Bits of Books - Books by Title
How to Live in a World We Don't Understand
by Nassim Taleb
Nassim Nicholas Taleb, a renowned sniffer-out of hypocrisy in high finance, on why bankers having a stake matters
Never ask anyone for their opinion, forecast or recommendation, Nassim Nicholas Taleb says in his latest blockbuster Antifragile: How to Live in a World We Don't Understand. Instead, ask them what they own in their investment portfolios.
It is fair advice, so when I meet the self-styled iconoclast, autodidact and author of the bestseller The Black Swan, I follow it.
Mr Taleb, a former options trader with Credit Suisse, famously cleaned up by betting against the banks in the crisis of 2008. Long before that, in his twenties, he made what he calls fuck-you money, giving him the freedom to do whatever he liked. And the cash keeps rolling in. His latest book has earned him an advance of $4 million.
So how is he positioned now? Surprisingly conventionally, it turns out. He owns buy-to-let residential property in the United States and land in Lebanon, the country of his birth. He has money invested in real estate investment trusts. He has a sprinkling of hedge fund investments. He's even long on the euro - suspicious of the herd, all of whom talk of going short. "People talk like Europe is a warzone. It's not Dresden in 1945."
The hedge fund investments are not because he has great faith in the skills of the managers running them, he says, but because they have what he calls "skin in the game", a constant refrain in his latest book. Nothing angers him more than the absence of skin in the game among bankers, bureaucrats, regulators, economists, ministers and plc chiefs. "At no time in history has so much power been given to people who take no risks," he says.
He harks back happily to Roman times, when engineers were made to sleep under the bridges they designed and princes led their armies into battle. He tells how Francesch Castello, a Catalan banker, was beheaded in 1360 after his institution failed.
Listening to Mr Taleb, one cannot help wondering whether Fred Goodwin and his fellow directors would have built Royal Bank of Scotland with such flimsy foundations if the law of the ancient world had hung over them. Mr Taleb calls the modern business world "pseudo-capitalism" because of the absence of downside to the people running companies.
He approves of the system in Brazil, where even modern-day bankers can be made unconditionally liable to the extent of their entire personal assets. To a purist such as Mr Taleb, the rot began to set in with the invention of the joint stock company and the notion of limited liability in the 17th century.
Mr Taleb, now an academic at New York University, has left professional investment behind him but still confesses to tinkering with his investments twice a week, sometimes more often, usually online when waiting at airports.
He owns gold, the investment regarded as the ultimate haven, but has been running down his holdings recently after doubling his money.
He does purchase unusual out-of-the-money bond market options, which in effect protect him against a burst of hyperinflation in the United States. "Every year I'm prepared to invest 10 per cent of my income to hedge against a blow-up in interest rates." And he believes that there is only a small chance of a sudden surge in American inflation - less than 5 per cent - although the enthusiasm in the US Federal Reserve for quantitative easing, which he calls a crime against economic welfare, means that anything could happen.
But here's the thing: if it does happen, it could be devastating and disruptive. It won't be linear. It will snap. Non-linearity is a Taleb obsession. The world is complex, he argues: if you double the dose of a medication, you don't get twice the effect, which is why he is so suspicious of scale in all things - especially large governments, large banks, large corporations and large projects. As things grow bigger, their impacts and risks do not grow smoothly or even exponentially. The side-effects from larger scale are not smooth.
And the bigger you are, the more that markets can move against you. Mr Taleb argues that the $6 billion lost by Societe Generale after extricating itself from the mammoth positions taken by the rogue trader Jerome Kerviel was a classic example of how losses can snowball in a non-linear fashion.
He claims to have been heckled and abused by Kerviel's bosses a few weeks before the scandal broke at a French business school convention when he warned about black swan risks. "In the eyes of the bankers, I was like a Jesuit preacher visiting Mecca in the middle of the annual haj - [their] risk people hated me with a passion."
His gloom about the folly and selfinterest of those who run global capitalism is matched by the low expectations he has about the return from his portfolio. He says that he would be happy if over the next 20 years he lost only 5 per cent of his principal in real terms.
"Give me back 95 per cent in 20 years' time - I'd settle for that," he says, sounding a bit like one of the ancient Stoics he so admires.
Glossary of Talebisms
Antifragility The capacity of people and organisations not only to be robust in the face of shocks but to benefit from them
Fragilista His derogatory term for people who misunderstand risk and end up making things even more vulnerable to adverse shocks
Hammurabi risk management Making people more responsible for tail risks. Engineers whose buildings collapsed and killed people were themselves put to death under the law of the Babylonian King Hammurabi 3,800 years ago
Iatrogenics The science of unintentional harm done by the healer. Regulators are particularly prone to this problem, according to Taleb
Joseph Stiglitz problem Selective memory of academics and columnists. Taleb accuses the former World Bank economist of conveniently forgetting some of his earlier opinions, notably his pre-crisis claim that Fannie Mae would never default.
Neomania Misguided love of the modern for its own sake, a besetting sin, according to Taleb, a romantic classicist, who won't let foodstuffs for which the Ancient Greeks had no name pass his lips
Robert Rubin violation. The tendency for leaders to negotiate huge upside while accepting no personal downside, however wrong things go. The former US Treasury Secretary took $120 million from advising Citigroup before it collapsed and had to be rescued by taxpayers
Soviet-Harvard illusion. The mistaken belief by academics and planners that they understand the world and can measure and anticipate risk
Touristification The tendency to want to suck the randomness out of life. They include mollycoddling soccer moms, civil servants and planners
Turkey fallacy. Misplaced faith that trends will carry on. A turkey fed for a thousand days by a butcher becomes ever more confident that the butcher will never hurt it - until Thanksgiving
How much does Nassim Taleb dislike journalists? Let me count the ways. "An erudite is someone who displays less than he knows; a journalist or consultant the opposite." "This business of journalism is about pure entertainment, not the search for the truth." "Most so-called writers keep writing and writing with the hope, some day, to find something to say" He disliked them before, but after he predicted the financial crash in his 2007 book, The Black Swan, a book that became a global bestseller, his antipathy reached new heights. He has dozens and dozens of quotes on the subject, and if that's too obtuse for us non-erudites, his online home page puts it even plainer: "I beg journalists and members of the media to leave me alone."
He's not wildly keen on appointments either. In his new book, Antifragile, he writes that he never makes them because a date in the calendar "makes me feel like a prisoner".
So imagine, if you will, how keenly he must be looking forward to the prospect of a pre-arranged appointment to meet me, a journalist. I approach our lunch meeting, at the Polytechnic Institute of New York University where he's the "distinguished professor of risk engineering", as one might approach a sleeping bear: gingerly. And with a certain degree of fear. And yet there he is, striding into the faculty lobby in a jacket and Steve Jobs turtleneck ("I want you to write down that I started wearing them before he did. I want that to be known."), smiling and effusive.
First, though, he has to have his photo taken. He claims it's the first time he's allowed it in three years, and has allotted just 10 minutes for it, though in the end it's more like five. "The last guy I had was a fucking dick. He wanted to be artsy fartsy," he tells the photographer, Mike McGregor. "You're OK."
Being artsy fartsy, I will learn, is even lower down the scale of Nassim Taleb pet hates than journalists. But then, being contradictory about what one hates and despises and loves and admires is actually another key Nassim Taleb trait.
In print, the hating and despising is there for all to see: he's forever having spats and fights. When he's not slagging off the Nobel prize for economics (a "fraud"), bankers ("I have a physical allergy to them") and the academic establishment (he has it in for something he calls the "Soviet-Harvard illusion"), he's trading blows with Steven Pinker ("clueless"), and a random reviewer on Amazon, who he took to his Twitter stream to berate. And this is just in the last week.
And yet here he is, chatting away, surprisingly friendly and approachable. When I say as much as we walk to the restaurant, he asks, "What do you mean?"
"In your book, you're quite..." and I struggle to find the right word, "grumpy".
He shrugs. "When you write, you don't have the social constraints of having people in front of you, so you talk about abstract matters."
Social constraints, it turns out, have their uses. And he's an excellent host. We go to his regular restaurant, a no-nonsense, Italian-run, canteen-like place, a few yards from his faculty in central Brooklyn, and he insists that I order a glass of wine.
"And what'll you have?" asks the waitress.
"I'll take a coffee," he says.
"What?" I say. "No way! You can't trick me into ordering a glass of wine and then have coffee." It's like flunking lesson #101 at interviewing school, though in the end he relents and has not one but two glasses and a plate of "pasta without pasta" (though strictly speaking you could call it "mixed vegetables and chicken"), and attacks the bread basket "because it doesn't have any calories here in Brooklyn".
But then, having read his latest book, I actually know an awful lot about his diet. How he doesn't eat sugar, any fruits which "don't have a Greek or Hebrew name" or any liquid which is less than 1,000 years old. Just as I know that he doesn't like air-conditioning, soccer moms, sunscreen and copy editors. That he believes the "non-natural" has to prove its harmlessness. That America tranquillises its children with drugs and pathologises sadness. That he values honour above all things, banging on about it so much that at times he comes across as a medieval knight who's got lost somewhere in the space-time continuum. And that several times a week he goes and lifts weights in a basement gym with a bunch of doormen.
He says that after the financial crisis he received "all manner of threats" and at one time was advised to "stock up on bodyguards". Instead, "I found it more appealing to look like one". Now, he writes, when he's harassed by limo drivers in the arrival hall at JFK, "I calmly tell them to fuck off."
Taleb started out as a trader, worked as a quantitative analyst and ran his own investment firm, but the more he studied statistics, the more he became convinced that the entire financial system was a keg of dynamite that was ready to blow. In The Black Swan he argued that modernity is too complex to understand, and "Black Swan" events - hitherto unknown and unpredicted shocks - will always occur.
What's more, because of the complexity of the system, if one bank went down, they all would. The book sold 3m copies. And months later, of course, this was more or less exactly what happened. Overnight, he went from lone-voice-in-the-wilderness, spouting off-the-wall theories, to the great seer of the modern age.
Antifragile, the follow-up, is his most important work so far, he says. It takes the central idea of The Black Swan and expands it to encompass almost every other aspect of life, from the 19th century rise of the nation state to what to eat for breakfast (fresh air, as a general rule).
As you might suspect, it's a great, baggy, idiosyncratic doorstopper of a book. Reading it, I spend the first 200 pages or so mildly confused. "I couldn't figure out what genre it was," I tell him. "Forget the genre!" he says. I'd been expecting a popular science-style read, a Freakonomics or a Nudge. And then I realised it's actually a philosophical treatise.
"Exactly!" says Taleb. Once you get over the idea that you're reading some sort of popular economics book and realise that it's basically Nassim Taleb's Rules for Life, it's actually rather enjoyable. Highly eccentric, it's true, but very readable and something like a chivalric code d'honneur for the 21st century. Modern life is akin to a chronic stress injury, he says. And the way to combat it is to embrace randomness in all its forms: live true to your principles, don't sell your soul and watch out for the carbohydrates.
What's more, for all the barmy passages involving an invented character called Fat Tony engaging in a Socratic dialogue with another invented character called Nero Tulip (a very thinly disguised Taleb), and the fact that at one point he does actually seem to compare himself to Jesus - they're both prophets who came from the east - he does talk a lot of what I can only describe as sense.
His justification for all this is that "experience is devoid of the cherry-picking that we find in studies". More than anything else, he believes in having "skin in the game". When, for example, he warned about the fragility of the banking system in The Black Swan, "I was betting on its collapse". His point is that he's always put his money where his mouth is, and it's this principle - and the lack of it - that is still, he believes, the fundamental problem with the entire banking system.
In the book he calls this "Hammurabi's Code", a 3,800-year-old Babylonian law that stipulated that if a building collapses and kills someone, the builder should be put to death. Whereas, for bankers, "there is no downside". The bonus system means that "they're paid billions in compensation". And if their bets lose, it's the taxpayers who pay.
He cites, not unadmiringly, the tradition in Catalonia where they would "behead bankers in front of their banks". So, what's changed, I asked, since he wrote the book, and the system collapsed?
"Nothing. Nothing has changed. Zero. Now I switch to writing technical papers. There is some hope, the Bank of England wants to implement antifragility. Mervyn King [the governor of the Bank of England] spoke about it at the LSE. And I've done work for the IMF..."
But nothing's changed?
"I no longer care about the financial system. I gave them my roadmap. OK? Thanks, bye. I've no idea what's going on. I'm disconnected. I'm totally disengaged. People read 3m copies of The Black Swan. The bulk of them before the crisis. And people love it. They agree with it. They invite me to dinner. And they don't do anything about it.
"You have to pull back and let the system destroy itself, and then come back. That's Seneca's recommendation. He's the one who says that the sage should let the republic destroy itself."
But doesn't that frustrate you?
"It did. Now it doesn't. But if you continue talking about it I will get frustrated so let's switch."
He means it too. There's a bit of an edge to the statement, so I ask him about David Cameron instead and he immediately relaxes. "He's a great guy," he says. There's some sort of mutual appreciation which goes on between the modern Conservative party and Taleb. He name-checks Steve Hilton (Cameron's former head of strategy) and Rohan Silva (one of his special advisers) and says they're "buddies".
"We had lunch once and realised we were talking the same language and it went from there. I never mention it in anything."
Well, actually, I say, you mention it in the book.
Fraser Nelson, the editor of the Spectator, says that Taleb "is probably the closest thing Cameron has to a guru". Why does Taleb think that is?
"Because they care about risk. Labour don't care."
And have they done anything about it? "I don't know. I don't read the papers... I provide intellectual backing for some principles, taking into account bigger risks with size and debt. With debt they have the arguments, they don't need me. For size, I have the arguments."
The "arguments" are that size, in Taleb's view, matters. Bigger means more complex, means more prone to failure. Or, as he puts it, "fragile". It's what made - still makes - the banking system so vulnerable, in his view. It needs to be more "antifragile". This isn't the same as robust, he explains, which means it can simply take the knocks. "Antifragile" is when something is actually strengthened by the knocks.
He gives all sorts of examples of this in the book. A clerk in a large company is fragile as he has only one source of income. A taxi driver is antifragile. A banker is fragile. A prostitute is antifragile. General Petraeus is fragile: a single indiscretion was enough to destroy his career. Boris Johnson is antifragile: a whole string of scandals has actually enhanced his reputation. "He's smart enough to present himself as sort of 'This is how I am'," says Taleb. London, too, seems to be antifragile. The global financial crisis was just another boost: a safe haven for foreign real-estate cash.
In Taleb's view, small is beautiful. Corporate mergers never work. "It's not a good idea being large during difficult times." And, when companies think otherwise, it's the "hubris hypothesis". After reading this section of the book I flick to the cover to check who printed it: Allen Lane, an imprint of Penguin. Which has recently merged with Random House to create one big mega-publishing company.
"Your publishers haven't actually read your book, have they?" I say. "If they're smart enough they can keep the companies separate," he says, not very convincingly. And anyway, there's really no evidence that they are smart enough.
In The Black Swan, one of Taleb's great examples of "non-linearity", or Black Swan behaviour, was blockbusters. There's no predicting what will be the next breakout success, or next year's 50 Shades of Grey, but when they take off, they fly off the charts, as The Black Swan did. The book itself was a Black Swan phenomenon. As Taleb is fond of pointing out - and as the small print beneath advertisements for mutual funds states - past performance is no indicator of future growth. Penguin seemed to have overlooked this point too since they paid him an astonishing $4m advance for this book.
"They made a lot of money from Black Swan so to them it's not too bad a risk," he says, but I feel it's more a guest's politeness towards their host than anything else. Anyway, the money was not, he says, "a major part of my income at the time". In 1987 he made a great deal of money shorting the financial crash, and millions more during the 2008 meltdown. It's his "fuck you" money that allows him to do exactly what he wants, when he wants, beholden to no one.
Most people would say, "It's all right for some," I point out. We'd all like that kind of independence. "That's a false dilemma," he says. And claims that a janitor also has that kind of independence. "He can say what he thinks. He doesn't have to fit his ethics to his job. It's not about money." Hmm, well, up to a point.
We're perhaps not all quite as independent as Taleb, who writes about how, as a trader, on his first day in a new job, he wrote his resignation letter and placed it in his office drawer. What's more, while a lot of people are rich because they like money and want more of it, Taleb doesn't actually seem to be one of them. Most people, however wealthy, like to be paid for doing their job. But not Taleb. He doesn't actually take a salary from NYU. "Well, I keep the minimum. I give back the rest. So if, tomorrow morning, they say 'fuck you', I'm gone."
Then again this may be because as well as hating journalists and bankers, he's almost as damning about academics.
"But you are one!" I point out.
"Not really. I'm an independent scholar, practically speaking."
He's also largely an autodidact. He has higher degrees but most of his working life was spent outside academia, and much of his thinking is rooted not in 21st-century mathematics but the classics. He quotes them endlessly, hero-worships Seneca and refers to himself as a "stoic".
Not everyone, it has to be said, is a fan of the high style. Jamie Whyte in Standpoint magazine reflects the criticism of many when he accuses Taleb of "inflating" the significance of his observations with "an absurdly combative and grandiose writing style", and points out that publishing a book of aphorisms, as Taleb did last year, is "usually completed by someone else after one's death".
But Taleb is not someone who lacks confidence. He was born and brought up in Lebanon, his family rich and influential Greek Orthodox believers, a minority religion even in a country of minority religions. His grandfather and great-grandfather were deputy prime ministers, and his great-great-great-great grandfather was the governor of Ottoman Mount Lebanon.
In Antifragile he tells a story about his father, a doctor, a scholar and man with "a large ego and immense dignity who commanded respect". At some point during the civil war, he stopped at a checkpoint where a militiaman treated him disrespectfully. "My father refused to comply and the gunman shot him in the back."
It's a pretty astonishing story, and when I ask Taleb about it, he says: "I have very similar stories, too, but I chose not to tell them." What do you mean? He prevaricates and then talks about "personal stories about taking a stand but I don't want to wander into near-eastern politics".
Have you ever considered a political career?
"No. But if you see my bio, there are missing parts. The Lebanese war. I'll leave it at that."
He won't tell me any more and it's a bit of a mystery. He writes how, as a teenager, he was jailed for assaulting a policeman during a student riot, and his entire family were "scared" of him. When war broke out, he initially stayed in Beirut, then left, but then came back again. But he won't tell me what he did.
It's too neat a formulation to ascribe Taleb's Lebanese upbringing and his war-scarred teenage years as the source for his theories on randomness and instability. Malcolm Gladwell profiled him in the New Yorker more than a decade ago, and attributed his belief in Black Swans to having experienced them (not just in the Lebanese war but also in a bout of non-smoking-related throat cancer).
But Taleb shakes his head. "That article was wrong about me," he says. "That's why you think I'm gloomy."
"I didn't say you were gloomy," I say. "I said you were grumpy."
"But anyway, these guys who think the same as me, many of them are from the midwest. It's much more to do with somebody's temperament rather than their experiences."
When the financial journalist Michael Lewis profiled a collection of individuals who, like Taleb, saw the crash coming and shorted the market, he described them as "social misfits". It takes a certain sort of personality to stand apart from the herd. And Taleb's cantankerousness, his propensity for picking fights, and for taking stands does also seem to be the source of his greatest triumphs. It was horrible, though, he says.
"Really horrible. Between 2004 and 2008 were the worst years of my life. Everybody thought I was an idiot. And I knew that. But at the same time I couldn't change my mind to fit in. So you have this dilemma: my behaviour isn't impacted by what people think of me, but I have the pain of it.
"People made fun of me. I don't know if you can still find it on the web but you would not believe how much crap was written about me. The finance industry hates me with a passion."
You must have felt incredibly vindicated?
"Vindication doesn't pay back. Nobody likes you because you were right. This is why I'm glad I made the shekels."
Anyway, Taleb is a fighter. And like the Roman generals, he believes in going into battle, leading from the front. It's why he thinks Tony Blair is a coward and a knave: "He's a very dishonourable fellow. Gordon Brown is an idiot. But Blair was dishonourable." He believes that people should be banned from making money from having been in public office. And he especially despises journalists who made the case for war on Iraq, like the New York Times's Thomas Friedman, "a serial criminal" who he says makes him feel physically sick.
It's back to his "skin in the game" beliefs. If you're going to make the case for war, you need to have at least one direct descendant who stands to lose his life from the decision. And while some may wonder why they need a lecture on ethics from an ex-city trader, it's hard to argue with. Though it's easy enough to argue about more or less anything else. He won't confirm or deny the existence of a Mrs Taleb. And he has a son and daughter "who are exactly like me" - but that's all he'll say about them. "I'm a private intellectual, not a public one."
But you write about parenting at one point, I say. And you've written a book about how to live.
"Exactly. Here's how to live: keep your public life separate from your private life."
He makes me order tiramisu and then eats half of it, but then no food has passed his lips for about 17 hours, he says. Incorporating randomness into his life has led him to adopt the style of eating known as "paleo". Roughly speaking, this means that if a caveman wouldn't have eaten it, then you don't. Except tiramisu. And intermittent fasting is recommended as a way of mimicking the effects of, say, failing to catch a sabre-toothed tiger.
What's more, he says, he goes to bed at 8pm and gets up at 4.
Like a dog, I say.
"Unless I go out."
He's throwing a party for his students the next night "to get them drunk". With what aim? "No aim. They're just so uptight." He loves parties "but with close people. Not with hotshots. Not some black-tie dinner where you're sitting next to some schmuck who's going to tell you what he paid for his swimming pool. And not artsy fartsy. I can't stand artsy fartsy."
But isn't it hypocritical to be so anti-artsy fartsy when you are artsy fartsy?
"I'm not. I'm mathematical not artsy."
"But you go on about your private library. You say you spend at least 30 hours a week reading. You love the classics."
"Yes, but it doesn't mean I'm artsy. I don't hang around with artsy people. I have zero literary friends."
I wouldn't want to get into a Twitter catfight with Nassim Taleb. Or be a banker in the audience when he gives one of his talks. "They pay me tens of thousands of dollars to come and rip them apart."
But he gives good lunch. And he does something which no interviewee in the history of interviews has ever done – he pays. Whatever else he does or doesn't do, Nassim Taleb puts his money where his mouth is. He has skin in the game.
That, or it's another example of "fuck-you money". Possibly both.
I had lunch with Nassim Nicholas Taleb. It didn't go well.
We met at a French cafe in Manhattan, on the Upper West Side, not far from Columbia University. It was a meeting more than a year in the making. I first e-mailed him when his book of aphorisms, The Bed of Procrustes, was published to see if he might submit to an interview. This, I realized, was a long shot. Taleb, best known as the author of The Black Swan, a book about how we underestimate the improbable, isn't much for interviews and regards most journalists as fools and phonies, right alongside professional academics and bureaucrats. I didn't expect to hear back.
Lo and behold, he agreed to an interview. Before we could hash out the details, though, Carlin Romano wrote a review of The Bed of Procrustes for The Chronicle. The headline was "The Bed of Crusty," so right away it didn't sound favorable. It wasn't. Romano dismissed Taleb as a "would-be aphorist with a major tin ear." I explained to Taleb that, while Romano and I write for the same publication, we had never met and I didn't know about the review in advance. He was not mollified and backed out, with apologies. Who could blame him?
Then, last summer, I learned that he had a new book coming out. Not a slim volume of maxims and observations but rather a meaty treatise. I e-mailed him again, and we spoke on the phone. He seemed excited about the possibility of an article, giddy even, perhaps because he thought it would stick it to the academics he regards with contempt. In previous books, he told me, he had held back, pulled a punch or two. Not this time. If they wanted to come at him with lawyers and pitchforks, so be it. Taleb sent me a PDF of the manuscript, titled Antifragile: Things That Gain From Disorder, which he hadn't quite completed. It had yet to be edited, and he was still working on the conclusion.
I read it. Afterward, I sent him an e-mail, calling the book "engaging and stimulating throughout." Say what you want about Taleb's writing - and Romano is not the only critic - he doesn't produce antiseptic prose, and there's something fun about his surly, middle-finger-to-the-experts attitude. And the digressions! One moment he's telling you why convexity leads to philostochasticity and the next he's explaining why he doesn't eat papayas. For the record, he avoids all fruits without a Greek or Hebrew name because his ancestors would not have eaten them. And he drinks only beverages that are at least a thousand years old. Don't offer the man an orange Shasta.
Taleb, now in his early 50s, lives his philosophy and believes everyone else should too. You must have "skin in the game," as he puts it repeatedly. He uses that phrase, by my count, 28 times in Antifragile, and it's central to his worldview and integral to his critique of the "fragilista": the sucker who sits on the sidelines, who doesn't know what he thinks he knows, who lacks the pluck to risk his own fortune and reputation. Unlike Taleb. "I have only written, in every line I have composed in my professional life, about things I have done, and the risks I have recommended that others take or avoid were risks I have been taking or avoiding myself," he writes. "I will be the first hurt if I am wrong."
Here's an example. Taleb made a lot of money when the housing bubble burst in 2008. Common wisdom had it that housing prices go up, because they had always gone up. Taleb told me it was obvious to him that executives at Fannie Mae, the government-sponsored mortgage company, didn't understand the concept of "fat tails," that is, they didn't understand the extreme risks of the investments they held. In retrospect that's obvious, but it was not a widely held opinion back then. The handful who bet on the unthinkable made a killing, including Taleb.
He asked me how much I thought he made during the crisis.
"I don't know," I said.
He laughed. "Try times 10," he said.
Later, he made a reference to $30-million, so I'm unsure of the exact figure, not that it matters: Taleb was already wealthy. He had made his first millions on Wall Street by age 27. "I became successful because I knew what I learned in school about probability was bullshit," he said. "That's when my war with academia started."
Taleb is in the university but not of it. He spent the first couple decades of his career as a derivatives trader before turning to scholarship and essay writing in his mid-40s. Taleb is a professor of risk engineering at the Polytechnic Institute of New York University. Despite his wall of degrees (he has an M.B.A. from the University of Pennsylvania's Wharton School and a doctorate from the University of Paris), he believes that universities propagate "touristification," another term he coined, a phenomenon that occurs when what should be an exciting exploration turns into a programmatic exercise. It's better to be an adventurer than a tourist. Education isn't the only result of this modern sin; gym machines and "the electronic calendar" fall short as well.
Taleb has a low opinion of most professors. He titles one section of the new book "The Charlatan, the Academic, and the Showman." In a chart, Taleb divides professions into three categories: fragile, robust, and antifragile. It's bad to be fragile, better to be robust, best to be antifragile. Artists and writers are antifragile. Postal employees and truck drivers are robust. Academics, bureaucrats, and the pope are fragile. Benedict, beware.
"I don't rely on external confirmation, and I have a happy life."
Most of Taleb's ire is directed at business schools, specifically the one at Harvard. At Harvard they "lecture birds to fly," then arrogantly claim credit when the fledglings become airborne. He rails against the "Soviet-Harvard delusion," linking an institution that's graduated thousands with a state that killed millions. What is the delusion, exactly? It is a belief in a top-down system that tries to control and protect, purportedly for mankind's benefit, thereby eliminating the natural stressors and necessary randomness that create strength and encourage enterprise. Dekulakization and course catalogs are symptoms of the same ailment.
Taleb has no patience for so-called structured learning. "Only the autodidacts are free," he writes in the book. He pursued his real education in his spare time, doing only as much as was required to pass his courses. At 13, he set himself a goal of reading for 30 to 60 hours a week, pretty much a full-time job. To prove that he hit the books with enthusiasm, Taleb ticks off the names of more than 30 great writers he has read. We don't learn much about what he gleaned from this ardent page-turning or which authors influenced his own style. He does give the following assessment of the work of Austrian novelist Stefan Zweig: "didn't like."
Actually, Antifragile feels like a compendium of people and things Taleb doesn't like. He is, for instance, annoyed by editors who "overedit," when what they should really do is hunt for typos; unctuous, fawning travel assistants; "bourgeois bohemian bonus earners"; meetings of any kind; appointments of any kind; doctors; Paul Krugman; Thomas Friedman; nerds; bureaucrats; air conditioning; television; soccer moms; smooth surfaces; Harvard Business School; business schools in general; bankers at the Federal Reserve; bankers in general; economists; sissies; fakes; "bureaucrato-journalistic" talk; Robert Rubin; Google News; marketing; neckties; "the inexorable disloyalty of Mother Nature"; regular shoes.
The social sciences make the list, too. He contrasts them with "smart" sciences, like physics. He mocks social scientists as mired in "petty obsessions, envy, and icy-cold hatreds," contrasting the small-mindedness of academe with the joie de vivre of the business world. "My experience is that money and transactions purify relations," he writes. "Ideas and abstract matters like 'recognition' and 'credit' warp them, creating an atmosphere of perpetual rivalry." In our interview, he went even further, saying he would "shut down" the social sciences. "Those guys are living in their own world," he said. "That is the truth. You don't need them."
I pointed out that he praises some psychologists, like Daniel Kahneman, and regularly refers to psychological concepts in Antifragile. Would he padlock the psych labs, too? No, he told me. "Psychology is more empirical," he clarified. Sociologists, on the other hand, would presumably be better off delivering mail.
He saves his iciest hate for economists. Taleb has no use for the "charlatanic" field, comparing economic research to medieval medicine. Economists are, in his estimation, weak, ignorant, fearful, and generally pathetic. At one point he fantasizes about beating up an economist in public.
Taleb singles out his least-favorite economists, including Robert C. Merton, a professor of finance at MIT, formerly of Harvard, and Myron Scholes, a professor emeritus of finance at Stanford, who jointly received the Nobel Prize in 1997 for their model of valuing derivatives that's designed to hedge against risk. Merton is "serious, mechanistic, boring," according to Taleb, and the two used "fictional mathematics" in their research. He calls this "unsettling" in a footnote, though in the earlier draft he sent me he used a harsher word. I'd wager that punch may have been pulled by Random House's legal department. Merton didn't return my messages, and Scholes politely declined to comment.
Gary Pisano, however, was willing to talk. Pisano, a professor of business administration at Harvard, is singled out in the book for his "dangerous" thinking; Taleb hammers him for supposedly misunderstanding the market for biotechnology. Pisano told me Taleb didn't know what he was talking about. "His argument is about these rare events that generate huge returns," he said. "That doesn't happen in biotech." The specifics of that debate aside, Pisano shrugged off the criticism and said he had enjoyed Taleb's work in the past: "I think he writes some very interesting and provocative things, but I think it gets a little lost in the manner."
The idea that Taleb's insights are sometimes overwhelmed by his belligerence is a longstanding criticism. Articles published in the American Statistician soon after The Black Swan appeared chastised him for his alleged ignorance of "entire subfields of statistics," committing mathematical errors, and lobbing "gratuitous insults" at statisticians. The opprobrium was mixed with gratitude that, whatever his faults, Taleb had managed to shine a bright light on an arcane topic. Still, you got the sense that statisticians were smarting. Taleb's fans—and there are many of them—see his abrasiveness as proof that he doesn't tolerate nonsense. They show up in droves to hear him speak, leave rapturous reviews on Amazon, and praise his television appearances. One YouTube commenter put it succinctly: "He's so awesome."
While Taleb dislikes the university system and doesn't respect career academics, he's not against education per se. Studying mathematics is fine for its own sake. And it's worthwhile to read the classics. But modern scholarship is bewitched by novel findings - what Taleb dubs "neomania" - and researchers are driven by their need to publish, perverting their efforts and tainting the outcome. "How can knowledge be something you do for professional advancement?" he asked. But, you might counter, Taleb is a professor at a university who publishes in journals. It would be one thing if he were blogging from a cabin somewhere, but isn't he part of the problem he's identified?
Ah, but he doesn't publish papers to advance his career. They are technical addenda to his popular books. "I ban myself from publishing anything outside of these footnotes," he writes in Antifragile. Because of his success, he is not beholden to deans and committees or anyone else, for that matter. "You cannot rely on external confirmation and have a happy life," he told me. "I don't rely on external confirmation, and I have a happy life."
I wanted to know more about that happy life, which is why I flew to New York to meet Taleb. When he arrived at lunch, he was wearing a plain black shirt, black shorts, and sandals of some kind (not regular shoes, which, as stated earlier, he opposes). He writes in Antifragile that readers, upon meeting him, "have a rough time dealing with an intellectual who has the appearance of a bodyguard." I wouldn't have guessed bodyguard, though he is thicker - thanks to a newfound love of weightlifting - than he appeared in publicity shots for The Black Swan, published in 2007. Taleb has less hair these days, and more of it is gray. He speaks rapidly and conspiratorially, punctuating his remarks with "You see?" - though the way he says it is more imperative than interrogative. You will see.
We sat outside, where it was difficult to hear over the din from the street and the chatter of fellow diners. The waiter screwed up his order. Taleb seemed generally agitated and uncomfortable. That was understandable, I thought: He's been in his head, writing his opus, the book he believes is more significant than his big best seller, and then somebody starts poking at him before it's been delivered to the printer. That could put a person on edge. The double espresso he knocked back didn't help either.
After we ate, Taleb asked if I wanted to accompany him to a nearby bookstore. I said sure. When we arrived, he turned to me and asserted that any article I wrote should be in the form of a question-and-answer column. I bumbled a response, telling him that's not what I had in mind (indeed, in an e-mail, I had used the word "profile" twice). This was unacceptable to him. "Go write fiction then!" he exclaimed. "I haven't given you enough for a profile anyway!" We parted on bad terms and exchanged a few curt e-mails the next day. A planned follow-up - we were going to rendezvous at a restaurant in his neighborhood - didn't happen.
Taleb writes about storming out of meetings with publishers and interviews with radio stations. That usually happens when he feels he's been insulted. The publisher suggests he take speaking lessons or the radio host tells him his answer is too complicated. Perhaps I accidentally insulted him or didn't sufficiently appreciate his ideas. Or maybe my questions about his weightlifting and dietary habits were too intrusive. I don't know what set him off. But considering his history, maybe I should have seen it coming.
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