Impressively scathing of both the Obama and former Bush administrations. I'm not sure how he would go about implementing some of his ideas since on one hand he argues against additional regulations and on the other he argues for a ban certain types of complex financial products (ie who would be the arbiter of what he calls a return to products that dependend on trial and error?). He is however a great writer and more importantly, he, even more than Peter Schiff was right (from an FT article that echoes some of his points in the letter and in some cases is a bit more specific - http://www.fooledbyrandomness.com/tenprinciples.pdf) :
"Then we will see an economic life closer to our biological environment: smaller companies,
richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and
companies are born and die every day without making the news."
Having been on both sides of the coin, I do wonder how much those who allocate the capital (bankers) should make relative to those who generate the ideas and innovation - but clearly in recent years, it was skewed towards the former. Lots more from Taleb at his site: http://www.fooledbyrandomness.com/
Taleb wants financial services to come in two flavors: boring, predictable, public banking utiliies; and no-safety-net no-bailout risk-taking investment.
He sees current regulation as helping to create the monsters we have now, where the risk-takers are allowed to play with the money that's supposed to be stable.
"Taleb wants financial services to come in two flavors: boring, predictable, public banking utiliies; and no-safety-net no-bailout risk-taking investment."
But how do you get there? How do you make sure they don't spin out of control or even how do you decide which firms to break up and how? (I don't disagree, I am genuinely interested in learning how he sees it can be implemented and without new significant regulations no less).
One way to make banks boring and predictable would be to define precisely what kind of products they are allowed to sell. This sounds like what Taleb would want, but it don't think it would be good to entirely eliminate innovation.
But if regulators would forbid any product valued by models they don't understand, it would probably be a good start.
Taleb has no problem with innovation - as long as the risk of the innovation is borne by the innovators, or investors putting their own money at risk. The problem occurs when people bet other people's money, reaping nost of the rewards when the bet pays off, and incurring little loss when the bet goes wrong.
"I'm not sure how he would go about implementing some of his ideas"
Mocking the young math-geek (I studied math) analysts, bankers, derivative creators or whatever their titles are, is a good start. I heard it somewhere that over the past decade or two, everyone's mom went from wanting their kid to be a doctor or lawyer to instead be a Wall Street I-banker. All we really need is for society to trust elaborate investment and debt schemes less.
I'm not sure if the moms had it right the first time though, because we have too many lawyers and doctors are taking a beating now from Obama,
"Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news."
Having been on both sides of the coin, I do wonder how much those who allocate the capital (bankers) should make relative to those who generate the ideas and innovation - but clearly in recent years, it was skewed towards the former. Lots more from Taleb at his site: http://www.fooledbyrandomness.com/