Wednesday, June 27, 2012

That man...

I have disagreed with him in the past for many things (not least of which is his propensity to claim that the future of complex systems cannot be predicted...while simultaneously proclaiming the future of Western Civilization is dire), but the following passage is flat out true.

In his most recent work, the statistician and options trader turned
philosopher Nassim Taleb asks a wonderful question: “What is the
opposite of fragile?”

The answer is not “robust” or “strong”- which is probably what you
were thinking - because those words simply mean less fragile. The true
opposite of fragile is anti-fragile.

A system that becomes stronger when subjected to perturbation is
anti-fragile. The point is that regulation should be designed to
heighten anti-fragility. But the regulation we are contemplating today
does the very opposite: because of its very complexity – and often
self-contradictory objectives – it is pro-fragile.

Over-complicated regulation can indeed be the disease of which it
purports to be the cure. Just as the planners of the old Soviet system
could never hope to direct a modern economy in all its complexity, for
reasons long ago explained by Friedrich Hayek and Janos Kornai, so the
regulators of the post-crisis world are doomed to fail in their
efforts to make the global financial system crisis-free. They can
never know enough to manage such a complex system. They will only ever
learn from the last crisis how to make the next one. Is there an
alternative? I believe there is. But I believe we need to go back to
the time of Darwin to find it.

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