

Ten principles for a Black Swan-proof world - ahalan
http://www.fooledbyrandomness.com/tenprinciples.pdf

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MrMan
Making financial subjects into moral parables is not an effective way to deal
with complexity. Simplicity will fall naturally out of the process of refining
derivatives markets. Insurance is a derivative. Options are derivatives.
Common Stock is actually arguably a derivative as well. Welcome to capitalism!
Complexity is born of there being lots of people on Earth who trade goods and
services. No way back except to wish calamity on us all?

~~~
_delirium
> Simplicity will fall naturally out of the process of refining derivatives
> markets.

Is there any empirical evidence that this is true?

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raphman
Original source:
[http://www.ft.com/cms/s/0/5d5aa24e-23a4-11de-996a-00144feabd...](http://www.ft.com/cms/s/0/5d5aa24e-23a4-11de-996a-00144feabdc0.html)

needs Google referrer, though.

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drallison
Taleb's point is that there no real way to create a Black Swan proof world,
but that by applying a few straight forward rules the impact of a Black Swan
Event can be kept bounded. He also believes, that reckless behavior should not
be encouraged by social and/or economic policies.

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jamesaguilar
Am I misreading number point two or does it basically say, "One mistake and
you are out?"

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nandemo
Basically, he's saying that we should allow banks to go bankrupt instead of
bailing them out.

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kristianp
Here's what he actually said. It's pretty clear:

    
    
      2. No socialisation of losses and privatisation of gains. Whatever may need to be 
      bailed out should be nationalised; whatever does not need a bail-out should be 
      free, small and riskbearing.
    

And the next sentence criticises what was done.

    
    
      We have managed to combine the worst of capitalism and socialism. In France in the
      1980s, the socialists took over the banks. In the US in the 2000s, the banks took
      over the government. This is surreal.

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jamesaguilar
Yikes, I just realized that I put down the wrong point. Point 3 was the one I
objected to.

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chime
> Only Ponzi schemes should depend on confidence. Governments should never
> need to “restore confidence”.

I wholeheartedly disagree. Confidence in this instance is just trust that your
assets won't suddenly become worthless or your standard of living won't drop
drastically overnight. It is a GOOD thing that I have the choice to have or
not have confidence in the Government. It means (a) I am not expected to have
blind faith and (b) I have the right to assess the level of risk involved in
trading and conduct my economic activities accordingly. I absolutely need the
Government to restore consumer confidence in the housing market before I buy a
new house. Last time people felt overconfident about the housing market, it
caused a boom and bust.

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drcube
What do they think money is? It's basically just fungible units of
"confidence". Or maybe "trust" is a better word. That goes for gold as well as
the "fiat" variety.

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javascriptlol
You have misinterpreted this completely. The linked PDF doesn't mention fiat
currency once. NNT says a lot of bullshit, but it's amazing how willing people
are to comment without even reading the paper and taking some time to reflect
upon it.

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drcube
No, but it did mention "confidence". My point is that that is the entire basis
for money. Deep down, the economy is psychological. You can't "shrug it off"
and "remain robust" when the people who make up the economy stop believing in
it.

