Learning to Love Volatility
In a world that constantly throws big, unexpected events our way, we must learn to benefit from disorder, writes Nassim Nicholas Taleb.
http://online.wsj.com/article/SB10001424127887324735104578120953311383448.html
This is a _really_ interesting article, I strongly recommend it to my reader(s). The author’s comments really mesh with my feelings and he hits on all sorts of topics that I also feel are interrelated. Antifragile really seems like it should be the next ‘big thing’. To attempt to whet your interest in reading the whole article, below are his five policy rules he believes should become part of our society’s DNA:
Rule 1: Think of the economy as being more like a cat than a washing machine.
Rule 2: Favor businesses that benefit from their own mistakes, not those whose mistakes percolate into the system.
Rule 3: Small is beautiful, but it is also efficient.
Rule 4: Trial and error beats academic knowledge.
Rule 5: Decision makers must have skin in the game.
I would like to particularly highlight that last rule. What we have created today in our so-called capitalistic society (it really is oligarchical and has nothing to do with capitalism) is the exact worst case scenario for a strong and stable economy. By tying compensation to the stock price and to short-term periods we have created an entire culture of senior decision makers whose only purpose is to ‘pump and dump’ their own company. This culture is so pervasive that everyone actually thinks it is normal for CEOs to get paid 10’s of millions a year and then throw stock price bonuses on top! People who lack ‘skin in the game’ have absolutely no incentive to anything other than maximizing their short-term value. We have this giant merry-go-round in our senior CEO ranks where the few at the top take turns running different companies into the ground, then drift off in their platinum parachutes to sit on the bench for a while, then repeat at another company.
But hey, with the oligarchy in control, I don’t see any of the author’s rules being implemented, but it is a nice fantasy to think about as an alternative to dwelling on our current depressing reality.
