Do We Really Want A World With No Black Swans?

Nassim Taleb got more media love this week after publishing a Financial Times op-ed on preventing future Black Swans.

In it, he said we’d need to ban complex derivatives, get rid of the economics nobel prize and eliminate incentive bonuses.

Reuters scribe Felix Salmon called it “utterly genius” and said it “must be implemented,” though he doubted it ever would be implemented. Others lauded it as well.

But we read it differently. We didn’t think Taleb was actually making real policy suggestions. It seemed more along the lines of: Sure, we could have a world with no Black Swans, but it’d be utterly boring and incredibly restrictive, and who in their right mind would want to make that trade?

Because of course, you could apply this logic to other non-financial spheres, as well. We could’ve prevented the Binghamton massacre by saying there should be no more immigrant centres, no more guns, no more knives, no more cars, and a cop every half block. That would prevent most crime-related black swans.

You could prevent bridge collapses by mandating that they be stress tested every other day. You could tell everyone not to live near the coast, or anywhere close to an earthquake fault line and prevent a lot of natural disaster related deaths.

But seriously, what kind of world would that be?

How about we take our chaotic, risky world and the black swans that come with it.

(Meanwhile, if you really just wanted to limit financial black swans, why not just say: No more fractional reserve lending and no bank can have a balance sheet bigger than $100 billion. Problem solved, but then you can’t fill a whole op-ed with that, can you?)

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