the black swan
Nassim Taleb

Nassim Taleb was on Bloomberg television on Friday. It is always a pleasure to hear him speak as he does not do too many interviews on television.

Taleb is the author of two bestsellers; The Black Swan which we reviewed here. , and Fooled by Randomness which we reviewed here. In addition, I just found out recently that Taleb is coming out with a new book on November 30th titledThe Bed of Procrustes: Philosophical and Practical Aphorisms. I plan to review Taleb’s new book shortly.

If anyone has read Taleb books it is obvious that something like the financial crisis was no surprise to him. Taleb talks at length how most people; regulators, investors, institutions and the average person do not prepare for the unexpected “black swan event”.

Taleb in this exclusive Bloomberg interview rips Ben Bernanke. He uses a lot of anologies which in general I find to be unintellectual and childish (but that is a topic for a different time).

Taleb argues that Bernanke did not see the financial crisis coming and therefore cannot be trusted now to make decisions to get us out of the financial crisis. Taleb has a good point.

In early 2007 Bernanke stated:

“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,”

While there is plenty of blame to go around for the subprime crisis, I understand Taleb’s lack of confidence in Bernanke since he really missed the boat on this one. 

Taleb now is concerned that Bernanke does not understand risk and does not see the risk that QEII might bring. Taleb thinks QEII MIGHT work but the risks are enormous. Taleb also says retirees are assuming all the risk.

Basically the retirees are bailing out the risk takers. The people paying the price are not the people who caused the crisis.

Taleb also does not have kind words for Alan Greenspan.

This video is really great check out the full video below. Sorry for all the macro stuff. I will have a write up this week about some recent interesting news regarding Seth Klarman. Stay tuned.