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TALEB, Nassim Nicholas

The Black Swan

To summarize: in this (personal) essay, I stick my neck out and make a claim, against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according our current knowledge)–and all the while we spend our time engaged in small talk, focusing on the known, and the repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug. I also make the bolder (and more annoying) claim that in spite of our progress and the growth in knowledge, or perhaps because of such progress and growth, the future will be increasingly less predictable, while both human nature and social “science” seem to conspire to hide the idea from us

Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks – when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur .... I shiver at the thought. The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events unlikely


Skin in the Game

The Dictatorship of the Small Minority

Now consider this manifestation of the dictatorship of the minority. In the United Kingdom, where the (practicing) Muslim population is only three to four percent, a very high number of the meat we find is halal. Close to seventy percent of lamb imports from New Zealand are halal. Close to ten percent of the chain Subway carry halal-only stores (meaning no pork), in spite of the high costs from the loss of business of nonpork stores. The same holds in South Africa where, with the same proportion of Muslims, a disproportionately higher number of chicken is Halal certified. But in the U.K. and other Christian countries, halal is not neutral enough to reach a high level, as people may rebel against forceful abidance to other’s religious norms. For instance, the 7th Century Christian Arab poet Al-Akhtal made a point to never eat halal meat, in his famous defiant poem boasting his Christianity: “I do not eat sacrificial flesh”. (Al-Akhtal was reflecting the standard Christian reaction from three or four centuries earlier Christians were tortured in pagan times by being forced to eat sacrificial meat, which they found sacrilegious. Many Christian martyrs starved to death.)

One can expect the same rejection of religious norms to take place in the West as the Muslim populations in Europe grows