Perhaps it’s the limitation of the medium, but if your only introduction to Nasssim Taleb was his appearance on CNBC this morning, you’d think he was a very conventional thinker.
The main theme he kept hammering home: There’s too much debt and leverage in the system. In other words, he’s making the same point as almost everyone else talking about the economy these days.
The way to restart everything is restructuring, conversion of debt into equity, convince people that debt is not good,” Taleb said.
“Do not delay a root canal,” he added. “Don’t do piecemeal solutions to a problem that is fundamental.”
“The solution is there, convert debt to equity. Usually it happens with Chapter 11, let’s do it faster, and across the board,” Taleb said.
Joe Kernan tried to get him to explain further how this works in practice, particularly with respect to Uncle Sam’s debt, but Taleb wasn’t keen on answering. Either he’s not interested in discussing specifics (likely) or he didn’t really get what Kernan was asking (possible).
To be fair, Taleb has had some interesting thoughts on debt, such as the suggestion that hyper-efficiency is its own form of leverage, and that actual financial leverage is superfluous and dangerous. That’s an interesting idea that should be unpacked further, although the fact that most tech companies go through life debt-free suggests that this concept isn’t terribly novel.
(CNBC hasn’t put up the video this yet, but we’ll post it when it’s up)