hey, they did not. It was not part of the Customs at a time.
How did you decide specifically on the talmud? I guess that's. Not your
okay. No, it's because I like Aramaic which is closer to my native language is lower than levantine dialect.
Aramaic. And then started having interaction on Twitter with people who are talmudic
Scholars, based on the interest in the
language. Do I put something in there? No, of my interest in language, I have interest in ancient languages more than interested in ideas, but I'm poor with languages. So it's not taking me anywhere, except exploring text, and I'm enjoying stuff. So you could have a collection of ancient wisdom in the talmud embedded in the talmud. That is a very interesting because
This Monumental
work. I'm just wondering at I guess in addition to or amongst the different sacred texts or scriptures that you could study why that stands out. Now
what stands out really is more like someone like a queen us? The Summa theologica was written by one person, or is it talmud is a concoction of opinion on opinions. All right, but I like the talmud only because I had the privilege of understand Semitic languages so I'm enjoying it, more fun.
Mystic stuff, just for the fun of it and it's fun to read something. And you understand, this is why I plus it is effectively a body of work. That's what Monumental, you know, that took centuries to build a collection of Scholars, talking about Scholars And discussing one another time. This is what, why? I like I like about acridness is took a topic and boom everything in it. All the questions and answer you can have it, we question themselves. So this is why I'm much more impressed with acridness.
As an individual and can never imitate that acting as. So, I could be as a scholar, like, one of those who contributed to that Tom would, you know, one of small contributed not done with that Collective piece of
work. I'm jealous of your ability to engage with the Semitic languages, then just be able to access some of the text in its original form. I'm very jealous of that.
Now, I enjoy that, I don't do as well as Greek as I should ancient. Greek do better with modern, but Latin is
Here the summary function but the grammar is more complicated than the Army and land. Hmm. Well we could go down that rabbit hole, the baby
sounds save that for the next round and do you have food and booze to get to? But Scott, is there anything else you'd like to mention before we wrap up anything, that maybe we didn't get to, or anywhere. You'd like to point people that I didn't mention or the next book that you'd like to give a teaser for anything, anything at all that, you'd like to mention. Before we wrap up, I really appreciate you taking the time, appreciating the same.
Taking the time. I don't know about my next book. I mean, I'm right now just completely immersed in this climate world and last year, the B Administration passed the inflation reduction act, which has nothing to do with inflation. But yeah, that thing is sending shockwaves through the climate technology World in ways. That's just, it's kind of mind-blowing and changed the game for America, at least, and it's at,
To
catch up with what China has started more than 10 years ago to develop these Technologies, but it's going to take awhile. But in my opinion, it's pretty necessary to start doing that. Yeah, like find the entire space, super fascinating and I know we were talking about the ideas in the current books. We didn't allocate a lot of real estate to that particular topic. But you know, I was thinking about what you were mentioning about climate change and some of the challenges and engaging different parties. And what I've found, I live in Texas, right?
A lot of people engaged in the hydrocarbon businesses and so on. And I've spent time with a lot of these people are not stupid. There's some very smart people, but there are, you study the incentives? And you see certain babies? You looked at the sort of incumbent interests and where I have found productive conversations to be had as if I avoid certain types of language. So for instance, if I don't mention climate change, but I say, let's put aside the question of whether humans are causing this or not which is very painful for a lot of people to do.
It's a great way to fight you know but if I'm a thug let's put that aside and just look at extreme weather events and look at some of the upside potential with some of these Technologies and like where they could find incentives like Financial incentives outside of some of their current sandboxes. I've had pretty good luck, engaging people with that. I don't always have this compelling opportunities to immediately present them necessarily. Although there are a, I mean, quite a few out there.
I've been working on some stories about climate technology in Appalachia. So I've had a lot of conversations with Republican lawmakers and States like West Virginia about efforts to bring in renewable energy into the state and you can have perfectly rational conversations with them and they love it and you don't talk about global warming or no climate change. You talk about energy and
About how, you know, why would we not use this new form of energy? That's actually cheaper than everything else wind and solar and they get that. They're like we're energy people we understand and they're embracing it. I think energy Independence is sort of bipartisan with China, in competition. Well, I guess we can we say that for round two but I really appreciate the time from both. You Took a ton of notes for people listening also will have
Notes link and everything that we mentioned, as usual, it tuned up, log / podcasts, you'll be able to find references and links to certainly everything I have in my notes and a lot more that came up in conversation. Any last parting words, gentlemen,
you're not gonna play with dinner. This time? I'm Faith. Okay, great a good last time.
Okay, no games, I won't skulk off and surreptitiously pay for anything. So
On that note off to dinner, we go. And thank you very much, guys. And everybody listening, thanks for tuning in. Hey guys, this is Tim again, just one more thing before you take off and that is five bullet Friday. Would you enjoy getting a short email from me every Friday? That provides a little fun before the weekend, between one and a half, and two million people. Subscribe to my free newsletter, my super short newsletter called five bullet Friday, easy to sign up, easy to cancel. It is basically a half page that I
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