691 Nassim Nicholas Taleb & Scott Patterson — How Traders Make Billions in The New Age of Crisis, Defending Against Silent Risks, Personal Independence, Skepticism Where It (Really) Counts
This is a Open AI summary of the Tim Ferriss Podcast #691- visit www.TinyTim.blog for more AI summaries, or www.Tim.blog for the official Tim Ferriss Podcasts.
Scott Patterson and Nassim Nicholas Taleb met through mutual friends in the hedge fund community. Taleb had recently written a book called Fooled by Randomness, which was popular among hedge fund managers, and Patterson was curious to find out more about him. They ended up talking about a new hedge fund that Taleb's colleague was starting up, and Patterson ended up writing a story about it for The Wall Street Journal. Taleb eventually decided to step away from active trading because he knew he would never be able to stop. He didn't want the responsibility of managing other people's money anymore, and he wanted to focus on his ideas instead.
Nassim Nicholas Taleb is a writer and thinker who is best known for his work on the topic of randomness, and in particular, on the idea of "tail events" - rare events with a large impact. In this conversation with Tim Ferriss, Taleb discusses his career as a trader and how he came to write his best-known book, The Black Swan. He also talks about the different ways that people can bet on tail events, and why he thinks it is more important to focus on avoiding them than on trying to profit from them.
Nassim Nicholas Taleb and Scott Patterson discuss Universa Investments, a hedge fund that bets on tail events. Taleb explains that the fund allows investors to increase their exposure to the market while being protected from a major market crash. Patterson notes that the Universa strategy is stressful to implement, but has been successful in recent years.
Nassim Nicholas Taleb and Tim Ferriss discuss the importance of tail risk and how Universa Investments is a one-trick pony that has found success by focusing on only one trade. Taleb explains that many of Universa's competitors went bust because they attempted to mitigate the strategy instead of staying pure. Ferriss and Taleb also discuss how taking the long road is often the best way to achieve success.
This document is a conversation between Scott Patterson and Tim Ferriss about the importance of tail hedging for society. Scott Patterson explains that he was compelled to write a book on the subject because of the events of 2020. He interviews Nassim Nicholas Taleb, who has been thinking about pandemics since 2007. Taleb explains that we are in a different environment now where things can spread much more quickly than in the past.
Nassim Nicholas Taleb is a very smart person who knows a lot about pandemics. He believes that people should panic early if a pandemic is occurring, in order to take action and avoid disaster. He also believes that testing people at borders is a good way to control the spread of a pandemic.
Nassim Nicholas Taleb is a financial analyst who advocates for taking measures to protect oneself from "tail risks" - events that are highly improbable, but would have catastrophic consequences if they were to occur. He argues that the banking system is particularly vulnerable to tail risks, and that steps should be taken to mitigate these risks.
In this interview, Tim Ferriss talks to Nassim Nicholas Taleb about the importance of robustness and resilience in the face of criticism. Taleb explains that he has always been someone who has not taken established ideas at face value, and that this has led him to be less concerned with his reputation than with the opinions of those who know him and his work. Ferriss then asks Scott Patterson about the patterns he has observed in people who are good at what he does, and Patterson replies that many successful people are very focused on making money.
According to Scott Patterson, many hedge fund managers are driven by a desire to be wealthier than the next guy, and this often leads them to be extremely focused and driven individuals. Nassim Nicholas Taleb is different in that he is more interested in literature and philosophy than financial markets, and he doesn't let the stock market page dictate his day. Instead, he is driven by a desire to be more erudite than the next person.
In this interview, Tim Ferriss speaks with Nassim Nicholas Taleb about the importance of skepticism. Taleb argues that people who are skeptical of things like religion or the stock market are more likely to be taken advantage of. He also discusses his own journey to becoming a successful author and thinker.
This is a discussion about the history of skepticism and how it relates to the current age of crisis. Scott Patterson talks about how Wall Street traders make billions in the new age of crisis, and how this is magnifying extreme events and causing them to overlap. Nassim Nicholas Taleb then talks about the precautionary principle and how it can be applied to risks that are global and systemic.
In this excerpt, Scott Patterson and Nassim Nicholas Taleb discuss the risks associated with things that could be exponential or fat-tailed. Taleb argues that it is important to take extreme precaution with these risks, and that we should not play Russian roulette with them. Patterson agrees, and adds that the book is structured around this idea. He also mentions that Taleb initially did not want to participate in the project, but eventually agreed.
The precautionary principle is a way of dealing with uncertainty, whereby you take action to avoid potentially harmful consequences even if there is no definitive evidence that those consequences will occur. This is in contrast to the counter-precautionary principle, which says that you should only take action to avoid potential harm if there is definitive evidence that it will occur.
Nassim Nicholas Taleb discusses fat tails, which are events that have a greater contribution from a smaller number of occurrences. He explains that fat tails are present in many socioeconomic areas of life, and that they can be used to prioritize the application of the precautionary principle.
Nassim Nicholas Taleb discusses the precautionary principle and vaccines. He argues that the risk of a new vaccine is much smaller than the risk of things like COVID. He also argues that the focus on the tail risks of a new vaccine is much smaller than the focus on the tail risks of something like COVID.
In this conversation, Tim Ferriss and Nassim Nicholas Taleb discuss the risks associated with GMOs. Taleb argues that there has never been a proper risk assessment of GMOs on the environment and that the risks are much higher than people realize. He also discusses the Monsanto company and how they have been known to intimidate scientists who speak out against GMOs.
The precautionary principle is a way of thinking about risks that takes into account the uncertainty of future events. In Europe, the principle is widely used by regulatory agencies, but in the United States it is not as well known. Nassim Nicholas Taleb and Scott Patterson argue that the principle should be more widely adopted in the United States in order to help protect against future risks.
Nassim Nicholas Taleb and Tim Ferriss discuss the importance of being cautious when it comes to flying and other risks. Taleb argues that people should not blindly trust experts, and that we should always be prepared for the possibility of black swan events. Ferriss agrees, and adds that we should also be aware of the dangers of complacency and groupthink.
In 2007, Nassim Nicholas Taleb noticed that Fannie Mae was sitting on a barrel of dynamite and predicted that they would soon start losing money. In 2008, the housing market crashed and Fannie Mae lost $600 billion. Taleb attributes their losses to convexity, or the asymmetrical risk/reward ratio.
Nassim Nicholas Taleb and Scott Patterson discuss the potential risks of investing in an increasingly interconnected world. Taleb notes that investors can do a lot of damage by catalyzing crises, and Patterson agrees that the interconnectedness of financial markets makes it possible for a small event to have a big ripple effect.
In this interview, Nassim Nicholas Taleb discusses the effects of globalization and how it has changed the landscape of diversification and risk. He explains that because of the increased integration of the world, stocks now collapse globally for even small deviations. This has made it difficult to diversify and also creates new risks, like shortages followed by gluts. He also talks about how regulators tend to focus on trivial things instead of the big picture.
The Singapore government, facing poor outcomes from COVID, decided to reverse engineer their hedge in order to be better prepared for future shocks. Tim Ferriss asks if there are other examples of this outside of Singapore, and Nassim Nicholas Taleb cites traditional societies like Italy which resist GMOs. He goes on to say that it depends on the country and the domain, and that propaganda can have a non-trivial effect on people's perceptions of risk. Scott Patterson gives the example of Germany shutting down their nuclear program after Fukushima, despite the fact that nuclear power plants are much less risky than coal-fired power plants. Taleb concludes by saying that banks are very safe because they are a utility, but that the saving of banks can have spillover effects.
Nassim Nicholas Taleb is discussing the skin in the game concept and how it applies to different areas. He starts with hedge funds and how the owners having skin in the game (money invested in the fund) is a positive. He then moves on to startups and private equity, and how the current funding model is based on selling the company rather than generating cash flow.
In this conversation, Tim Ferriss and Nassim Nicholas Taleb discuss the importance of convexity in fields like medicine and nutrition. Taleb argues that our system prefers volatility, and that we should take advantage of this by intermittent fasting and other means.
In this excerpt, Tim Ferriss and Nassim Nicholas Taleb discuss the idea that people should not try to become familiar with options trading, because it is not something that "mom and pop" can do. Scott Patterson agrees, and adds that people should focus on their own businesses instead of trying to trade derivatives.
In his interview with Tim Ferriss, Nassim Nicholas Taleb discusses the importance of understanding how things scale differently. He also debunks the idea that a virtuous society can only be built by virtuous individuals. Finally, he talks about the difference between BS and non-BS.
In this conversation, Nassim Nicholas Taleb and Tim Ferriss discuss Taleb's upcoming book, which is a collection of his thoughts on what constitutes "non-BS" (rigidity of meaning and retrospective bigger tiering, among other things). They also talk about the Talmud, which Taleb has been studying recently, and why he finds it interesting.
In this excerpt, Tim Ferriss interviews Nassim Nicholas Taleb about the Talmud and Aquinas. Taleb discusses his enjoyment of the Talmud for its linguistic value and its monumentality. Ferriss expresses jealousy at Taleb's ability to engage with Semitic languages. Patterson talks about the impact of the Biden administration's inflation reduction act on the climate technology world. Ferriss notes that he has found productive conversations about climate change to be had when he avoids certain language that can be painful for people to hear.
In this episode of the Tim Ferriss Show, Scott Patterson and Nassim Nicholas Taleb discuss their work on climate technology and energy independence. They talk about how they have been able to have rational conversations with Republican lawmakers about these topics, and how energy independence is a bipartisan issue. They also talk about how they are working to bring renewable energy into states like West Virginia.
https://tim.blog/2023/09/07/nassim-nicholas-taleb-scott-patterson/
