(2010-07-06) Taleb Design Robustness

Nassim Taleb suggests 10 Society Design Game Rule-s to improve Robust Ness.

But consider what would happen to the country if the price of wine fluctuated. A simple perturbation around this assumption leads one to reach the opposite conclusion to David Ricardo. Mother Nature does not like Over-Specialization, as it limits evolution and weakens the animals. This explains why I found the current ideas on Globalization (such as those promoted by the journalist Thomas Friedman) too naive, and too dangerous for society - unless one takes into account the side effects. Globalisation might give the appearance of efficiency, but the operating leverage and the degrees of interaction between parts will cause small cracks in one spot to percolate through the entire system.

My dream is to have a true "epistemocracy"; that is, a society robust against Expert errors, forecasting errors and hubris, one that can be resistant to the incompetence of politicians, regulators, economists, central bankers, bank ers, policy wonks and epidemiologists.

People who drove a school bus blindfolded (and crashed it) should never be given a new bus: The economics establishment lost its legitimacy with the failure of the system in 2008. Find the smart people whose hands are clean to get us out of this mess.

Don't let someone making an "incentive" bonus manage a nuclear plant - or your financial risks.

*Only Ponzi Scheme-s should depend on confidence: Governments should never need to "restore confidence". Cascading rumours are a product of Complex System-s. Governments cannot stop the rumours. We just need to be able to shrug off rumours, to be robust to them. Do not give an addict more drugs if he has withdrawal pains: Using Leverage to cure the problems of too much leverage is not homoeopathy, it's denial. The debt crisis (Credit Crisis 2008) is not a temporary problem, it's a structural one. We need rehab.

Citizens should not depend on financial assets as a repository of value and rely on fallible "Expert" advice for their Retirement: Economic life should be definancialised. We should learn not to use markets as warehouses of value.* What does that mean, I should convert my 401k to freeze-dried fruit?

• In May, he said What I call cash, I’ve changed my definition of cash, my cash is what I call the numerator. It’s not just cash because I’m afraid of Inflation. So I have some inflation-linked securities, what I call repository of value. I have a collection of currencies and metals. So it’s a combination of inflation-linked currencies and metals, but very short term… treasury bills, from governments… is what I call cash. And a good collection of metals would work, or agricultural, not speculative Real Estate land.