
Nassim Taleb on Antifragility - pelle
http://www.econtalk.org/archives/2012/01/taleb_on_antifr.html
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krig
I just listened to this in the car, and I must say it was really interesting.
A lot of what Taleb said struck me as very insightful. Especially intriguing
was his idea for fixing the economic crisis: Since any bank that is deemed too
big to fail is going to have to be bailed out by tax payer money, the tax
payers are the true stock holders/risk takers behind that bank. So the
solution to this issue is to institute a law that prohibits any bank or
company that is too big to fail from paying out any bonuses (alternatively,
perhaps all profits from such banks/companies goes directly to the tax
payers). This would provide a direct financial incentive for banks to stay
small enough that they aren't targeted by this law.

I found that very intriguing. I don't know if it would work in practice, but
it seems perfectly doable, and it does seem like it could work.

Edit: Here's a transcript of the relevant section:

It's very simple; you take the convexity and you certify whether company sales
--you don't know if it's going to fail, but you know, should it fail, the
taxpayer has to bail it out? Yes/No? If you think the taxpayer would need to
bail it out, if it fails, then automatically the employees can no longer can
no longer get bonuses. De facto, potential civil servants. And you can't play
the long option game at the expense of taxpayers. Remember, my ethics problem
is someone who owns the option at the expense of taxpayers or someone else.
That would automatically force companies to be of such size as they won't be
bailed out. It's a very nice pact you make with a company. You say: You can do
whatever you want, you can pay each other as much as you want, we don't care.
Provided we don't deem that you are to be bailed out. Now, of course, it's a
gray area, a large gray area. For a lot of companies we know it's very
visible. We know we are going to bail them out. Therefore they are civil
servants. And now by putting caps on how much banks can pay in bonuses, people
are moving to hedge funds, the risk is slow into hedge funds, and these are
not to be bailed out. Great; let them go. Exactly. So, I am not asking to
regulate society. So, government can use something to protect citizens from
large corporations. Not exactly a rent directly in proportion to their size.
It's an interesting way to limit their size organically, in theory at least.
It's a way to discourage them from growing because they realize that if they
do they will lose their opportunities for the upside. Exactly. They no longer
can use the option, it's the option of society. Or do what I call the Bob
Rubin. Bob Rubin had $5 million in bonuses, retroactively financed by the
taxpayer. We have to eliminate the Bob Rubin problem.

