Cobb

Taleb's Epistemocracy

That's what I'm talking about.

My dream is to have a true "epistemocracy"; that is, a society robust against expert errors, forecasting errors and hubris, one that can be resistant to the incompetence of politicians, regulators, economists, central bankers, bank ers, policy wonks and epidemiologists.Here are ten principles for a Black Swan-robust society.

What is fragile should break early while it's still small: Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks become the biggest.

No socialisation of losses and privatisation of gains: Whatever may need to be bailed out should be nationalised; whatever does not need a bailout should be free, small and risk-bearing. We got ourselves into 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.

People who drove a school bus blindfolded (and crashed it) should never be given a new bus: The economics establishment lost its legitimacy with the failure of the system in 2008. Find the smart people whose hands are clean to get us out of this mess.

Don't let someone making an "incentive" bonus manage a nuclear plant - or your financial risks: Odds are he would cut every corner on safety to show "profits" from these savings while claiming to be "conservative". Bonuses don't accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives.

Compensate complexity with simplicity: Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. Complex systems survive thanks to slack and redundancy, not debt and optimisation.

Do not give children sticks of dynamite, even if they come with a warning label: Complex financial products need to be banned because nobody understands them, and few are rational enough to know it. We need to protect citizens from themselves, from bankers selling them "hedging" products, and from gullible regulators who listen to economic theorists.

Only Ponzi schemes should depend on confidence: Governments should never need to "restore confidence". Cascading rumours are a product of complex systems. Governments cannot stop the rumours. We just need to be able to shrug off rumours, to be robust to them. Do not give an addict more drugs if he has withdrawal pains: Using leverage to cure the problems of too much leverage is not homoeopathy, it's denial. The debt crisis is not a temporary problem, it's a structural one. We need rehab.

Citizens should not depend on financial assets as a repository of value and rely on fallible "expert" advice for their retirement: Economic life should be definancialised. We should learn not to use markets as warehouses of value.

Make an omelette with the broken eggs: The crisis of 2008 was not a problem to fix with makeshift repairs. We will have to remake the system before it does so itself. Let us move voluntarily into a robust economy by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here and teaching people to navigate a world with fewer certainties. Then we will see an economic life closer to our biological environment: smaller firms and no leverage - a world in which entrepreneurs, not bankers, take the risks, and in which companies are born and die every day without making the news. -- Excerpted from the author's New Statesman article, Beware those Black Swans.

Gladwell's Outliers & The Meritocratic Mesh

How many people believe that you can do anything you want? Raise your hand. You're wrong because Malcolm Gladwell said so. Now, of those of you who said in your own mind 'To Hell with Gladwell', you are right, and your stubborn mindset makes the difference. But it doesn't make *all* the difference because Gladwell, *is* right.

What is he right about? He's right about the fact that extraordinary individuals, those who are the best of the best, do not, in their Herculean efforts, make themselves successful. They stand on complex and overlapping waves of society. There are accidents of time, and place and culture, of opportunity and desire, that make the best that way, not merely extraordinary innate talent. Many times we think of our world, and especially American competition, as literally a running race. We overuse the metaphor of 'a level playing field' precisely because we view what's going on at game day as a competition of the best - that the fastest person is the best because he *is*.  We don't often think about what good luck means for people who are already talented. We think about the right place, the right time, the right combination for our own opportunity - but these things apply to the gifted too. When there's a new beauty creme on the shelves, the already beautiful use it too. And so all of the complexities of success + all of the unique opportunities are what make superstars from the talented.

From a longer view of history, what Gladwell says is almost common sense. We understand that certain things happen in history, the discovery of America, of radiation, of the earth's rotation, of the structure of DNA, of the making of steel. It could have been anybody, and sooner or later it would be somebody. America couldn't stay undiscovered forever given what ships could do and what kings and queens wanted. But somehow in our storytelling of success in America, we tend to behave as if only people possessed of extraordinary stuff rise to the top and that they do so strictly based upon their own will to power.

Most importantly, Gladwell illustrates how it is that people must wrestle with their social circumstances in order to achieve. He's not advocating a social determinism so much as he's saying that a certain view of individualism is not useful. In other words, he's putting the possibility of a comparitive work ethics out there. Start with the stereotype 'Asians are good at math' and you get beyond simplistic IQ arguments and deal with what Bryan Hirota was saying back in the day when we were bound up in that particular Affirmative Action debate.There's are reasons they are good at math but it's a social reason which has almost nothing to do with ambition. One of the reasons is language. Have you ever wondered why we use the term 'eleven' instead of 'oneteen', or 'twelve' instead of 'twoteen'. And if we ever did use 'oneteen' why not use it like 'twenty one' with the tens place first? It would be more logical and regular - like it is in Chinese. Gladwell demonstrated how the irregularity of the English language cripples our kids relatively speaking - that little difference is enough to make a difference, and it is something that might falsely be attributed to individuality.

Gladwell's book, now not so fresh in mind, since I read it in December, has one prominent lesson. That is that success has many parents, but that there are deep structural ones that we don't often consider because we are accustomed to using cliched arguments about success. We must therefore be a bit more honest about considering the circumstances and the arbitrary constraints on those border conditions between good and great, recognizing how many things make up the background for the winners in society. It's more than you think.