Nassim Taleb on What Bitcoiners, Anti-Vaxxers and Deadlift Maxis All Get Wrong

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1:27Hello and welcome to another episode of the Odd Lots podcast. I'm Jill Weisenthal. And I'm Tracy Alloway. Tracy, welcome back. You've been on vacation. It's so exciting to be recording an episode with you again. How was it? I missed you, for real. I missed you, for real. Thank you. I actually, I think this might be the first time in my life that I've been happy to come back from vacation. Honestly, a lot happened while I was away. It was beautiful, by the way. I went to the Seychelles for two weeks. It's not, I'm not a huge beach vacation person, so it wasn't a place that I would normally go to, but it was absolutely gorgeous.

2:06Highly recommend it. I think it's ruined me for all other beaches in the future, but I am happy to be back and recording with you once again. And I missed you too, Joy. Thank you. It's great to have you back and you sound great. You know what I did this week? I can take a guess, but go ahead. I did a deadlift. I did something. I've been lifting weights at the gym and I did something. I'm not going to say what my current... I was about to say, dare I ask you what your deadlift is. I'm still very weak. I'm not going to say what my PR is, my personal record is, but it was very satisfying. I felt good.

2:44And now I'm going to keep doing it. I've been doing weights for a little while. But Joe, is it a real deadlift if you're not bragging about it on Twitter? When I hit bragging level, I will definitely brag. But I bet everyone can figure out where I am going with that because we're going to be speaking today with one of the foremost, when I think of this guest, I think of it as many things, but I think of him as one of the foremost deadlift advocates in public. I, of course, know exactly who you're talking about. This is someone, you know, certainly a personality and a character, especially online, on Twitter.

3:24I think we've both at various times been blocked by him, as have quite a few people. Yeah, so I think I tweeted this while I was on vacation, actually. But one of the craziest things to me about 2023 is that I find myself not only unblocked by this guest, but also nodding my head vociferously in agreement with him on a variety of topics. 2023 is a very weird year for that very reason because it's like, oh, yeah, totally right. Anyway, we just got to get right into it. So we are, of course, speaking with the one and only Nassim Nicholas Taleb. He's a professor at NYU. He is an advisor at the Terrorist Fund Universa.

4:08He is the author of several books, including The Black Swan and Anti-Fragile and Fooled by Randomness. And he is a deadlift advocate. And he has also gotten into cycling lately, which is interesting. And he is a flaneur. I don't even know where to start. Nassim, thank you so much for joining us. Every time I see the word flaneur, I forget what it means. What does it mean? Yeah, I have to remember exactly what it means because the original designation is for someone who walks around aimlessly. And I try to generalize it to someone who does things aimlessly just for the fun of it without the prescribed plan.

4:50And if you find something interesting, then you go with it. So that's funny because I started off by saying that I think of you as a deadlift advocate. But this year you're getting into road biking, which is interesting because, you know, it's kind of very different type of exercise. It's not the type of exercise I associate you with. I was a cyclist. What's the deal with getting into cycling? I was a cyclist when we met last, which is about 15 years ago. And I had a near miss with a truck. and then I switched to a combination of a lot of walking and some intense but short episodes of weightlifting, full body weightlifting and then I followed the evidence started reading the literature and I realized that weightlifting is not good for your heart so it's actually not good at all on its own but it's needed it's necessary but that's the evidence it causes aortic stiffness a lot of things.

5:51You know this adaptation when you want to lift very heavy objects your body adapts by doing things that are not helpful for long term survival. So you need to compensate and how do you compensate? Instead of just walking something a little more intense than walking but not very intense. So here you have a barbell, a lot of aerobic exercise low grade and your occasional full body weight lift. So just a variation on what I was doing, but you've got to follow the evidence. I mean, the literature is stark that weightlifting is not for your heart, but that because it causes some adaptation by your heart that are not very good, it causes long-term heart failure.

6:35And if you adapt and overcompensate by doing aerobic exercise, which is more naturalistic, then you've got both. I think flexibility is also a sort of underrated component of that as well. So I'm trying to think how to take it from here. And I'm going to try to avoid doing a lot of media navel-gazing in this interview. But there is one question that I have to ask, just because I think it feeds in to a wider point about your online presence. But why did you block me and Joe? And why have we been unblocked? I think a lot of my blocking is not done by me directly, but by some automated boss. You have to understand that I got besieged by finance people and you know that I don't get along with the general finance crowd.

7:27And by the crypto people, particularly after I took positions that are not very favorable to the crypto people. So you do block and it cleans up my feet. just block things and i had someone who happened to be in ukraine at the time helping me uh you know do automatic blocking i believe these are not the best thing to do with your twitter feed is block groups because then then things become cleaned oh i believe it for sure so so unfortunately that you guys but then i unblocked people when i realized i went too far thank you so the first reaction is what I call via negativa. It's like you close the door and then you let in those you think that were excluded or would not degrade the feed.

8:17That's a great answer. It doesn't have anything to do with disagreements. It has to do with style also. Right. But I think the people that annoy you the most are those who nitpick because of diversity conversation. And nitpickers are, I mean, trolls, You can see the trolls, nitpickers. People don't notice the nitpickers. Well, since you mentioned it already, let's just start with the crypto thing. Because what's interesting to me about your disagreements with crypto people, Bitcoin maximalists, et cetera, is many of them, I think, looked up to you. And they read Antifragile. They misunderstood my words.

8:56Right. They read Antifragile, and they read Fooled by Randomness, and they read The Black Swan. And that informed them that it's like, OK, we need to adapt, get it, get into this currency that's very hard, that is anti-fragile. Bitcoin, the ultimate anti-fragile currency. And so to their mind, they were, many of them looked, read your work, and this is what they took away. And so what did they get wrong? OK, so the first thing is that my work is first about avoiding tail risk. Right. And basically, if you want to do well, you must first survive. And it's not like a separable condition. So one is we want to avoid fragilities.

9:35And it turns out that as much as the Federal Reserve induces fragility in the system, and as much as I dislike Bernanke, it turns out that Bitcoin is a lot worse. It is itself a very fragile commodity. And it got, of course, cartelled. A bunch of people, a very small number of people, started controlling it. and it's fragile in a sense that if one day if the you know all the miners go to the beach for one day or for an hour it's gone whereas if you have gold i have a necklace here a gold necklace if i leave it underground for 100 000 years it'll still be gold that may lose its financial value but its physical quality will not be altered whereas with bitcoin it's just a book entry that needs to be maintained and will collapse plus a lot of other things promised by Bitcoin that are not delivered.

10:31Like it was meant to be a transactional thing, turned out to be a speculative item. So I realized quickly that I made a mistake with Bitcoin. Like I made a mistake by avoiding aerobic exercise. And of course, I was at some point an owner of Bitcoin. I publicly said that I made a mistake. And I went short Bitcoin later. But that was not good for the system. And I outlined it in a paper that was published in Quantitative Finance. Where you look at, hey, what's the currency? What's an inflation hedge? What is a refuge investment? And Bitcoin satisfied none of these. So people, of course, they got angry because they had the feeling that they're going to blame you for changing your mind.

11:13They don't realize that I'm not selling a recipe. I'm selling a process. Sertow is the way of thinking, the way of approaching things. And if you realize that something is fragile, immediately, do something about it. And remarkably, it's the same cluster of people who read antifragile and thought that, hey, what doesn't kill you makes you stronger. Let's get infected with COVID and let's ignore COVID. It's going to make us stronger. It's going to kill a few people. So that kind of eugenism, that kind of stuff, I realized was inimical to me, profoundly inimical to me. So it's the same crowd that was denying COVID, saying, hey, you know, it's just a virus that's going to make you stronger.

12:02They didn't realize that they explained that you're fragile. Jumping one foot will make your bones stronger, but a thousand feet will not help you too much. I mean, it may help, you know, the caretaker and people who organize funerals, but not you. but so so I realized very quickly there's a cluster of people who were both into Bitcoin going to very naive reasoning extremely naive reasoning thinking hey you know it's an inflation hedge as we saw it was a reverse inflation hedge but the good thing that I figured out quickly to pull out in time in the sense that it lost its value and realized there was inflation and the same group of people were into conspiracies, all general conspiracies And that's not the crowd I want.

12:49That's not the crowd I want to be associated. You mentioned that Bitcoin was bad for the system. And I think that's sort of the connective tissue that leads into some more recent events with the banking system. But can you talk a little bit more about that? How do you see Bitcoin actually impacting? Okay, let's look at why we have Bitcoin and why we are talking about Bitcoin. Effectively, it's the incompetence of what I call Bernankeism, you know, because sometimes you've got to put name to a tendency. The Federal Reserve job is not to do structural things. The Federal Reserve job is to engage in monetary policies.

13:31And typically, the short-term monetary policies and their mission was and has been and will be the stability of the United States first. So the job is to ease when economic condition and threatened deflation and hard economic condition. But you cannot replace a structural policy with a monetary policy. In other words, we had a problem with debt, and you can't solve the debt problem by putting interest rates at zero for a long time. Or if you put interest rates at zero, it should be for a short period of time while looking for an alternative. So what they did for 15 years, they put interest rates at zero.

14:15And that does create tumors. So the root of everything is interest rates at zero, which ironically created Bitcoin. And of course, created all this, I would say, Ponzi-like class of investments because there's no time value of money anymore. Your discount rate, you don't know what even the discount rate is. And we created a generation of people who don't know the cost of funds, the cost of money. And anyone with 15 years of experience in finance and no more doesn't know anything about interest rates. So interest rates at zero creates to merge. Real estate values go up dramatically because the cost of holding a mansion was close to nothing or was close to nothing.

15:05And created a class of investment called PC funds. And these were what in the old days were promising you cash flow. Okay, future cash flow. Today they're promising you a round of funding where you're going to sell it to someone else. so we moved from the classical cash flow model or even if you're negative cash flow the promise of future cash flow to the promise of selling the company to someone else and you have billionaires in Silicon Valley who got rich from companies that never made the penny so that's the background and of course you're going to have a story like Bitcoin take off because it doesn't cost that big gold

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17:40Public Advisors, LLC, SEC Registered Advisor. Generated assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com slash disclosures. Since you mentioned it, I'm curious, COVID specifically, and your criticism of anti-vaxxers. And I find that one of the things that I think is interesting is it's not clear to me how you think about these problems. because, okay, the vaccine is fairly new. It seems to be relatively untested as a technology. And there are other sort of scientific advances that you've really recoiled against.

18:22For example, I think you were very critical about GMO crops and you worried about the tail risks posed by those. So can you talk a little bit about your framework and thinking about why something like the COVID vaccine you're comfortable with, whereas something like GMO crops to you creates an uncomfortable level of tail risk? Okay. So before we start, let's say that you cannot compare vaccines to 3MOs because vaccines are tested in individuals. So you can see the side effect in individuals where the 3MOs would be systemic. You don't know if they spread in the environment. And then also you're not taking the vaccine, you know, because you think it tastes good or it's going to be a pleasant experience.

19:08You're taking a vaccine, you've got to plot the vaccine versus COVID and COVID was not something benign. So comparing, it's a risk management difference between two items and two things I'd like to mention. The first one is that very rapidly, I waited a little bit and then very rapidly I saw that had a very large number of vaccinated people and no side effects. And people said, well, we need more time. They didn't understand that you can replace sample size, time with sample size, in the sense that if it's something related to genetic mistakes that are going to take place or something of a genetic nature, like cancer, for example, that the large sample size compensates for lack of time and actually overcompensates.

19:57Because we have the illusion that after Hiroshima, people got cancer about 12 and a half years later. That's not true. Some people got cancer within a few months. And the distribution, there's a distribution because you need X number of mutations. Like when you go to Las Vegas, for an individual to win eight times in a row, take decades, years of waiting. But if you have a billion people in a casino, you're going to have that every hour. So this is where very rapidly I realized that vaccine did not really pose a threat of that nature, and I wrote technical comments on that. But to go back to the pandemic, my thinking, basically my specialty is fat-tailed events.

20:43So I've done spent all my life dealing with that central problem. How do you do statistical tools for fat-tailed stuff like that? So when the pandemic happened, I started publishing in that field because people didn't realize that you have to think differently when it comes to fat tails. You see, you cannot take averages. You shouldn't do naive forecasting. And got involved in a few polemical discussions. But we published like seven or eight papers and journals on that, including masks. and I may have one on vaccine if people keep denying the risk differential between vaccine and the disease but there's a lot of stuff people don't get about COVID the first one I would say that is not something that affects the old, it affects everybody in proportion to their mortality so it's not particularly so in other words if you say okay it's only the old then you should say okay let's stop dealing with cancer because cancer affects the elderly disproportionately or let's stop cardiology it costs too much money you know gym bros don't need it because they're 38 years old it's the same item it kills this in proportion to age so in other words if your your mortality risk goes up by eight percent regardless above the age of 30 of course above some special and and that's not well understood so it's not an old person problem disease is an old person not COVID by itself so there are a bunch of things people didn't get but you see I was known initially by you and other people for the Blacks Mom as the author of By Randomness and that book was misunderstood initially I'm not saying there's no skills that there are no skills I'm saying the world is more random than you think but I'm not saying it's all random well actually I wanted yes go ahead let me finish one point it's connected to the idea one of the messages of food by randomness is we tend to be swayed by anecdotes and I noticed that over time things got worse I mean the Encircle sold 7, 8, 9 million copies worldwide but at the same time And a lot of people are swayed by the anecdote.

23:13So whether it's COVID, whether it's vaccines, whether it's a naive story, whether it's Bitcoin, whether it's stuff about elections, we're swayed by the anecdote. So our world is becoming more complex, requires more statistical sophistication, while social media is driving us to the most primitive way of thinking. Sorry to interrupt on your face. No, no, no. This is actually exactly what I wanted to ask you. Something that I've actually always wanted to ask you for a long time is, is there a tension between, you know, you say in a lot of your works that we shouldn't trust experts necessarily. You should be wary of, you know, I think you call them either bullshitters or other words.

24:03But on the other hand, you know, with something like the vaccine, I doubt that the average person has the scientific background to look at the literature and say, oh, this makes sense or it doesn't. And in that case, it seems like we should be trusting experts. So how do you square those two things? Yeah, no, I made the tableau in the black swan to answer your precise question. I had to explain in which field the expert is an expert and which field the expert is what I call a BS member. And the difference has to do with fat dance. If the macro is much easier to micro BS, then micro BS. So in that tableau, I said the dentist is going to be an expert at dentistry.

24:51The plumber is an expert at being a plumber. But the macroeconomist, we're not sure, is an expert at macroeconomics. And the same thing happens in medicine. Epidemiologists, we're not really experts at what's going on because it's fat-tailed. But doctors, doctors, doctors, and visual doctors is going to be an expert at that. And we're dealing with thin-tailed processes when you look at type series for vaccines and things like that. Vaccine is a thin-tailed thing. It's not a fat-tailed one. so the and that's the difference with GMO so it's synth-tailed versus fat-tailed and of course it would be too complex to explain here but I explained it in the black swan it's the difference between the income of a speculator and the income of the dentist one has winner-take-all effects the other one is more say narrowly distributed so this is where where I saw mainly the difference between expert and non-expert.

25:47Later on, I did some more thinking and skin in the game, say, how can you solve the problem? And I said, okay, it's a difference between skin in the game. That if you have skin in the game, then you have survival, and then we know if you're an expert. Or if there's any way to bust your claims, okay, and make you exit the pool, then, of course, an expert will have a filter eliminating pseudo-experts, particularly those who represent risks for others. A surgeon who does bad surgeries is going to exit the pool. So there is a mechanism in surgery. There is a mechanism in economic life. A grocer who doesn't understand balance sheets or doesn't understand cash flow will go out of business.

26:32But there are places where the process is delayed, namely technology, namely macroeconomics, economics. But I guess the difference, I keep going back to the difference say your plumber is an expert at plumbing but forecaster is not an expert at forecasting and there are fields where you have a lot of bs like for example psychology psychology or what i mean economic psychology not clinical the one that deals with biases and stuff like that and and there's all bs and they can't be caught whereas medicine is on firm ground of course, then it's not perfect. Medicine made a lot of mistakes, but it's fundamentally self-correct.

27:15So I get the distinction, but I guess my other question is, you yourself, as a flaneur and a thinker, you go from topic to topic to topic, and you say that you're... Let me tell you my rule. Let me tell you my rule, Casey. My rule is I publish in purely journal in these topics too professional and that's my problem with peterson all the guys is that i speak about men but i have seven uh papers and i mean a lot more than the local doctor in in medical uh topics okay whether it's published in medical journals or published in other scientific fields i talk about genetics i have two published and two coming in genetics Actually, one published, one accepted, one in two coming in genetics.

28:07So basically, I never talked about the subject unless I engaged the expert. And that was my fight with a lot of people. So my idea is not necessary to publish a peer-reviewed journal if you are in a practical profession. Like if you're a truck driver, you can talk about trucks. You don't need to publish. But if you're sitting in an ivory tower somewhere, you need to engage the professional, not be an expert just on Twitter. And that's my rule. And people don't realize that I'm subjecting myself to that discipline. So I did 80 papers after Black Swan. 80 papers, technical papers. Why? Not because it's not for the image.

28:53is because I require from others some kind of technical expertise before listening for them. Speaking of, I guess, bullshitters, and speaking of Twitter, and speaking of people who say a lot of things on topics that they either are not experts on or have not published in a rigorous manner, there is a certain... That's like 90 % of Twitter, Sheriff. That's true, but there is a certain class of people that, Nassim, you have been going back and forth with venture capitalists. For several years now, many of the prominent ones have fashioned themselves as these sort of like philosopher kings weighing in on everything from tech to politics to what the Fed should do to declining fertility rates in the West and all these things that they're up and arms about.

29:41And they've gotten really loud about how banking works in the wake of the failure of SVB. You seem to have a special place in your heart of disdain for many of these people. because of course your natural inclination is to believe that venture capitalists do a great job that they contribute to society that it's thanks to them that we have this whatever computer program we're using now to you know for this podcast that's the inclination when you scratch you realize that maybe maybe maybe that was a game but the game has changed dramatically and you have a bunch of people who package companies. They're good at packaging companies.

30:24And of course, the thing has positive characteristics. And not only that, but they think that society owes them something because we use an iPhone. So they have this feeling, hey, you know what? You're using an iPhone, therefore you owe me something. So come in and bail me out. Plus, a lot of these are libertarian. But it so happens that a lot of people are libertarian until they have the first drawdown. So DC, I mean, in principle, it's a very noble profession. Old professions are noble in principle. But you want to avoid the rent-seeking by that profession as a whole. And this is why every profession, although you have peer review within a profession, in economics, you have to just make sure there's some accountability, external accountability, or an adult supervision from the outside It looks like VCs are not doing what they claim to do.

31:22I mean, think of all these billionaires, and you realize that a lot of these billionaires are billionaires from funding. If Tracy and I started the company tomorrow, we put$10 ,000 each. Is it okay, Tracy, we'll put$10 ,000? I think maybe I can afford$10 ,000. Tracy's in for$10 ,000. She's got back from the Seychelles. Okay. So Tracy and I put$10 ,000. And now we have companies worth$20 ,000. And then we decide to sell to Joe 1 % of the company for$1 ,000. Guess what? Tracy and I now have 49.7%. Our$20 ,000 became almost$50 ,000. Joe, you're good for$1 ,000, right? I can swing that. Exactly. So, and then you have a friend who's going to spend another K to buy 0.1 % of the company and so on.