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“I hope for Goldman Sachs’ bankruptcy”: Nassim Nicholas Taleb on Skin in the Game

In Taleb’s universe, the fieriest circle of hell is reserved for bankers and neoconservatives.

Nassim Nicholas Taleb is an intellectual brawler, a philosophical pugilist. His new book, Skin in the Game, put me in mind of the final scene of The Godfather or Reservoir Dogs: everybody gets whacked. Bankers and bureaucrats, warmongers and wonks – all are targeted by Taleb.

For the Lebanese-American thinker, their shared sin is that (with some exceptions) they lack “skin in the game”. By this, Taleb means they are insulated from the consequences of their actions: they do not have “a share of the harm” or “pay a penalty if something goes wrong”. This “asymmetry in risk bearing”, he warns, leads to “imbalances”, “black swans” (the rare but high-impact events described in his 2007 mega-seller) and “potentially, to systemic ruin”.

When I meet Taleb, 57, at the Club Quarters hotel in central London I am mentally primed for conflict (journalists are another of his targets). But the self-described flâneur is courteous and polite, helpfully advising me to add an espresso to the hotel’s insufficiently strong coffee. I ask him how his deadlifts are (the stocky Taleb once boasted of lifting 400lbs). An unrelated injury, he laments, has “set him back” but he has shed fat, not muscle (“it could be that when you deadlift you’re always hungry”).

“I consider myself in the same business as journalists,” Taleb says when I raise the subject of my trade. “But if you don’t take risks it becomes propaganda or PR.” Taleb, a man sometimes described as having praise only for himself, speaks admiringly of the New Statesman’s in-house philosopher John Gray. “My respect for him is so great… He, visibly, has skin in the game, he was not afraid to be a Thatcherite when it was unpopular and later an anti-Thatcherite when it was also unpopular.”

In Taleb’s universe, the fieriest circle of hell is reserved for bankers and neoconservatives. “The best thing that could happen to society is the bankruptcy of Goldman Sachs,” he tells me. “Banking is rent-seeking of industrial proportions.” Taleb, who became rich as a derivatives trader, is not a foe of capitalism but of “cronyism”. “If you’re taking risks, God bless you. This is why I accept inequality. I’ve seen people go from trader to cab driver and back again.”

He similarly denounces armchair interventionists. “There’s a corrective mechanism in nature: a predator typically inflicts risk on others but also on itself. Unless warmongers are more exposed to dying than others it’s the equivalent of reckless drivers being isolated from the risks of reckless driving.” Is he suggesting that, like George Orwell in Spain, neocons should have joined the Iraq frontline? “They should have kept their mouths shut,” he replies.

Taleb was raised in Lebanon by a Greek Orthodox family during the 1975-90 civil war (resulting in what he calls “post-traumatic growth”). He charges the West with excessive rather than inadequate support for the Syrian rebels. “Obama is the reason my people – the Orthodox Christians of Syria – are down by half. Assad’s father blew up my house. But Assad’s enemies make him look like Mother Teresa. You’re not dealing with the Swedish parliament versus Assad: you’re dealing with real scum.”

Mindful of the charge of hypocrisy, Taleb seeks to ensure that he has skin in the game. Though he lives mostly in New York, he retains a property in Lebanon and houses six Syrian refugees. He does not employ an assistant (“it moves you one step away from authenticity”), rejects copy editing of his books and refuses to accept honours and prizes (“they give you an award, then they own you”). When later that day I join Taleb at a private dinner hosted by Second Home, an east London start-up hub, he dismisses the convention of Chatham House Rules, insisting that all his remarks are on the record.

As an investor, Taleb never advises others to make a trade that he has not done himself. He inverts our traditional conception of “conflicts of interest” (“no conflict, no interest,” as one Silicon Valley slogan has it). When Taleb spoke sympathetically of Brexit in 2016, he simultaneously bought a large quantity of pound sterling. Once asked during a TV appearance to comment on Microsoft, he replied: “I own no Microsoft stock… Hence I can’t talk about it.”

“Those who seek money from a transaction, at least you know where they stand and what their norms are,” Taleb explains. “But those who tell you ‘I’m doing it for the benefit of humanity’, you’ve got no way of checking them.”

Yet are there times when a lack of skin in the game is defensible? Taleb concedes that an exception should be made for jurors. “You don’t do it for a living, you have a cleaner opinion than someone who gets involved.” Taleb, a philosophical sceptic, influenced by Burkean and libertarian thought, observes: “I’m against universalism right there. Skin in the game is not something universal.”

By now, we have been talking for 90 minutes and Taleb remarks with surprise that he is running late for another appointment.

Our conversation concludes on an optimistic note: “We’ve survived 200,000 years as humans,” says Taleb. “Don’t you think there’s a reason why we survived? We’re good at risk management. And what’s our risk management? Paranoia. Optimism is not a good thing.” Is the paradox, I ask, that human pessimism offers grounds for optimism? “Exactly,” Taleb replies. “Provided psychologists don’t fuck with it.” 

George Eaton is political editor of the New Statesman.

This article first appeared in the 08 March 2018 issue of the New Statesman, The new cold war

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Commons confidential: Momentum’s Christine Shawcroft loses comrades with furious Whatsapp messages

Your weekly dose of gossip from Westminster.

The kamikaze style of Momentum narcissist Christine Shawcroft certainly isn’t found in the ABC of Chairmanship, Walter Citrine’s definitive guide to conducting labour movement meetings. Comrades fear the strain of chairing the party’s disputes panel is unsettling the veteran activist. Frustrated by her inability to persuade Labour’s National Executive Committee members to drop disciplinary charges in two constituency cases, three horrified sources recounted how, while still chairing the hearing, a seething Shawcroft pinged a couple of splenetic WhatsApp messages to a 25-strong left group. The first unwise denunciation – “you bunch of fucking wankers” – was followed swiftly by the perhaps unwiser “I want to kill you all”. Yelled in the room, the insult might have proved sufficient grounds to summon Shawcroft on an abuse charge before the very panel she convenes. How to lose friends and alienate comrades.

My radar-lugged snouts report Harriet Harman is quietly soliciting support for a potential tilt at the Speakership should John Bercow be forced to vacate the chair. The Westminster grande dame was overheard discussing the bullying row threatening Big John, a taxi driver’s son, in the members’ cloakroom with tall Tory Daniel Kawczynski. The Conservative MP loftily informed Harman, “We need a Speaker with a little dignity and class.” Who oozes more class than an earl’s niece or greater dignity than the woman who retained
her poise when Gordon Brown’s deputy?

The ears of little Ben Gummer will be burning. A band of Tories have warned Theresa May of their unhappiness should a peerage be awarded to the former cabinet office minister who lost his Ipswich seat in last year’s general election. “Gummer assured us the manifesto would create waves,” growled an angry rebel, “and the patronising squirt wasn’t bloody wrong.”

Nerdy Culture Secretary Matt Hancock’s nerdier special adviser Jamie Njoku-Goodwin stunned boozers by producing a roll-up chess board from his pocket to play a game sitting on the floor of a crowded bar
after midnight. Memo to self: check how that Tory campaign to fit in is going.

Labour’s punchy Louise Haigh has taken up boxing to keep fit. When Tory vice chair Chris Skidmore backed off in a lift, Left Hook Lou had to assure the wimp that she’s not hit an opponent. Yet.

“Are you Tom Watson?” inquired the stranger on a street, “You look a lot slimmer than on TV.” Not just the gogglebox. Shedding 5.5 stone creates a new political category: lightweight heavyweight. 

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 22 March 2018 issue of the New Statesman, Easter special