Things got icy between former Treasury Secretary Larry Summers and author Nassim Taleb last week at SALT Las Vegas, one of the biggest hedge fund conferences of the year.
The two shared the stage for a discussion about the global post-crisis financial system.
“I was fighting with a bully,” Taleb said of Summers’ performance, later adding, “It’s very strange for a Harvard professor to act like a cheap politician.”
That’s a burn, and here’s what Taleb is burning about.
In the debate, he maintained that ‘too big to fail’ is still very much a reality, that bankers were never punished for their recklessness and as such will remain reckless. Taleb said that anyone who handles money should have skin in the game. He reminded the room full of hedge fund managers that if they messed up, their funds would go down and it wouldn’t be front page news and government bailouts — not so with the banks, not in 2007 and not now.
Summers preferred to talk about what the government did, and can or cannot do in the future — which is ensure that banks are adequately capitalised and playing by the rules we have currently. He also said that it was not the government’s job to get involved in Wall Street compensation or anything that Taleb might consider a deterrent to reckless actions.
“He said we have good techniques to do stress testing … which is bullsh*t,” said Taleb.
As for what bothered Taleb the most, it was Summers’ characterization of Taleb’s argument about how it’s important to have skin in the game: “Basically when you argue with an academic that skin-in-the-game is necessary not sufficient, the rest of the discussion should take that into account. Summers kept viciously transforming my argument into “skin-in-the-game is a replacement for more capital and risk controls.””
So what’s the problem. Taleb is more offended by Summers’ form. He said Summers stooped to a low point that he wouldn’t go to.
“I stuck to my commitment,” Taleb said. “He’s [Summers] narcissistic… At no point did I try to win the argument.”
Business Insider was there, and it did seem like the argument was well-moderated. There were moments of tension, but that’s healthy. It’s certainly not the first time the two have gotten feisty either.
“We did lay out the ground rules and I don’t think either side violated them,” said Anthony Scaramucci, founder of Skybridge Capital, the firm that hosted the conference. “Moreover the audience seemed split. I even think Larry agreed with some of Nassim’s points. However the world isn’t perfect and like it or not governments intervene in crisis. They did in 2008 and will again in the future. We are lucky to have Larry otherwise things would be a lot worse.”
Right, at least Taleb didn’t live tweet it.
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