Black Swan Author Nassim Taleb Joins Arianna on CNBC's Squawk Box

Nassim Nicholas Taleb, author of The Black Swan, joined Arianna on Squawk Box to discuss the financial meltdown, mark-to-market accounting and ways to build a more robust economic system.

Comments

[Yehoshua]

Does Nassim Talleb know what is the "black swan" that defines today's macro SOLUTION?

His Thesis is to go backward, and this we cannot and we will not do.

The macro world capital market(s) asset "reallocation process," as is NOW proceeding, is irreversible; what everyone is so scared about, is the absence of credible and coherent information about WHAT exactly is the "black swan," by definition.

And even Nassim Taleb does not know the answer, ONLY the importance of having that answer, as he like all of you will have to come to Jerusalem to find out what it is, as this is where it resides.

Tky, Yehoshua

[dl63]

Nassim, you need to read Doug Noland at the Prudent Bear. He's been talking about the building crisis since before 2000. There were many who were warning, but nobody wanted to hear from them. The country wasn't ready to hear what they had to say.

[pragmaticdallasite]

Oh I wish I wish Taleb, Roubini and Krugman were the top 3 of Obama's economic advisors!!!!

[pragmaticdallasite]

Oh I wish I wish Taleb, Roubini and Krugman were the top 3 Obama economic advisors!!!!!

[ImmanuelGoldstein]

Taleb's reccomendations were sensible and should be followed but I have one reservation about all this.
This was not the result of some kind of 'Black Swan' random event like a meteorite killing the dinosaurs.
This was a matter of simple arithmetic. Simple arithmetic told me back in the 90's when I had several chances to get a NINJA house loan and if I had I'd be part of the problem(one of the hallmarks of the amateur investor is to climb on the bandwagon after the parade is almost over.). But simple arithmetic told me that the whole model of residential housing as a growth investment was logically bankrupt (and now is literally bankrupt.)­.
Now if I, a total amateur at this , using arithmetic daily spoonfed to school children, could figure this out and predict that a crash was inevitable (although I admit I had NO idea the secondary affects would be THIS bad.) Why is it that economists with wall full of diploma's couldn't?
Answer: A wise man once said something to the effect ,"It is difficult to see the truth when your livelihood depends on NOT seeing it."

[mozara]

The reason economists didn't see it, is because they are mostly very smart guys incapable of independent thinking. They are mentally trapped in the models they were taught in school.

[mozara]

And, you have to understand that economists are not engineers. They are grounded in theoretical models and not real life.

[Meng Bomin]

You probably haven't read The Black Swan, judging by your comment, but here's the definition that Taleb uses (quoted from the book):

"First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictabl­e."

The third part is often excluded when discussing Black Swans, but it's a critical part. Now, you saw part of this coming, but you didn't see the whole thing coming. A black swan is not necessarily something that is completely unforseeable, but rather something that we have a blindspot to, be it inherent or self-induced.

So, yes, the financial crisis was a black swan, even if a well informed observer could see hints of part of it and one with hindsight can stand agape at the stupidity that led to it.

[PhilipTaylor]

$7 Million to EVERY AMERICAN FAMILY!



$700 Trillion IN TOXIC PAPER Created by Banks is $7 Million to every Family in AMERICA!

$700,000,0­00,000,000 / 100,000,000 Families = $7,000,000

$7,000,000 to every family in America! That is what the BANKS DID TO US! JAIL THEM TOMORROW!




Instead they are REWARDING THEM!

[PhilipTaylor]

Wish it was WRONG!

$1.2 Quadrillion of Toxic Paper in the World

$700 Trillion created by American Banks!

http://financialclues.blogspot.com/2008/02/1-quadrillion-problem.html

[pragmaticdallasite]

To make your analogy true, you would have to only consider money the government has/will spend as the remedy to this toxic asset mess. I don't know where your getting the $700 trillion number, but let's say the U.S. Govt has/will spent $2.5 trillion in taxpayer money. Now, if you divide that by 100 million families you get (2,500,000­,000,000/1­00,000,000­)= $25,000 per family. It's still but I think your post is a bit exaggerated.

[Clem2]

Thanks Ariana for asking Taleb about what he invests in, and he says he's in cash. I guess til things straighten out a bit, that makes sense. And it is an investment to say in cash.

Appreciate how you handled this!

[Malkin71]

Watching Maria "Money Honey" Bartiromo on Morning Joe...

Once you know that she is married to a hedge fund manager...­just as once you know Jim Cramer made his money by using the media to manipulate the market...

...they really make you sick.

[pragmaticdallasite]

Indeed, I wish someone would debate her or take her to task ala Cramer

[maxfax]

Could their relationships be any more incestuous?

[beaupritchard]

"You're talking about walking back the financial innovations of the last twenty years" ... this is the mindset of the current crowd. The financial innovations he was talking about were gambles. The financial industry does not want to lose the instruments they use to gamble with other peoples money.

I would go further and outlaw the bundling of mortgages and their conversion into high tech gambling chips.

Great interview Arianna ... if not for you people who "got it right" would not be getting the voice they have been.

[pragmaticdallasite]

Yes this is what struck me from the interview, that is their mindset. Unfortunately the people at the Treasury Dept have the same mindset, and they're the ones in charge.

[CanHandleTheTruth]

Great insights from Taleb, but one complaint --

What did he mean 'How many economists besides Nouriel Roubini saw this coming?'!?

Just because he and Roubini are both professors at NYU doesn't mean he should conveniently ignore prescient economists from earlier in the decade like Robert Prechter, James Turk, Peter Schiff, Richard Duncan, Marc Faber, Addison Wiggin, Robert Schiller, Ron Paul and the others who warned about this Depression and Dollar Crisis approaching.

Not everyone has been glued to CNBC since 2002, Nick....

[DC]

They were polite but did not like having him on. You could see that. Taleb has been writing the same message concerning on value at risk for years now. His message is heresy to much of the "modern" financial industry, but is basic and honest. It will prevail.

He never would have been invited on a show like that two years ago.

[pragmaticdallasite]

Also he and Arianna may not have been on the show if it weren't for Jon Stewart.

[superstition]

It looks like we can thank Jon Stewart for his CNBC expose. I bet that helped to give them the incentive to ask Arianna, Taleb, and other anti-Crame­rs/anti-Sa­ntellis on their show for better PR.

Prior to Stewart's pieces, do you think CNBC would have had someone on who said the key is to "de-financialize the economy"? Lol.

[viper234]

Great job Arianna. You went where these guys on Squawk Box seldom dare travel. Great questions and Nassim Taleb has been out there for years warning, warning, warning yet the financial pundits always put him down as being too gloomy in his assessments of the economy. Now that the economy actually matched his predictions they are ready to listen after the fact. Why all the people who caused this crisis are now re-hired to "fix the economy" armed with even more sweeping powers is mind boggling!!!!!!!! I was astonished when I read and reviewed a spread sheet that showed just how much money has been pumped into the economy during this economic downturn. We're talking about over $12 trillion, an amount roughly equal to the GDP of the US in 2008. This is astonishing!

[pragmaticdallasite]

I didn't realize it was that much, forget about my above arithmetic. Multiply that $25,000 by 5 for each American family

[ckapilla]

wow who would of thought that such good sense could come out of Bubblevision. Great job Arianna!

[southwindow]

i agree, throw the bums out, and get rid of the complex derivatives- no one understands them as evidenced by the last year