Nassim Taleb: ‘Big corporations will always fail’
Monday, 22 November, 2010 Leave a comment
Building Robustness–(more) lessons from nature
SO I have given much thought to the reasons why.
It didn’t take me too long to figure that the biggest attraction – for both – is that they “cut through the crap”!.They simplify matters that others love to make complex or that we overcomplicate ourselves. This is a brief extract from an interview (June 2010) that appeared in The Observer. It isn’t rocket science – so don’t try to make it sound like it is – it is much closer to our hearts!
Your new Black Swan chapter looks back on the financial crash, but it
begins by thinking about what we might have learned from studying the
The notion of fragility and robustness that I am bringing is applicable across domains. The human body has built-in redundancies: two eyes, two kidneys, two lungs. It is good to incorporate that model into everything we create. In financial entities it creates less growth but more robustness. Also, wherever you have a lot of interactions, it is important to have nothing too large. Why has evolution made an elephant the largest thing on land, and in the ocean a whale?
You have to have a dogma that mother nature knows best.
Would you describe the black swan idea as a philosophy of humility – that
is, we never know as much as we think we do?
I would say it is more making a map of what you don’t know and confining it. The human body – we don’t know large parts of it. The economy, likewise. We shouldn’t treat it all the same. We must acknowledge where a lack of knowledge can harm us. Our lack of knowledge is everywhere, but in some domains, as we have seen, it can have monumental consequences.
Should anything be too big to fail?
I just wrote a paper explaining why size necessarily brings fragility. You have family owned businesses that have been around for 500 years. You cannot name a corporation that survives intact for even a few decades. We should not be concerned about wealth; we are rich enough, but we should be very concerned about robustness.