Hello, OddLots listeners. You are listening to another episode that was recorded live in New York City at our event on June 26th. This time it's with the one and only Nim Nicholas Taleb, distinguished scientist and adviser at Universa Investments.

Nim, what's your definition of a good life? What should we be aiming for?

I mean the the a lot of people think that we're programmed to be happy and stuff like that. In fact, we're programmed to feel useful.

That's a good life. Or I mean you don't have to be martyr to feel useful. As a matter of fact, martyrs go too far and if you look at their death typically in history, you realize they could have waited a decade and the problem was solved itself by self, right? So think of all the wars and hey the Vietnam war took care of the self or the so whatever. So, so let's forget about martyrdom except of course in narrow cases where you save someone. So the idea is to be useful to others and then the idea is you know to share your mistakes as you grow in age to share your mistakes with society so they can build on it. That's my idea of a good life. For a lot of people, good life is hydonic in the sense that they have a chef flown in from Europe to eat some complicated food uh that our friend here, you know, just would not approve eating, you know, not nonstakes and complicated thing with long long names and uh so that that's a hydonic approach to things. Mine is you feel useful. So whether you have a family and you're providing for them or if for a lot of people who don't have a family yet or may not have a family because in the past most people didn't have a family a lot of people were orphans a lot of people were uh had didn't had children who didn't survive so the idea is to be useful to the community in general.

So we talked about this in the market context at the very beginning but does you know I feel this poll to basically always look at my phone to monitor the latest headlines. Sometimes I don't think like I'm the best parent because I'm looking at my phone when I should be with my family as you mentioned. How do we be useful? Bombarded time we're just being bombarded with events beyond our control.

Okay. Yeah. But but you're we're better off than we were today. Um 40 years 50 years ago before many were born perhaps even you. Right. So the you don't realize that we spend about a century in front of a TV set.

Oh that's right.

Or reading papers where you're on a receiving end but not providing anything in return. So it was a centralized information uh era that started you know uh with modernity and and you realize you should see the families eating their dinner in front of the TV set. Basically you're receiving information whereas organically in the past the way we dealt with information was by trading it. It's like Twitter. You you you give information, you receive information. So you go to the barber, someone gives you information, and then you go to buy fish, you give the fish monger information, and then rumors start going. So, and now we're close to that period because you're not just receiving stuff, you're also tweeting, you know, so although your spouse, I'm sure, tells you not to tweet from home. That's wrong.

That's correct. That's correct. Okay. I guess it's true. When we're trying to get Joe's attention, we send a DM doesn't respond to anything.

So, I'm sure he's tweeting. So you're feeling you're not just receiving noise, but you're creating.

So I'm contributing. I'm being useful by contributing to the noise. Thank you. Thank very validating.

Wait, but do you personally enjoy being on Twitter? Because I read some of your tweets and uh you know sometimes you seem a little angry.

No. So just a little if I were tweeting now in front of all of you. Yeah. The tweet would look angry but my face I'm often giggling when I'm tweeting.

All right.

I'm often giggling. So, the idea is to separate your your uh public persona from your private life.

By the way, before we forget, before you leave tonight, someone DM'd me and said, "Can you please ask Nim to unblock me on Twitter? I get these all the time. It's probably the most remind me before you leave. It's a seemed like a nice guy." And so, they all say, "Oh, sorry. I had a drink or I don't know."

Wait, we should actually because of Bitcoin because I chain blocked. No, when you have a smear campaign, you chain block. So the friends, if someone bullies you or pro, you you block their friends as well. Making it was possible at a time.

Wait, how many people here have been personally blocked by Nim Taleb?

Not that many. Not that many. It's a small number. It's not because No, no, no. a random room in New York. I stopped I stopped a couple of years ago from using the chain blocker.

Yeah.

One because it had a lot of type two error that the you know the false positives and uh the other reason is uh because when Elon took Twitter he banned these uh bots.

Yeah.

So so they can't operate anymore. You got to do it manually.

Oh like the third party apps that you Yeah. Yeah. Exactly. They could use to block someone their friends the friends of their friends. a friend and friends of the friends and all of that to yourself.

Are you surprised that in a year of just like unbelievable headlines seemingly day after day multiple wars going on not to mention the trade war and all of that everything else Doge etc that the markets are not crazier than they are

let me compose a tweet that maybe I'll post is uh for Trump one okay Trump one was taken uh literally by his enemies by his uh and metaphorically by his friends. Okay. Trump too is taken metaphorically by his enemies and literally by his friends.

Explain.

So whatever he's saying now, he's pretty much doing I did you believe that he was going to start these tariffs. They make no sense. I mean it make sense to get elected in Pennsylvania, but but I mean it's not a kind of thing you do really. And and it turned out he he meant it. It was not just, you know, uh, a vague, uh, it's really an oral metaphor. It was real. He wants tariffs. So maybe he wants to destroy the American economy. Maybe that's his wish. And, uh, and you could probably put a dent.

And yet, but it's not work where stock market's at alltime high.

Sorry. The stock market is first of all, you have to separate the health of American companies.

No, I get that.

your the income of the American who went to uh Stop and Shop or what's this thing in your area? Not Whole Foods. You know, you guys go to Whole Food, but normal people go to Costco, whatever. Then you look at your bill, right? And and the bill went up practically for everything and their income did not. and tax breaks to come are not going to help those who don't shop at tofu because it's the the the poor people you don't pay taxes anyway so so they're not going to get break from that so the idea is there's a lunacy in in these tariffs I can understand that we need to protect pharma we have some strategic interest in this okay you protect the industry you want to make sure you don't depend on China for other things but it it's a lunacy to try to switch with 4% unemployment in America plus or minus from high margin you guys are all hard margin all right to low margin right high margin audience yeah we have a high margin audience to low margin right occupations right

yeah we have a high margin audience to low margin right occupations right

so now we're going to make socks can you imagine the high margin so making u making films we're going to make socks and and then also misperception of the whole process of a lot of things in um in in basic uh you know uh trade accounting like uh they say oh they're rip they're ripping us off I mean I'm a dentist all right and I go buy my bread it's ripping me off right I should make my own bread and and then the president probably the baker should be a dentist so the the whole the whole idea is not is it doesn't stand on and plus they have You you know if someone is not very intelligent or not very skilled and you can detect that at at it's like arbitragees. You guys are from financial audience and we call that trading against themselves. They do a series of trades that end up being closing a loop being circular but was a loss. All right. They used to call that Texas trades but I think that the state of Texas has been uh unfairly you know defamed. Yeah. Know Texas trades in general. One of them is Texas Hedge, right? So the So for example, they have tariffs on components that you would use to build a computer in your basement in New York. Okay? But if you bought an Apple product, then there's no tariff. Although that's made in over everything is made overseas, manufactured. Okay. So this is an inconsistency.

So there are plenty like that. Sure.

And there's also what's his name? Um the secretary of treasury is like secretary not treasury secretary of commerce is yeah he he he definitely someone should hire him for comedy because he was saying first of all he wants he he he he doesn't the inconsistency he didn't realize he said oh we're going to raise so much money from tariffs and and and then when you ask him you mean that the economy will not adapt to your tariffs by by replacement he didn't think about it and and and he wants us to produce to pay tariffs on bananas so we're gonna have substitutes or he he spoke about wine he said oh people will buy American wine but what happens if French the price of French wine goes up okay

okay

there's something called substitution I don't know if people do that in Europe they teach high school economics I mean for ch children where they teach substitution right so it's elementary me I mean I'm saying that he Trump should have hired If you if you could find people who have some skills. All right.

I can't wait to develop my skills growing my own bananas. Banana arti. Sorry, I can't talk tonight. Okay. I was going to ask, you always preach skin in the game.

Um unlike us journalists. So, I got to ask, you're still an adviser to Universa. What's been going on there? What are your returns like? Give us all the numbers.

Okay. No, I so this is not the place to discuss numbers. Uh you won't get all right but you can get a general approach and philosophy uh that I have now to describe in in a in a format compressed format of what we do and how we do it. Um we can safely say that as usual uh whatever we're doing worked okay in a sense that the idea the idea let me the idea the idea is that you got to look at the return of that hedge you got to return the portfolio that was hedged because sort of like when you when you have an insurance on your house all right you look at the package house plus insurance you don't look at insurance as a tradable think today I'm not going to have insurance, tomorrow I'll have or how is that paying off? You look at the package. Okay, insurance allows you to buy a bigger house because you know your your total risk is lower in the case of stuff like that.

So, it's the same situation and and the stock market rallied which which mean that not only did the hedge do okay, but it wasn't needed. So, you're like making money on your insurance. So netn net that story continued and we've been doing it now for uh time flies. Uh we're in 2025 25 minus uh oh it's a lot right so we've done it for 18 years 18 19 years directly was universal and then before of course an iteration before and it is that it's the same story we didn't change strategy for a second and uh we will not change strategy so basically that's what we do is the same thing it's just it's getting bigger that's it

well wait there are a lot more volatility events nowadays. Do you not adapt to that at all or take that?

Well, let me tell you if you look net net first of all I don't look at volatility as volatility okay in in my technical work and universal doesn't look at vol you look at for example you can have a tail event and then you can have or you can have regular volatility so a lot of people are overall by regular volatility and typically what they call regular volatility I learned the linguistics of of that business is when the market goes down they don't in the old days when they're losing money they would Okay. All the markets are volatile. Volatile doesn't mean it's going up. Volatile is not an absolute uh mean deviation. Volatile is negative return. All right. So, so a lot of perception of things of volatility by exact. I mean your profession journalist is of course very important that way you can reveal uh uh bad stuff when it's made and things like that. But but often

did Nim just say something nice about journalism?

Yeah. Yeah. No, no, there are a lot of things. It's an important mission. uh but but but very often uh there's the scaling doesn't uh doesn't quite match like for example people in journalism and this I wrote about in fooled by randomness you should have newspapers or they say length of newspapers now we don't have newspaper but you understand what I mean there should be on days like the stock market crash or on last couple of weeks newspapers should be that big and the rest of the time should be half a page but they have the same length

All right. So that's the scaling problem in journalism. In other words, you have the news 14 and a half minutes plus, you know, of course the Bloomberg uh ad in the middle. So so the I mean that that news bulletin should be variable with with with with the events. You see the idea? So same thing with market movement. So I don't think that we are experiencing real volatility compared to what could have happened and what we have seen with explosive uh markets. Yes.

So, as mentioned, multiple wars going on. Uh we had the COVID shock, we had the inflation shock, we have massive changes happening in the political landscape including uh right here in New York City. Is there an underlying reason in your view why it feels as though big things are happening?

No my whole point is that what to go back to is go back to tail to to what we call about fat tail. Fat tales means the smallest number of event explains the largest number of uh deviations. For example, if you take a thousand people and you have inequality, one person will have most of the money. Likewise, few historical days have most of the information.

Mh.

Like likewise. So this is entirely normal. The point is you can't you couldn't predict ahead of time that you're going to have when you're going to have these days or you're going to have the structure of it is though very very uh uh stable. It is things follow tend to follow a power law. So go ahead.

Oh I'm going to ask a very basic question that I'm sure you get asked all the time but we are all nevertheless very interested in your answer. Um, by definition, black swans, I guess, are unpredictable um, and impossible to forecast. But what black swans do you see on the horizon?

Okay, so this let me rephrase. Let me rephrase it. Okay, there's something called gray swans. All right. So great pandemics were gray swans or or you know gray swans means events that have these characteristics of very small number of events determine large part of the total effect like small a small number of events uh small number of wars that killed most of people stuff like that pandemics. So there's grace sworns and you can say they have a structure. You predict them ahead of time. You don't know. Okay. But what we do is you can figure out if an environment is fragile or not. And in a fragile environments you can say okay this is prone to break if there's a shock. Like in 2007 we knew that banks were fragile.

Why? They were net short volatility. That's sort of my fragility work in antifragile. To answer your question, I wrote antifragile, which on its own became a monster, right? But but the the whole idea is to figure out what can be uh have cascading effects from shocks. Okay, as I wrote to the black swan, it's foolish to say what color truck is going to break a fragile bridge. Okay, but it is not foolish to say this bridge is fragile. It's going to break one day. Don't cross it. Don't don't or or or or invite your enemies to you know

Okay. Okay. What what areas of fragility do you see right now?

So the first one I'm learning. Yeah. The fir Okay. So the first Yeah. The the first one is we have a I don't know if you're aware of it. Maybe people aren't aware yet that I don't know if we know we have a deficit.

Oh, I heard about this. And you know that that you have to borrow, you know, to pay for the interest rates for the interest uh uh ex you know the the uh the the debt that you've had before. And at four north of 4% interest rates, four to 5% interest rate, this is significant means you can have a snowballing effect. You had to borrow more and more and you know that they're not fixing the budget problem except verbally. Hey, we're going to fix the budget. You know, it's all the same story. Uh the structure of the political system unfortunately is driving us there. Okay. So, this is one source of fragility, one main source of fragility. Okay. That the political system is not adapted to that kind of thing. So, what happened in the western world, it's not just a case of United States. It's a case of the western world because you got to look at it as I describe in antifragiles. Think of an S-curve

like China can have rapid growth because they're pulling people out of their beautifully landscaped countryside to pull them in apartment blocks that maybe it's not pleasant for for the people, you know, to to live in in boxes, but that generates a huge amount of economic growth. Okay. So, a lot of people going up the so-called development scale. You're you're on the convex part of the S-curve. Okay. The west is on a concave part of the escort.

So which means that you have two car most except New York New Yorkers live in small boxes like like like uh poor people in middle ages but outside New York City in a real most people have two car garages stuff like that. So you you you we can't you can't grow right and you don't have poor people so you have to import them from El Salvador Panama a lot of people you don't have poor people. So, so you don't to create that kind of thing and and and even and now you don't want them anymore. You don't they don't want you don't want everybody, you know. So, so they have a problem that growth in America is structurally declining.

Yeah.

Well, at the same time, the debt burden is structurally increasing. You see that diversion and that applies to the rest of the developer because you develop, you're arriving to destination. Why are you still borrowing? The problem is most countries tend to borrow when they're already rich, when they don't need it anymore. Just like people, see like people on Wall Street. These people are on Wall Street. They probably borrow a lot now already rich. All right? Whereas poor people don't borrow. So that's a big problem. That's number one problem.

The second one is China is representing a larger larger share of GDP of the world. And so you're going to think that geopolitics aren't going to be the same. And you don't want to live, you know, in the wrong century. Think you're living in this century, think you're in a different century.

All right, Nimb. Yeah. Thank you so much.

Thanks. Thanks for eating cow meat and thanks for the steak. So, next time, let's make sure either have organ food or bring wine.

We'll definitely have wine. Thank you so much. This has been another episode of the All Thoughts Podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway. And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our producers, Carmen Rodriguez at Kerman, D-obenett, and Kellbrooks at Kellbrooks. For more OddLots content, go to bloomberg.com/odlots where we have a daily newsletter and all of our episodes. And you can chat about these topics 24/7 in our Discord, discord.gg/odlotss. And if you enjoy OddLots, if you like it when we do these live recordings, then please leave us a positive review on your favorite podcast platform. Thanks for listening.