Notes below; will organize soon.
"Look at nature"
not like "leverage" or debt
opposite of debt or leverage is redundance
opposite of debt is spare parts
if economists managed mother nature, give one lung to everyone, allow borrowing for optimum efficiency
nature opposite of specialization
not efficient or optimal, but they help...EVOLUTION
Mother nature can show us how to build a robust system
can withstand huge deviations and remain standing
Debt can be a good thing if you are right
debt comes from overconfidence
more confident, less sense to issue equity and dilute your ownership of profits
Humans can't be trusted, we are always overconfident, so go into debt more readily than we should
"moderation" we don't now that moderation means
can express overconfidence with equity and not harm yourself too much
witness the silicon valley bubble vs. current debt bubble
hyperinflation is huge risk with increasing debt to handle the current crisis
What do instead
if you are hungry, you may need to borrow from your uncle to get by--necessary debt
transform debt into equity
instead of forclosing on homeowner, lower his payments on the condition of ownship of 1/2 profits from home when it sells--tranforming debt into equity
Yet those that do the right thing (buy good car, not get into debt) are paying for mistakes of those who did the wrong thing
What is evolutionary purpose of being fooled by randomness (since we are so easily)
build an ecology so that people can fail without the system failing....equity vs debt.
1800 hedge funds failed with little widespread consequence
mistakes---we need to be able, as a system, to make mistakes and survive, learn, do better next time
how do you identify domains where black swans are a risk?
can you lose back everything you gained, then your in a black swan domain
if you can win back everything you spent, you are in a black swan domain
not like "too big to fail"
avoid those at all cost to preserve a system
financial system currently doesn't do that
vulnerable to "too big to fail" entities failing
- how to protect from inflation?
need to hedge, protect from the hyperinlation
options high cost for currency expecting hyper inflation
put money into less inflation vulnerable currency?
|Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb|
|The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb|