Little Things Mean A Lot 6

This essay was inspired by a man named Nassim Nicholas Taleb, author of a very famous book, “The Black Swan”.  This is not about the Natalie Portman movie, it is a very interesting book on where our financial experts went wrong leading up to the economic disasters in the last few decades. It is a bit mathematical, and certainly covers some philosophical points. It may be boring for some people, but for those who want to know how some things work, it is well worth the effort.

The term Black Swan  comes from the fact that for centuries, nobody knew there was such a thing as a black swan. All swans in the known world were white. One day, people went to Australia and lo-and-behold, what did they find but black swans. No longer were all swans assumed to be white.  The discovery of black swans was a totally unexpected event.

Nassim Nicholas Taleb took that idea, and describes the 9/11 terrorist attacks, hurricane Katrina, the US financial system disasters in the 1980’s, 1990’s, and the 2000’s as black swans. They were all big, life changing events, not predicted, and most people believe they should have been predictable if only we had connected the dots. That’s a black swan.

How do you make yourself ready for an unpredicted, really big, life-changing event? Think like a boxer. These guys work out extensively every day by doing calisthenics, getting punched on the body and the face, and by keeping to a training diet. When the big fight comes, their body is in condition, and they are ready for the big punches their opponent is certain to deal them.

Being able to handle all the little punches, adversities, and problems in everyday life is one way to be ready for the “Big One”. There are obviously many dimensions to this idea, and many are sound. Allergy shots are given everyday to inoculate the body from the really big shock of a heavy, Atlanta Georgia allergy season. Infants and toddlers should be allowed to crawl on floors, go to those pre-schools which are germ incubators, and to generally let their little bodies learn to cope with the little attacks of daily life so they can grow up prepared to handle the tough, and germ infested world.

Is there any connection with the economic world, i.e., government and other institutions?

Socialism, communism, and fascism try to insulate people from the economic travails of life, i.e., joblessness, bankruptcies, natural calamities, fraud, and greed. Instead of letting people learn to deal with joblessness and their own economic problems, the state tries to protect them. Inevitably, the government is going to screw up big time (lowering credit standards for home buyers), and a VERY BIG catastrophe will ensue. It is the big government-caused disaster that hurts people, not the little ones they have accustomed themselves to handle.

It is endemic to big government and big corporations that are “too big to fail” that really bad things will happen, on huge scales. If the government is limiting depositor risk in the banking system by bailing out big banks, all they are doing is transferring the bank’s risk of doing business to taxpayers. This should be considered criminal, it is certainly illogical, and in many cases, stupid.

We have heard all our lives, “Don’t sweat the small stuff.” I have extended it to, “Don’t let the little people get you down”. Now, the watchword is changing to, “Watch out for Big Brother”. He is here, he is malicious, and he is unrelenting. Look for more big problems, bank failures. crony-capitalism, and downright corruption in our government.

Corruption goes hand-in-hand with big government.

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6 comments

  1. Hi, Bob, your comment at my Sunday Faith Blog keeps popping into my mind. The fact that you like my faith posts so much means a TON to me; the fact that you said it brought you to read Acts on Sunday knocked the air out of me. It’s such a blessing to have people like you inspired by what I come up with (which I never think is really ME, by the way, from the way ideas come to me, etc….no way)… thank you for helping build my faith.

    And I mentioned your article above in comments on my newest post because I think it’s THAT GOOD. Thanks for that…It’d be interesting to hear Taleb’s take on the latest scandals, particularly that of the IRS, huh?
    God bless you. Z

  2. Thanks, Zee. I always appreciate your comments because I know you think before you speak/write, which is more than I can say about some of us. Taleb is a PhD in management science (heavy statistical stuff), and a former Wall Street trader who got rich betting against the crowd. He is an expert on risk. Even though a political opinion will pop out occasionally, for the most part he does not comment on political stuff. Reading his books can be arduous, but that’s the kind of stuff I am doing during my retirement. Gotta keep the brain working, you know.

  3. It is the big government-caused disaster that hurts people, not the little ones they have accustomed themselves to handle.

    And the above isn’t a “black swan,” either. Over and over again — particularly in the 20th Century but certainly not limited to the 20th Century — we have seen failed utopias, which turned into tyrannies and the slaughter of millions upon millions.

    Great post, Bob! I’m glad that Z called my attention to it over at her blog.

  4. ““Watch out for Big Brother”. He is here, he is malicious, and he is unrelenting. Look for more big problems, bank failures. crony-capitalism, and downright corruption in our government.

    Corruption goes hand-in-hand with big government.”

    You are a wise man, Bob. I only wish you would post more often!

  5. AOW: Thanks for the comment. The big deal about the Black Swan is not that they are not predictable. Indeed, we know they will happen. The big deal is that big government keeps doing the same top-down-micromanagement, and expects different results. It is not only insane, but it should be criminal.

  6. COF: Thanks, Jim. The interesting thing to me is that Taleb has almost expressed this idea of top-down risk mathematically. As a former investment and financial advisor, I find his viewpoints articulate very well what happened to us in so many of our financial meltdowns. As you have expressed, time and time again, the bank bailouts not only reward bad business practices, but they encourage the same bad business policies to be practiced over and over. Big government has trapped us into periodic financial failures. There is no light at the end of this tunnel.

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