One can never get tried of Taleb, yet another fascinating interview with him on Econtalk:
Russ and Taleb ponder on how our society changed in recent times to embrace no skin in the game:
So here we have a generation of people who have never had to take risks for the sake of others. And society cannot function when you have an imbalance between, like in the first column is people who make others take risks for them. And then you have in the right column people who take risks for the sake of others. It can't function that way. It cannot. You cannot have too many of the traders--and George W. Bush--who would have never taken personal risks but engaged others in a war--you can't have too many of these. We need the reverse. And we had plenty of these, as I said earlier.
Russ: I wonder why that changed.
Taleb: Technology. The problem is technology, is modernity is causing disruptions in the entire system.
Russ: I don't know. I think part of it is how wealthy we are. Staying alive is definitely what we call in economics a 'normal good,' meaning we want more of it as we get wealthier. So I think we value our lives and our health a little higher than we used to, and so our willingness to sacrifice it is a lot harder. Taleb: I don't think--I think this is probably the culture. Because the change is very recent. It just took place very abruptly.
Russ: Right, but why did that culture change?
Taleb: look for an explanation. The thing you have to look at the world today. It's highly technological. We have dangers but not the same kind we had before. And modernity, put the bureaucrat in place of risk-taking... Now, risk-taking isn't just physical. Risk-taking is entrepreneurship. So instead of worshipping entrepreneurs, they sacrifice really for the sake of others, because of probability success is much slower than that of say venture capitalistic. So they take risks for society. And they save a lot, but collectively we need them because otherwise we can't advance. Instead of having all these people glorified and put on a pedestal, you put on a pedestal Harvard grads. That's not how a society can evolve. I used 'Harvard graduates' as a metaphor. England was built and America was built by adventurers, in the economic sense, what Adam Smith called adventurers. Not by bureaucrats. And then after on the benefits are reaped by the class of bureaucrats who come and try to control the process.
And this is my favorite part - on parenting:
Russ: It seems to me that when our children are younger, we don't want them to have skin in the game. Literally. We don't let them get near the stove--that's hot--because they'll burn their hand. And as they get older, good parenting, it seems to me, which is hard to do, means letting our children have their own skin in the game rather than the skin of the parent. Do you think that's right?
Taleb: I think that's right. I think traditional parenting has some merits, in the sense that you protect--there is an expression in Lebanon that the first 7 years, you play with them; the second 7 years you let them get in trouble; and the third 7 years advice them on how he got in trouble. And there are 21 years. That's a Lebanese expression. The first 7 years you protect them, because they are fragile. The second 7 years are antifragile; they need to get in trouble because they never learn unless they have skin in the game.
Russ and Taleb ponder on how our society changed in recent times to embrace no skin in the game:
So here we have a generation of people who have never had to take risks for the sake of others. And society cannot function when you have an imbalance between, like in the first column is people who make others take risks for them. And then you have in the right column people who take risks for the sake of others. It can't function that way. It cannot. You cannot have too many of the traders--and George W. Bush--who would have never taken personal risks but engaged others in a war--you can't have too many of these. We need the reverse. And we had plenty of these, as I said earlier.
Russ: I wonder why that changed.
Taleb: Technology. The problem is technology, is modernity is causing disruptions in the entire system.
Russ: I don't know. I think part of it is how wealthy we are. Staying alive is definitely what we call in economics a 'normal good,' meaning we want more of it as we get wealthier. So I think we value our lives and our health a little higher than we used to, and so our willingness to sacrifice it is a lot harder. Taleb: I don't think--I think this is probably the culture. Because the change is very recent. It just took place very abruptly.
Russ: Right, but why did that culture change?
Taleb: look for an explanation. The thing you have to look at the world today. It's highly technological. We have dangers but not the same kind we had before. And modernity, put the bureaucrat in place of risk-taking... Now, risk-taking isn't just physical. Risk-taking is entrepreneurship. So instead of worshipping entrepreneurs, they sacrifice really for the sake of others, because of probability success is much slower than that of say venture capitalistic. So they take risks for society. And they save a lot, but collectively we need them because otherwise we can't advance. Instead of having all these people glorified and put on a pedestal, you put on a pedestal Harvard grads. That's not how a society can evolve. I used 'Harvard graduates' as a metaphor. England was built and America was built by adventurers, in the economic sense, what Adam Smith called adventurers. Not by bureaucrats. And then after on the benefits are reaped by the class of bureaucrats who come and try to control the process.
And this is my favorite part - on parenting:
Russ: It seems to me that when our children are younger, we don't want them to have skin in the game. Literally. We don't let them get near the stove--that's hot--because they'll burn their hand. And as they get older, good parenting, it seems to me, which is hard to do, means letting our children have their own skin in the game rather than the skin of the parent. Do you think that's right?
Taleb: I think that's right. I think traditional parenting has some merits, in the sense that you protect--there is an expression in Lebanon that the first 7 years, you play with them; the second 7 years you let them get in trouble; and the third 7 years advice them on how he got in trouble. And there are 21 years. That's a Lebanese expression. The first 7 years you protect them, because they are fragile. The second 7 years are antifragile; they need to get in trouble because they never learn unless they have skin in the game.
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