The Merge: Ep. 03 | The past is not gone; it lives on in the future
What this covers
In Episode 3 of The Merge, Dr. Nassim Nicholas Taleb challenges how we view identity, risk, and history. He explores how our past shapes our future, critiques modern systems, and urges a fresh look at the Levant as a living, interconnected cultural mosaic.
The Merge is a production of the Maroun Semaan Faculty of Engineering and Architecture at AUB. The podcast was recorded at the studios of the Abdulla Al Ghurair Hub for Digital Teaching & Learning at MSFEA. Special thanks to our team Karen Kelaita, Rima Ghannoum, Christina Sleiman, Mariam Noureddine, Kassem Zaayter, and Dana Ghalayini for recording, editing, and production.
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Taleb argues that randomness and uncertainty are epistemically defined (dependent on observer knowledge), that probability distributions fall into three classes with fundamentally different properties, and that fat-tailed distributions—where extreme events dominate outcomes—require different risk management frameworks than the Gaussian/mediocre-stan paradigm that dominates policy and academic thinking.
- Randomness is not metaphysical but epistemic—a pregnant woman's baby gender is random to a stranger (50/50) but deterministic to the doctor (95-100%)
- Three distribution classes exist: extreme-stan (power law, dominated by rare events), mediocre-stan (Gaussian, driven by the mean), and an intermediate subexponential class; most real-world risks (pandemics, wars, market crashes) are extreme-stan but analyzed with mediocre-stan tools
- Fat-tailed phenomena require early reaction, cutting transmission, avoiding forecasts, and managing ruin risk rather than statistical averages—frameworks absent from mainstream epidemiology and risk management
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Overarching theme across five (soon six) books: We don't understand how the world works, and that's not a problem IF we have asymmetry of decision. If uncertain about the source of water (harmful?), don't drink it. If uncertain about fossil fuels' climate effects, don't use them. Asymmetry of decision (precaution) is the engine behind fragility and antifragility frameworks.
“so to summarize I mean my work I have the answer inserto five books so far maybe six soon I I don't know for now it's Five Books Okay around the theme of uncertainty and the overall theme is we don't quite understand how the world works but that's not a problem so you so why isn't it a problem because because of a symmetry of decision if this water has I know this water came from auv so got to be very safe but if I don't know I have uncertainty about the source of this water my decision is very simple what should I do not drink it”
The concept of anachronism—projecting modern ideas and categories backward in time—is a fundamental source of error in historical analysis, comparable to survivorship bias in its severity and ubiquity.
“very similar to the survivorship bias we tend to flow backwards modern conceptions okay and when I wrote about the lant we say when we talk about Christianity or Judaism um we use modern definitions post rical Judaism and and flow them back to what they were so this era of anachronism not realizing the differentiation between Christianity and Judaism was different and not realizing Judaism was at a time a religion that was very protic”
Bob Rubin trade: Robert Rubin collected bonuses from Citibank for selling tail events (rare tail risks) while employed, then left the company before it collapsed. He made $200 million in annual bonuses for risks that blow up every 10 years—a mismatch between mediocre-stan thinking (annual bonus for annual risk) and extreme-stan reality (tail events every decade).
“what I call the Bob Rubin trade Robert Rubin was vice chairman of City Bank part of the system he was treasury secretary former partner in K saxs made $200 million in bonuses from $120 million from City Bank for trades I call selling tail events and then of course going bound to go bust he's paid an annual bonus for event that happen every 10 years that's another mismatch between medran and extremist Stan that was not understood during covid so something blows up every 10 years but we PID an annual bonus all right and then when City Bank blew up he got he he he left the bonus he he he kept his bonus”
The value of understanding small probability is critical: if a system has 99% safety, that means 1% annual failure rate, so a pilot with 10 years exposure has exponentially compounded risk; this is why small probabilities of ruin matter more than large probabilities of gain, fundamentally inverting how we prioritize in risk management.
“and people don't realize the value the why small probability is very important that if you're a pilot and you say this plane is 99% safe which is what we use standards and and evidence for for many domains what you'd have no pilot would survive 10 years of flying right”
Skin in the game is also an evolutionary filter: on a highway, you don't see crazy drivers going the wrong direction killing 30-40 people because those drivers are already dead—filtered out. Skin in the game is a filter in the system. If you can cause harm and receive harm, you won't do it for long because the system will filter you out.
“when you drive on Highway drive on a highway even Lebanon okay uh you don't have crazy people who uh because you can easily kill you if you drive in the opposite direction you can easily Kill 30 40 people mhm but why doesn't it happen because people who have these attributes are already dead they're already filtered out they're filtered out so so skin game is a filter in the system you see so if you're not if you can in if you can cause harm okay and receive harm you're not going to do it for long because it will filter you out of the system”
In fat-tailed (extremistan) distributions, everything is determined by the extremes: 2% of companies represent more than 50% of market capitalization; 0.2% of authors have more than 50% of books sold; most academic papers are never cited while few generate all citations.
“everything's determined by the extreme so Give an example take the stock market 2% of companies represent more than half the capitalization 2% um uh the Arts uh maybe 0 2% of authors have more than half the books MH sold or mentioned academic citations same effect uh the bulk of I mean the most academics are hardly ever cited and if you just get all the credit mhm”
In finance, traders cannot lose half their net worth in a day but can lose 100% of their money in a minute—and this happens practically every day in some market. Fat-tailed risk exposure is asymmetric: ruin is possible on the downside in ways mediocristan risk is not.
“most losses come from very few events and uh and and for a Trader like you can't lose half your weight on a day but you can use 100% of your money in a minute and it happens it happens practically every day”
Historically, corporations weren't necessary to have skin in the game (individual founders bore all risk). The shift to corporate structure (limited liability) reduced founder exposure but enabled business growth; however, this also created the 'empty suit CEO' problem: professional managers optimize for short-term shareholder metrics without bearing downside risk.
“and you know the lack of skin in the game as you've pointed out is kind of a it's an attribute of the modern world we're living and and a source of a lot of pain in the end of the day yes I mean started it was NE in the beginning to to have a less skin in game to encourage the formation of Corporations M but even Adam Smith warned about it because you end up having when you have your own company you have soen a game but when you have a corporation you end up having people who cosmetically just good at getting jobs as CEOs and the CEO is not the founder is not the CEO is someone who just playing the game you've talked about empty suits empty suits and and the more person looks like a c CEO the more likely he or she would be an empty suit”
Clawback provisions and hedge fund structure (where fund manager must be invested in their own fund at higher proportion of net worth than investors) attempt to restore skin in the game post-2008, but many corporations still lack this alignment.
“like for example hedge fund don't have that problem because the owner of the hedge fund must be invested in her or his uh funds so therefore if they lose money it's higher proportion of their net worth than any of the investors so um so they have skin in the game but a a corporate uh I mean all these Heroes of Corporation”
Modern capitalism introduced liability limits (corporations can go bankrupt without owners/executives facing personal ruin), which was initially useful to encourage corporation formation. But this decoupled decision-making from consequence-bearing. Clawback provisions and hedge fund structures (where owners must invest in their own funds) are attempts to restore alignment, but most corporations allow CEOs to collect bonuses despite losses.
“so the the this thing distribution was uh communal in other words you communal you bear the cost of a loss that that some of it still exists in the maritime law because you know the law is fuzzy but capitalism is trying to do away with it trying to do away with that distribution of capitalism is about uh neatly defined self standing entities that are even separate from the owner because you can go bankrupt without having to go to death or jail which is good in a way but it has drawbacks that you got to be aware of MH uh on Wall Street in 2008 2007 uh Traders lost went bankrupt kept their bonuses”
In finance, most losses come from very few extreme events. A trader cannot lose half their wealth in a day but can lose 100% of their money (via leverage/margin) in a minute, and this happens practically every day to some traders. Fat tails in finance manifest as tail events occurring more frequently than Gaussian models predict.
“or the League of Nations initially nothing changed it's the same thing in finance most losses come from very few events and uh and and for a Trader like you can't lose half your weight on a day but you can use 100% of your money in a minute and it happens it happens practically every day”
Survivorship bias: traders who survived were observed as rich, but the inside view (from trading floors) reveals many bankrupt traders. Dentists, once graduated, have almost zero probability of becoming cab drivers unless extreme malpractice; traders have high probability of going from rich to cab driver. This selection bias causes people to think trading is stable when it's actually a survival-filtered pool.
“except that that it was part of my treatment of of Randomness not my own Discovery is that you have survivorship bias in other words you have a selection bias uh caused by survival of some entities versus others and I noticed early on that people were were always um a team of full by Randomness always under you know there under impression that Traders were rich and all I knew was bankrupt Traders okay because I was from the inside”
Historical risk-sharing practices: Phoenician and Arab caravan practices involved shared cost of loss—if a caravan was robbed at the tail end, all participants shared the loss. Rhodian law (based on Phoenician practice) formalized this: if a ship sinks, the cost is shared among owner, ship owner, buyer, seller, and all who have financial investment. This distributed ruin risk and created communal accountability.
“there's a communal scan game and and teamwork MH but I spoke about risk sharing and that's uh that was important from our practices both Phoenician and the Arab one that you know when when you had a caravan and uh for the Arabs and um and there theft of you know at the tail end you know PR to you know a lot of uh uh being held up at the end someone's going to come take that they all share the cost I see and uh but the uh the Greek called rodian law is based on Phan Phoenician practice that if a ship sinks it's not just the owner of merchandise who loses uh the property but there's something called appropriation the owner of the ship the buyer the seller and the Whoever has Financial investment in it they all share the cost MH”
Genetic mixing is ongoing: most Western Eurasian populations are a mix of four ancestral groups that have been mixing for millennia. The idea of genetically 'pure' populations is bogus. Genetic arguments for territorial claims are therefore scientifically invalid—mixing is universal and continuous.
“the no the idea I mean in my new work I talk about using genetic arguments is so bogus because wom been mixing the most of what we have is a Eurasian population particularly Western Eurasia mix of four population groups that kept mixing over time you see so what youan you going to stop the mixing you see you know like hey we found the right combination people are mixing you see now they're probably mixing faster than before”
In the power-law/extreme-stan class, everything is determined by the extremes: 2% of companies represent more than half of total market capitalization; 0.2% of authors have more than half of all books sold; the vast majority of academics are hardly cited while very few get all credit; very few scientific papers out of a million per year have any impact.
“but if you take extremist it's the exact opposite everything's determined by the extreme so Give an example take the stock market 2% of companies represent more than half the capitalization 2% um uh the Arts uh maybe 0 2% of authors have more than half the books MH sold or mentioned academic citations same effect uh the bulk of I mean the most academics are hardly ever cited and if you just get all the credit mhm uh you have what a million scientific papers every year uh very few have any impact”
Randomness is epistemic, not metaphysical—whether something appears random depends entirely on the observer's knowledge state. A pregnant woman's baby's sex is approximately 50/50 random to a stranger, 100% (or 95%) determined to her doctor, and the baby's outcome is never truly random but only appears so because the observer lacks information about the deterministic process.
“to me Randomness is epistemic so the example is that of a pregnant woman walking down the street for you and I unless you you know you're you happen to be you know have some inside information exactly previe to some information it's a random number generator all right it's 50/50 approximately 50/50 for her doctor it's it's 100% or or if it's a male you can see it's 100% it's a females like 95%”
A Black Swan's status is also epistemic: an event is a Black Swan relative to what an observer knows, not intrinsically. For a butcher, a turkey's fate is not a Black Swan; for the turkey, it is. For September 11 hijackers, the event was certain; for the rest of the world, it was an extreme surprise.
“when people ask me about a Black Swan um Define the Black Swan is this a Black Swan or not tell them it depends on what you know for the butcher um you know it's not going to be a Black Swan for the turkey it is for those um uh involved in in hijacking the planes for September 11 it was there's nothing uncertain about the event or there very little of certainty about the event but for the rest of us it was Black Swan”
Conventional metrics (mean and variance) used in Gaussian distributions are uninformative for fat-tailed phenomena. In fat-tailed epidemiology, 95-99.9% of observations fall below the mean, so being a good predictor of the mean doesn't capture the distribution's true properties; sampling error is monstrous, the law of large numbers barely applies, and prediction error dominates.
“if you like the the gaussian distribution is based on mean and variance and these are uninformative okay um I remember I had a fight with a fellow whom I met when he was he was humble he's probably the most published person in medicine his name is yanis m so we had a debate uh fight intellectual fight and he was he was saying okay no let's predict uh let's learn to predict the number of deaths and the problem is that you can't really uh rely on prediction because your prediction error is monstrous because sampling error is very high the law of large number is does work at all works very slowly and and and also because you have 95% or to 99.9% of the observation falling below the mean”
In extreme-stan, the scaling of probabilities is non-linear and counter-intuitive: the probability of one or two people dying in a car accident is higher than one or two people dying of COVID, but the probability of 1,000 people dying of COVID in the same town is HIGHER than 1,000 dying in car accidents. The tail dominates as scale increases, so you cannot reason from individual risk to population risk in power-law domains.
“the way scaling works for extremist time is weird so the probability of you and ey of dying of a car accident okay of of of of any two people dying of of or or any hundred people dying of car accident is much lower of than the probability of dying from Co let's say that we were in 2019 it held true but the probability of a thousand people dying of covid in the same town is higher than prob thousand people di of accident in the same town understood so when you start working with extreme uh so with the mentality you start with the extremes and you tell yourself if I were to go to Mars spend six months and had the news that 100 million people died in the United States what it likely more likely to come from is pandemic absolutely”
Phoenician and Greek genetic distinction was purely linguistic and cultural, not genetic. The same genetic substrate is dominant in Northern Syria, Greece, and Greek islands. Ancient distinctions invented later (like Semite vs European) are anachronistic projections.
“when you look at syrians and Greeks you say oh the are semites uropean oh that is bogus because language change but the genes so they same genes to is a dominant in Northern Syria and Greece and among Greek Islands so distinction Phoenician Greek was only linguistic”
Turks are genetically very similar to Syrians and Greeks, not to Mongolians (their Central Asian origins are ~5-7% of the population at most). Turks are Canaanite/Syrian/Armenian converts to Islam and Turkish language. The linguistic/religious shift was rapid (minority rule); genetic composition remained continuous.
“so maybe there's this effect I don't know about teams right how and the end is important in other words more is different MH so some things I mean the Swiss work better at teams but individually you know I don't know they have a lot of skills I mean they were the least educated country in Europe I mean years ago so I I don't but I mean I have to think of the thing about how uh there's a communal scan game and and teamwork MH but I spoke about risk sharing and that's uh that was important from our practices both Phoenician and the Arab one...but there's another thing we go even Beyond when you look at syrians and Greeks you say oh the are semites uropean oh that is bogus because language change but the genes so they same genes to is a dominant in Northern Syria and Greece and among Greek Islands so distinction Phoenician Greek was only linguistic so again the in relation to the uh minority Rule and majority rule yeah what you're saying is the the genetics move slowly those that's a majority rule problem yeah and language culture religion can can move quickly and be a minority rule exactly”
In power-law/extreme-stan domains, luck plays a much bigger role than skill, because there are outcomes that are much more explained by variance than by drift. Hard work gets you a nice car, house, or watch in a Gaussian world, but to get a private jet or island you need hard work PLUS substantial luck—the variance dominates the deterministic component.
“so extremist stand you have a lot of unfairness MH uh luck plays much bigger role I mean skills play a role okay but it's sort of like I gives a difference in kistan you need uh hard work will get you a nice car a nice house maybe nice watch and for you nice bicycle for you too yeah so but a uh but to have a private jet a private island all that you need the same amount of hard work plus a lot of luck so because there's there's some outcome that can be much more explained by variance than by uh what we call the drift”
Jack Welch (former GE CEO) was a fraud: he would buy and sell companies, keeping profitable ones and offloading losing ones, using accounting tricks to show cosmetic earnings growth. He collected bonuses and became a billionaire without bearing downside risk. This is an example of the 'Bob Rubin trade'—capturing upside without downside.
“all these Heroes of Corporation what's his name this guy what's his name um Jack Welsh he was a fraud yeah I was saying that when he was alive so this is why I can continue it's not like but he was a fraud but it took a long time for me to figure out he was a fraud he why was he a fraud he would manufacture U cosmetically uh good earnings uh you collect companies right you buy companies some of them make money some of them don't the one that make money because of the the accounting valuation he would sell them for a profit and then he would keep the rest so it's an adverse selection right in the portfolio”
Genetic analysis confirms: Christian Palestinians are genetically closest to what we have as ancient DNA. This is expected because religious conversion doesn't change genetics—the underlying population remains. Genetic distance measurements show that isolated Mediterranean populations (like Lebanon) have changed less over millennia than populations that received northern/Eurasian migration (like Greece).
“the evidence is clear that the Christian Palestinian are the closest to what we have ancient DNA the Discover budies on ground mhm the closest thing of Christian Palestinian not because like I guess someone like you all right so because they uh there there's something about I call it the U the bran Bridge think that most likely Place someone's going to be after 2,000 years is where the person was years ago”
The US took 13 months to shut down the border during COVID, using a paradigm of mediocristan assumptions, and epidemiologists offered arguments against quick action that were mathematically non-rigorous, revealing lack of rigor in medicine generally and the need to focus on medical statistics where large-scale decisions are made without understanding local properties.
“it took 13 months for the United States to shut down the Border I mean so shut down the Border you don't have to close the border you just have to test like in quarantine 13 month we're testing in Beirut you see because we were we were we were stuck in another Paradigm I mean we're stuck in a paradigm of mediocris stand and things being uh predictable and exactly I mean they're using tools of show me your forecast and your forecast error is forecast error is in in Shan has a different property absolutely so I explain that mathematically luckily we got published in good journals”
The interevent time between very large wars is ~250 years; between medium-large wars is >100 years. Therefore, you cannot claim the world is safe because 75 years have passed without a major war. This is a property of history that hasn't changed despite education, UN creation, League of Nations—nuclear war risk remains because large-scale conflict is a fat-tailed phenomenon.
“for example the interal time between large Wars is 250 years okay okay very large Wars um medium large Wars is more than 100 years so you can't say hey we have 75 years without a war without a big war the world is a safe place you can't which is why uh you have to worry about nuclear war or to something because it's a property of History hasn't changed okay education didn't change it the creation of the UN didn't change it nothing right”
Macro BS (bullshit) exists because macroeconomic policies have no skin in the game—effects are not visible and economists cannot be professionally eliminated for being wrong. Micro BS is nearly impossible (plumbers, dentists must be competent or die professionally). This explains why there's so much incompetence among economists—they survive despite being wrong.
“so this is an example of lack of skin in the game if you have to have contact with reality so you tend to see a lot of incompetence among economists MH there no contact with reality say he's a great Economist why well because he got the Nobel know he gave them Nobel this is why we have all these guys go bankrupt actually after the Nobel uh some committee all right it's like with a restaurant whereas a plumber you know it's impossible to be incompetent and survive absolutely okay dentist same thing say same thing for dentist it's the same you have to your SK are visible so you can when I say macro mcro BS but not micr BS got it”
Turkey example: Turks don't look Mongolian; they look like Syrians and Greeks. The conquest of Anatolia involved conversion to Islam and Turkish language, not genetic replacement from Central Asia. Genetic studies show Turks are largely descended from local (Greek, Armenian) populations with only ~5-7% admixture from Central Asian populations.
“but there's something quite uh important about that Minority rule is that you notice that places like turkey mhm that the think the first thing that hit me when I went to Turkey so I looked at Turks that I tried they don't look Mongolian they look like syrians and Greeks said okay H maybe they change religion and like language well that's what happened mhm so the Turks are largely uh Greeks Armenians and um and turds that are converted with small minorities 7% 5% of people from Central Asia okay or maybe higher still there's a mixer mixture”
In thin-tailed (mediocristan) distributions, the mean and variance are informative summaries and single events have negligible impact; annual food consumption is a classic example—no single day can change annual consumption by more than ~0.3%, making extremes irrelevant.
“nothing can really impact the average when you have a lot of observation so let's take your annual consumption your Bay probably one the best series to eat 365 days a year not a single day can change your annual consumption our annual consumption than 3id 365 by 1% MH it's not a single day so people were were got up and ate a lot on uh Christmas or or what have you it's not going to really affect the mean exactly it's not doesn't have a cumulative effect it's very small so the extreme is interesting but doesn't play a huge role”
The probability of a pilot surviving 10 years of flying with 99% per-flight safety would be one in 10^30, whereas pilots routinely survive 10 years. This shows that for systems with no recovery from failure, you need much higher safety standards (effectively 100%) than aggregate probability metrics suggest.
“if you're a pilot and you say this plane is 99% safe which is what we use standards and and evidence for for many domains what you'd have no pilot would survive 10 years of flying right I mean I mean the probability is one in 10 to the 30 maybe PL surviv 10 years if it was 99% 9% safe okay it has to be uh so you have to have much higher standards when you have ruined things without recovery”
Life expectancy demonstrates the three distribution classes: (1) In extreme-stan (aging-dominated, like humans), as you age, your remaining life expectancy actually shortens non-linearly—at 80 you have 12 more years, at 100 maybe 2.5, at 120 just minutes; (2) In intermediate/memoryless (accident-dominated, like crocodiles), life expectancy stays constant regardless of age—a crocodile at birth has 40 years, at age 10 has 40 more years, at any age always 40 more, because accidents are independent of age.
“let me um so Define the three classes in term life expectancy in in medoc Stan uh let's take aging all right okay your uh as you get older your life Effy shortens so conditional on being zero your life prancy is 80 years but if you're 8 years old your left pregnancy and another 12 mhm at 100 maybe two two and a half years and at 120 few minutes right so that is the uh so that's uh the first class”
Modern definitions are anachronistically applied to history: contemporary concepts of Christianity and Judaism are different from their historical forms. Judaism was originally a proselytizing religion seeking converts; the distinction between Judaism and Christianity emerged later through theological development. Using modern religious definitions to make historical claims about ancestry and land rights is scientifically invalid.
“I talk about time at time and very similar to the survivorship bias we tend to flow backwards modern conceptions okay and when I wrote about the lant we say when we talk about Christianity or Judaism um we use modern definitions post rical Judaism and and flow them back to what they were so this era of anachronism not realizing the differentiation between Christianity and Judaism was different and not realizing Judaism was at a time a religion that was very protic MH people wanted you to worship their God okay that was the one they worshiped in the temple of Jerusalem”
Foreign-born professors dominate US STEM fields; domestic talent is nearly absent. By contrast, the American University of Beirut has local talent participation. This suggests the US STEM system is being sustained by immigration and brain drain from the East, not by domestic production.
“the US uh now still has good scholarship but it first of all thanks to foreigners because most professors I I was in an engineering school in the US and we didn't have any uh domestic uh Talent zero nor domestic students yeah especially in the stem disciplines it is here it's the first place here where I don't see you know uh that effect okay non non locals”
The law of return—the claim that Jewish people have a right to return to Israel based on historical ancestry—is based on a false premise. Genetic and historical evidence shows that Palestinians already returned and never left, making their historical claim to the land stronger than claims based on religion or ancient ancestry.
“then I read schom Mand and schand was criticized say oh it's not rigorous in fact it is rigorous that he said that the bulk of Jews from Yemen are converts under the hamites the B of Jews from uh Morocco are converts and of course there's a kesar theory which may not be correct but we know that a lot of the ashas come from north of the Black Sea I mean they're there MH so then it hit me that that law of return is nonsense MH because when we read about ancient Hebrews there the people are there they already returned they never left they never left”
The 'minority rule' governs languages, religions, and cultures (not populations or genetics): a small number of people can shift the entire group's language/religion if the majority must accommodate them (e.g., at a table with one non-Arabic speaker, 11 others switch to English). This explains how religions and languages spread despite stable genetic populations.
“and I realized from another piece of work that's in uh the the uh skin in the game in the incerto is our minority role MH that there's a big mistake people make about mixing cultures and population uh populations follow the majority rule genetics follow the majority rule uh whereas languages religions and cultures follow the majority of a minority minority let me explain yes please let's go into that uh we're in Beirut at AU what is the language used Arabic English no no just let's say there's a German person sitting here 15 people who instead of speaking Arabic 11 Arabic you switch because one person doesn't understand it okay absolutely uh so languages uh travel faster very fast and culture travel fast was a genetics you got to mix people and wait for generations”
Teamwork and F1 racing: successful teams (like Formula 1 teams) have high accountability where everyone knows when someone didn't do their job well. The whole system (race strategist, engineers, tire technicians, pit crew) functions like an orchestra because each person's performance is visible and failure is immediately apparent. This creates natural skin in the game at a team level.
“the way the team works there's so much accountability there's so high expectations everyone lets everyone know when they didn't do their job well and everyone knows if they did their job well or not and functions as an orchestra from the race strategist in the moment to monitoring the tire temperatures and what the competitors are doing to the engineers who were thinking about the fluid dynamics around the car to the race car driver themselves”
Shlomo Sand's genetic analysis: the bulk of Yemenite Jews are likely converts (Hamites); Moroccan Jews are likely converts; Ashkenazi Jews likely descend from populations north of the Black Sea (Khazar hypothesis, though disputed). This genetic diversity shows that 'Law of Return' assumes a uniform Jewish ancestry that doesn't exist genetically.
“then I read schom Mand and schand was criticized say oh it's not rigorous in fact it is rigorous that he said that the bulk of Jews from Yemen are converts under the hamites the B of Jews from uh Morocco are converts and of course there's a kesar theory which may not be correct but we know that a lot of the ashas come from north of the Black Sea I mean they're there MH”
Criticism of the West: the US faces structural problems in three critical sectors—healthcare (extremely expensive with poor outcomes), education (costs more and delivers less than alternatives like Lebanese education), and military (China produces drones for 7% of US cost). The West has high quality-of-life indicators but faces headwinds and saturation.
“something went wrong with in three Fields the first one is uh Healthcare cost tons of money to get nothing you're subsidizing some kind of research or something the second one is education you pay tons of money and you get better education elsewhere I mean my education in Beirut was better than what I you know my children got in the US and the third one is the military MH like China produces drones for 7% of what it cost the US”
Geopolitical shift: the center of gravity of the world has moved multiple times historically—from China/India to Europe (only after Industrial Revolution and discovery of America), back to the East as Asia rises. The Roman Empire shifted East because that's where the wealth was. Today, the East (China, India, Turkey, Iran) represents the future, not Europe.
“traditionally it was here at the center gravity of the world moved from China India to the Europe only after the Industrial Revolution after discovery of America then Industrial Revolution so remember that the Roman Empire had to move East because that's where the money was so so I think that there's a headwind it's not like I'm not uh preaching in the desert there's a headwind and people soon will stop going to Europe because to go to Europe to work you know European are leaving Europe for work um scientific researchers concentrated now in China already all right”
The Palestinian people and the land: ancient inhabitants (ancient Hebrews/Judeans) never left the land. Palestinians are largely genetically descended from the ancient inhabitants who converted to Islam and adopted Arabic. The 'Law of Return' is baseless because the original inhabitants are still there—there is no 'return,' only displacement.
“so it hit me that that law of return is nonsense MH because when we read about ancient Hebrews there the people are there they already returned they never left they never left and um and they're the Palestinians right and they if stubborn because ancient Hebrews were stubborn these guys are stubborn okay they're people of the land and then of course and and the other thing is that nobody came to what they call land of milk and honey they're already there okay maybe a few preachers came from Mesopotamia like Abraham maybe a few preachers or what but they were they were there people invent stories about their own background”
Life expectancy in thin-tailed systems increases with age: if you're 80, your remaining life expectancy may be 12 years; if you're 100, your remaining life expectancy is 2-2.5 years. The older you get, the longer you statistically live (because you've already survived many hazards).
“let me um so Define the three classes in term life expectancy in in medoc Stan uh let's take aging all right okay your uh as you get older your life Effy shortens so conditional on being zero your life prancy is 80 years but if you're 8 years old your left pregnancy and another 12 mhm at 100 maybe two two and a half years”
In the Gaussian/mediocre-stan class, no single observation can meaningfully change the mean when there are many observations. For example, eating more on Christmas cannot change annual food consumption by more than ~0.3%, so extreme days have negligible impact on the yearly total.
“nothing can really impact the average when you have a lot of observation so let's take your annual consumption your Bay probably one the best series to eat 365 days a year not a single day can change your annual consumption our annual consumption than 3id 365 by 1% MH it's not a single day so people were were got up and ate a lot on uh Christmas or or what have you it's not going to really affect the mean”
For fat-tailed risks (like pandemics), you must react very quickly by cutting transmission at the source ("kill it in the egg") rather than waiting to see the impact, because the variance/uncertainty is so high that delayed reaction allows exponential spread. The Silk Road example: a contagious disease took 2-3 centuries to reach distant parts of Europe due to slow travel; today that same spread would take hours if not stopped immediately.
“and so and then also the other thing is that you have to react very quickly in the presence of these uh risks from extremist stand fat tail risks you have to react very quickly figure out how to kill it in the egg by preventing spreading”
Skin in the game is fundamentally about alignment of disincentives and exposure to risk, not primarily about incentives. If you cause injury, you should be exposed to it. In the past, warmongers were first in battle; ~2/3 of Roman emperors died violent deaths. Today, political leaders make war decisions from air-conditioned offices, divorced from consequences.
“the way I read it at least uh in large part it's uh it's kind of a it's an essay among other things about ethics and um and how one should conduct themselves ethics and evolution Evolution and why I said so let me explain this again and again yeah that a system uh well first of all the ethical part that if you're causing injury you should be exposed to it okay so you can't make a decision on Syria sitting in an air conditioned office in a pentagon”
China and India are already the largest economies by many metrics. The exchange rate artificially understates China's economic size; when measured by energy consumption and other real metrics, China already exceeds the US. Both have larger growth potential due to bringing hundreds of millions from poverty to middle class.
“and if you look in terms of energy consumed and all of that China is already you know and China has more growth because they got more people to bring up to middle class and India as well so the S of gravity is going to be more in the East so turkey and Iran but particularly turkey turkey have been growing mhm people talk about problems so turkey is for example one another example of of where the future is much more than uh than going to France or or somewhere else so so this is why we can capitalize on that well we're so glad to have you here oh thank you um we look forward to you know interacting with you many different venues I hope I can help not take your time and and and get all these nice lunch well to the contrary I mean you you're already helping um you're already working with our faculty and uh we'll see soon visiting our stud I'd like to teach a class eventually listening yeah but I I I typically get bored getting into details well maybe you can collaborate with someone maybe but your dumbbell uh analogy barbell yeah I have actually I do my muks on the web and they last about 8 minutes things thought seems in probability yeah”
The US has three specific structural problems: (1) Healthcare costs tons of money for poor outcomes relative to elsewhere; (2) Education costs tons of money for outcomes worse than available elsewhere; (3) Military spending produces systems at 7% of China's efficiency (China produces drones for 7% of US cost). These inefficiencies drain the system.
“but what's the problem of the US the problem of the US is something went wrong with in three Fields the first one is uh Healthcare cost tons of money to get nothing you're subsidizing some kind of research or something the second one is education you pay tons of money and you get better education elsewhere I mean my education in Beirut was better than what I you know my children got in the US and the third one is the military MH like China produces drones for 7% of what it cost the US so you realize that the West is um there's something about the West okay that is that's you know they have a good life they have nice biking path for you and I who like cycling but you can't really see a lot of future there MH and so the future is closer to East to the east MH”
Turkey is a particularly promising example of future opportunity compared to Western Europe because it has positioned itself at the center of multiple growth regions and has demonstrated growth despite political headwinds, making it more attractive than France or other established European economies.
“so turkey and Iran but particularly turkey turkey have been growing mhm people talk about problems so turkey is for example one another example of of where the future is much more than uh than going to France or or somewhere else so so this is why we can capitalize on that well we're so glad to have you here”
The scaling of fat-tail risks is non-intuitive: the probability of any two people dying in a car accident is higher than two people dying of COVID, but the probability of 1,000 people dying of COVID in the same town is higher than 1,000 dying in car accidents. This inverts individual vs. population risk.
“the way scaling works for extremist time is weird so the probability of you and ey of dying of a car accident okay of of of of any two people dying of of or or any hundred people dying of car accident is much lower of than the probability of dying from Co let's say that we were in 2019 it held true but the probability of a thousand people dying of covid in the same town is higher than prob thousand people di of accident in the same town understood so when you start working with extreme uh so with the mentality you start with the extremes and you tell yourself if I were to go to Mars spend six months and had the news that 100 million people died in the United States what it likely more likely to come from is pandemic absolutely so whereas the risk of dying of a pandemic locally for any individual is lower than the risk of dying a car accid but you're not going to have million people dying of a car accident or drowning in their bathtub”
Genetic evidence shows that modern Palestinians and Christian Palestinians are genetically closest to ancient Hebrews/Canaanites (compared to modern Jews, who show mixed ancestry from Yemen, Morocco, Eastern Europe, etc.). This suggests ancient Canaanite-descended populations remained in the region while religions spread through trade networks and conversion, not through mass migration.
“I started talking on Twitter about the genetics of information I looked at the Palestinians and the Samaritans they're the descendants of ancient whatever you want to call them ancient people of that land you want to call them anient Hebrews yes uh maybe they call Hebrews but we're not that sure okay okay then I then it it it triggered some kind of U uh investigation on my part where I felt uneasy we're using uh supposedly ancient terms to Define stuff that were invented later on MH then I read schom Mand and schand was criticized say oh it's not rigorous in fact it is rigorous that he said that the bulk of Jews from Yemen are converts under the hamites the B of Jews from uh Morocco are converts and of course there's a kesar theory which may not be correct but we know that a lot of the ashas come from north of the Black Sea I mean they're there MH”
Probability distributions are not objective descriptions of reality but 'Platonic objects' that allow mathematical manipulation; the real question is not whether you know the true distribution but which class of distribution (thin-tailed, fat-tailed, or subexponential) governs a phenomenon.
“probability distribution is not is a very platonic object okay that allows you to summarize a bunch of things but we can work with it mathematically because they are some uh properties that are sometimes Universal like for example if you have sequences of independent random event the sum such as con to convert to gaussian to normal distribution for example so for me uh the classes of probab distribution rather than specific probability distribution and there's a classification right from at the top”
The concept of a 'Black Swan' is not an objective property of events but depends on the observer's knowledge: for the butcher, a turkey is not a Black Swan; for the turkey itself, it is; for those involved in the September 11 attacks, the event was certain, but for the rest of the world, it was a Black Swan.
“when people ask me about a Black Swan um Define the Black Swan is this a Black Swan or not tell them it depends on what you know for the butcher um you know it's not going to be a Black Swan for the turkey it is for those um uh involved in in hijacking the planes for September 11 it was there's nothing uncertain about the event or there very little of certainty about the event but for the rest of us it was Black Swan”
In extremistan (fat-tailed) distributions, luck plays a much larger role than in mediocristan: hard work gets you a nice car, house, or watch, but getting a private jet or island requires the same effort plus substantial luck, because outcomes are explained more by variance than by drift.
“you have a lot of unfairness MH uh luck plays much bigger role I mean skills play a role okay but it's sort of like I gives a difference in kistan you need uh hard work will get you a nice car a nice house maybe nice watch and for you nice bicycle for you too yeah so but a uh but to have a private jet a private island all that you need the same amount of hard work plus a lot of luck so because there's there's some outcome that can be much more explained by variance than by uh what we call the drift”
Statistical evidence is insufficient for risk management; you must separately evaluate the probability of ruin, which is 'a completely different dimension.' You cannot say '80% of doctors agree the Russian Roulette is safe' or 'one in six is 80% safe'—ruin is binary and irreversible, requiring different standards than typical statistical thresholds.
“you can't say uh 80% of doctors agree that the Russian Roulette is safe or Russian is 80% is what is one of the six is 80% safe you say you can't say that right is one six safe all right or 56 safe uh so you can't say that because the the consequences are are tough so uh very often when we talk about statistical evidence we don't realize there in sufficient for risk management mhm you need the probability of Ruin which is complete different dimension to be very low mhm and and and that's sort of embedded in in my work”
'Soul in the game' is distinct from skin in the game: doing things beyond financial incentive, purely for internal satisfaction or craft. Steve Jobs obsessed over internal aesthetics of computers no customer would see; Chinese students worked after graduation on projects with no credit just to see outcomes. Soul in the game is intrinsic motivation beyond external reward.
“so marom is a solid game you go one step Beyond you're doing things not for financial success so the first thing people don't understand about kind the game it's not about incentive it's about alignment of disincentives but in some cases you have a lot more harm you take a lot more harm than needed for the sake of a for a cause of doing something right exactly so whether you love uh I have stolen a game in my books mhm um so it's be Beyond I mean I like you know I don't take it casually but also some people may may have solden the game and whatever they're producing beyond the Cosmetic beyond the perception beyond anything just like it feels right for them”
Confusing modern identity categories (Christianity, Judaism) with historical ones is anachronism: Judaism was not always a religion but a provincial identity tied to Judea/Jerusalem; post-biblical Judaism evolved into what we call 'religion.' Projecting modern definitions backward obscures how identity and geography shaped belonging.
“when I wrote about the lant we say when we talk about Christianity or Judaism um we use modern definitions post rical Judaism and and flow them back to what they were so this era of anachronism not realizing the differentiation between Christianity and Judaism was different and not realizing Judaism was at a time a religion that was very protic MH people wanted you to worship their God okay that was the one they worshiped in the temple of Jerusalem”
Randomness is not an objective property of events but an epistemic property dependent on the observer's knowledge; what appears random to one person (a pregnant woman's baby gender being ~50/50 for a stranger) is nearly certain to another (95-100% for her doctor with medical information).
“the example I typically give...is that of a pregnant woman walking down the street for you and I unless you you know you're you happen to be you know have some inside information exactly previe to some information it's a random number generator all right it's 50/50 approximately 50/50 for her doctor it's it's 100% or or if it's a male you can see it's 100% it's a females like 95%”
Macro-level economics has no skin in the game (economists predict with no consequences); micro-level (plumbers) does (they must deliver working results to survive). This is why 'macro BS but not micro BS': microeconomics and crafts naturally filter out incompetence; macroeconomics does not.
“so this is where uh so this is an example of lack of skin in the game if you have to have contact with reality so you tend to see a lot of incompetence among economists MH there no contact with reality say he's a great Economist why well because he got the Nobel know he gave them Nobel this is why we have all these guys go bankrupt actually after the Nobel uh some committee all right it's like with a restaurant whereas a plumber you know it's impossible to be incompetent and survive absolutely okay dentist same thing say same thing for dentist it's the same you have to your SK are visible so you can when I say macro mcro BS but not micr BS got it so skin in the game is when a person has some kind of contact with reality which entails professional survival or other things and then not judge I mean plumber doesn't get his bonus by Committee of plumers Comm of plumbers exactly yeah or by journalists yeah okay yeah there's no tenure committee for the plumber exactly exactly”
The overarching theme of Taleb's work across five books is that we don't understand how the world works, but this is not a problem because an asymmetry of decision allows us to act wisely despite uncertainty. If uncertain about a risk's source, don't expose yourself to it; if uncertain about fossil fuels' climate effects, don't use them.
“to summarize I mean my work I have the answer inserto five books so far maybe six soon I I don't know for now it's Five Books Okay around the theme of uncertainty and the overall theme is we don't quite understand how the world works but that's not a problem so you so why isn't it a problem because because of a symmetry of decision if this water has I know this water came from auv so got to be very safe but if I don't know I have uncertainty about the source of this water my decision is very simple what should I do not drink it not drink it so so if you're uncertain about the effect of uh fossil fuels on a climate who don't use it if you're people say oh we're uncertain about the effect let's use it all right so you see the there is a asymmetry now that asymmetry is the engine behind fragility antifragility all of that so embedding a symmetry in systems”
Probability distributions are Platonic objects that enable mathematical work, but the key insight is that they fall into classes rather than being individually specified: a classification exists from top to bottom, where some distributions (like the fat-tailed power law) can never have their attributes fully known from observation, while others are easier to track.
“probability distribution is not is a very platonic object okay that allows you to summarize a bunch of things but we can work with it mathematically because they are some uh properties that are sometimes Universal like for example if you have sequences of independent random event the sum such as con to convert to gaussian to normal distribution for example so for me uh the classes of probab distribution rather than specific probability distribution and there's a classification right from at the top there's something called forget about it because distribution you'll never know the attributes from observation of random data”
Soul in the game: beyond skin in the game (financial/professional stake), some people do things not for success but because it feels right—they have intrinsic motivation. Steve Jobs obsessed over the internal aesthetics of computers that customers would never see because he had soul in the game. Artists must have soul in the game or their work becomes cosmetic.
“Martyrs I mean we saw we had a war now was uh and then so marom is a solid game you go one step Beyond you're doing things not for financial success so the first thing people don't understand about kind the game it's not about incentive it's about alignment of disincentives but in some cases you have a lot more harm you take a lot more harm than needed for the sake of a for a cause of doing something right exactly”
Russian Roulette example: you cannot say 'Russian Roulette is 5/6 safe' or '80% of doctors agree Russian Roulette is safe' because ruin is binary—one wrong outcome and you're dead. Therefore, statistical evidence (mean, probability) is insufficient for risk management; you need the probability of ruin to be extremely low, which is a completely different dimension.
“you can't say uh 80% of doctors agree that the Russian Roulette is safe or Russian is 80% is what is one of the six is 80% safe you say you can't say that right is one six safe all right or 56 safe uh so you can't say that because the the consequences are are tough so uh very often when we talk about statistical evidence we don't realize there in sufficient for risk management MH you need the probability of Ruin which is complete different dimension to be very low mhm”
Epistemological dimension of skin in the game: you cannot really capture a process intellectually without having contact with reality (skin in the game). Restaurants survive based on invisible factors not captured by industry reviews—restaurants with bad food win because people like each other, or the setting, etc. Awards given by journalists don't predict restaurant survival; customer choice (survival filtering) does.
“there are other things there epistemological dimensions is that you can't really capture a process intellectually without having contact with reality you skin in the game and to give you an idea of how some system which systems have SC G which systems don't uh I give the best example of that of restaurants okay the survival of a restaurant is completely determined by nonvisible or or things that that are not visible ible to the uh industry okay”
The minority rule: populations follow the majority rule (genetics follow majority rule), but languages, religions, and cultures follow the minority rule (a minority can shift the behavior of a majority). If 15 people speak Arabic but 1 speaks German, the group switches to German out of courtesy; thus language spreads faster than genetics because it follows minority rule.
“and I realized from another piece of work that's in uh the the uh skin in the game in the incerto is our minority role MH that there's a big mistake people make about mixing cultures and population uh populations follow the majority rule genetics follow the majority rule uh whereas languages religions and cultures follow the majority of a minority minority let me explain yes please let's go into that uh we're in Beirut at AU what is the language used Arabic English no no just let's say there's a German person sitting here 15 people who instead of speaking Arabic 11 Arabic you switch because one person doesn't understand it okay absolutely uh so languages uh travel faster very fast and culture travel fast was a genetics you got to mix people and wait for generations”
We tend to scorn abstract reasoning even when it has clear statistical power—a generalization of survivorship bias: because we see only success stories (investors who invested in stock markets that succeeded), we're fooled into believing that is how success works, missing all the markets that busted (Turkish, Russian, French markets circa 1900 except Anglo-Saxon countries).
“how we tend to Scorn the abstract even when it has clear statistical uh uh Power okay okay and that's where we were Fooled by Randomness Iz that beyond the survivorship bias but Survivor bias is is is is very big in a lot of things it's like we have the impression that if you invested in stock market that you would have already done well but someone in 1900 who invested in stock market for the same reasoning would have invested in the Turkish stock market and the Russian stock market and the French stock market except for Anglo-Saxon countries okay uh the the the you you know the the rest one bust completely bust but we we tend to see the success stories”
'Skin in the game' is fundamentally about ethics: if you cause injury, you should be exposed to it; decision-makers should face consequences. Historically, warmongers were first in battle (Napoleon, Roman emperors—2/3 died violently); today (~40-50 years ago), leaders like Kennedy and Bush Sr. were in combat; now, leaders make decisions without exposure.
“if you're causing injury you should be exposed to it okay so you can't make a decision on Syria sitting in an air conditioned office in a pentagon you see because in a past that's not how it happened uh warmongers were first in battle first line in battle Napoleon was overly exposed although he wasn't the most ethical General he fled twice right m uh so so a general in in say ancient times would be in the Battle two3 of Roman emper died of violent died of violent death two3 so he has SC the game and how how do you contrast that to today I mean okay so today we lost it about 40 50 years ago because before that the George Bush was Kennedy was in war and he was injured George Bush was pres War the father not the son but but another so there's an ethical dimension”
Some organizations (corporations, F1 teams) owned by rich individuals manage to reflect an ethos of soul in the game despite not being founded by their owners. This happens when the owner's values align with the team's function, suggesting scale and ownership structure are less determinative than shared commitment to excellence.
“so sometimes teams even corporations this is in in the end of the day this is owned by some rich person one of these teams or or a corporation and yet it reflects the ethos okay of having soul in the game I I I I haven't I didn't think of the pro it takes me a while to think of problems all right but I've looked at a scaling notion okay why is it that some people are more effective some societies composite of edges can have a greatly functioning system and how sociey compos of geniuses have terrible system terrible because how things scale and the intelligence of group isn't the same as intelligence of one individual”
The 'Bob Rubin trade' (selling tail events): Robert Rubin was Citibank vice chair, treasury secretary, KKR partner, and made $200M in bonuses for trading that payed annual bonuses for ~10-year tail events. When Citibank collapsed, he kept bonuses and claimed a Black Swan event. This exemplifies misalignment between mediocristan (annual bonuses) and extremistan (10-year collapse frequency).
“or what I call the Bob Rubin trade Robert Rubin was vice chairman of City Bank part of the system he was treasury secretary former partner in K saxs made $200 million in bonuses from $120 million from City Bank for trades I call selling tail events and then of course going bound to go bust he's paid an annual bonus for event that happen every 10 years that's another mismatch between medran and extremist Stan that was not understood during covid so something blows up every 10 years but we PID an annual bonus all right and then when City Bank blew up he got he he he left the bonus he he he kept his bonus all he had to do is say well was a Black Swan”
The time between large wars is ~250 years; between medium-large wars, ~100 years; you cannot argue 'we've had 75 years of peace, so the world is safe.' The statistical interval has not reset, and the probability of nuclear war remains salient. Education, the UN, and the League of Nations have not changed this property of history.
“my colleagues and I U were complaining about wars right for example the interal time between large Wars is 250 years okay okay very large Wars um medium large Wars is more than 100 years so you can't say hey we have 75 years without a war without a big war the world is a safe place you can't which is why uh you have to worry about nuclear war or to something because it's a property of History hasn't changed okay education didn't change it the creation of the UN didn't change it nothing right or the League of Nations initially nothing changed it's the same thing”
The Mediterranean, particularly Lebanon, has had very little population mixing since the Bronze Age collapse: Lebanese immigrants go to Americas or Australia, not Sicily; Sicilians don't come to Lebanon. Geographic distance drives migration patterns more than cultural affinity, leaving the Mediterranean genetically stable.
“the only few cases where genetics moved fast and in places that were like Americas MH or uh the uh the the what's now Russia you know Siberia is because it was invaded late nobody wants to go there would you want to go there if you if you can live by the Mediterranean but the Mediterranean had had no mixing of populations strangely since the Bron age collapsed very little because think about it even today when the Lebanese want immigrate where do they go they go to the American or Australia do they go to Sicily no no and sicil and when they immigrate where they go come to Lebanon no they went to the Americans some went to Egypt okay but at some point there was some kind of business there but typically so you go far M so the mediteranian hasn't had too much movement of population over time”
Jordan's law—the principle of minimum expected change in historical location—suggests that the most likely place to find a population 2,000 years later is where they were 2,000 years ago, due to peasant populations' lack of mobility and geographic inertia.
“there's something about I call it the U the bran Bridge think that most likely Place someone's going to be after 2,000 years is where the person was years ago there's some kind of inertia uh peasants first of all don't travel and the Jans were peasants you have to dis between Jewish and Judean because in Hebrew and Arabic it's the same word m the province of Judea of Jerusalem as it's Big Town these people are peasants”
Applying mediocristan (Gaussian-based) statistical tools to extremistan phenomena like pandemics is mathematically invalid: mean and variance are uninformative for fat tails; prediction error is 'monstrous'; sampling error is very high; the law of large numbers works very slowly or not at all; 95-99.9% of observations fall below the mean, making average-based predictions useless for extreme events.
“let's let's drill into that for a second so how so how so how how did uh how did inter how did looking at CO as mediocris impact a lot of people are aware that like under fat tail distributions your metrics aren't quite adequate M but they have no idea uh how inadequate they are and they have no idea uh about how to correct that to give you an idea if you like the the gaussian distribution is based on mean and variance and these are uninformative okay um I remember I had a fight with a fellow whom I met when he was he was humble he's probably the most published person in medicine his name is yanis m so we had a debate uh fight intellectual fight and he was he was saying okay no let's predict uh let's learn to predict the number of deaths and the problem is that you can't really uh rely on prediction because your prediction error is monstrous because sampling error is very high the law of large number is does work at all works very slowly and and and also because you have 95% or to 99.9% of the observation falling below the mean so being a good predictor okay doesn't capture the properties”
Engineering and medicine have skin in the game (buildings collapse, medical treatments fail visibly); law, economics, and macro-policy do not (consequences are diffuse and long-delayed). Professions respected by grandmothers (doctor, engineer) have skin in the game; those not respected often don't.
“some disciplines have Scan gain medicine because we're interested in survival people absolutely other disciplines economics there's no SC game for the discipline in general because the effects are not visible I like to think of engineering as one of those disciplines I mean it depends which engineering some civil engineering we're sitting here sitting here but but some some kind of branches of engineering it's not immune of course but of overall engineering is respected whatever your grandmother respects has going in the game interesting herotic yeah this is a good herotic your grandmother wants wanted you to be doctor or engineer yeah there you go well what if she wanted you to be a lawyer uh well in the United States lawyer I mean lawyers are uh considered U uh are more respected in countries where more where they're more also more hated like United States because but where you have more consumer protection so I'm saying United States being a lawyer is something your grandmother would want you to do but because of structure here lawyers are less role in functioning of society absolutely unfortunately unfortunately you want to live in a place where people hate lawyers then you feel because they're effective in that sense exactly exactly”
Philosophical discussions about whether randomness is truly random are functionally useless—a blind alley—and ultimately lead back to theological definitions of God as that For Whom nothing is random; the practical approach is to treat randomness as epistemic and focus on real-world consequences.
“there have been a lot of philosophical discussions on on Randomness that I skip I mean I I sometimes I I was involved I mean at some point like everyone you start reading books uh uh philosophical uh aspects of of things you go deeper in philosophy and then realize that it was really functionally U it was a uh was called blind alley it was like there no point going in that direction at least in my own work maybe for someone else because then you you go back to theology definition of God okay and the definition of God is For Whom nothing is random understood”
Restaurants survive based on invisible, non-articulable factors that journalists and restaurant industry committees miss: a bad restaurant survives because people like each other there; awards given by committees go to restaurants that soon go bankrupt because judges don't have skin in the game (not dining there regularly), while customers (who do have skin in the game) select for different criteria.
“in Atlanta serves horrible Italian food nobody's Italian there except the daughter daughter of the owner has a grand Italian grandmother or something like that okay so the uh the the it's in the basement in Atlanta is musty food is bad but people go there maybe because they like one another whatever it is okay so there was a uh in New York a friend of mine who invested in restaurant lost a lot of money told me that there was a um an annual Gala uh dinner where uh you know because the prices throughout the year given by journalists and other restaurant owners there the gala dinner where they uh present prizes for these restaurants who won all these um uh like uh best dessert best dessert what whatever and then usually half the restaurants are bankrupt by then by the time they receive the award exactly because the the the way it works is you're not tested by some committee this is not a Soviet Union you're tested by the customers exactly so and customers may go to restaurant for different reason than on top down that journalists can imagine okay”
Genetic arguments about which populations 'belong' anywhere are bogus because Western Eurasian populations have been continuously mixing over millennia. The real lesson is not 'genetics determines land claims' but rather that focusing on ancestry claims obscures the reality of continuous mixing and human migration.
“you're not necessarily making the argument I just want to be clear you're not necessarily making the argument that genetics should be a basis for settling uh historical claims but you're but you're say you're you're in a way countering with evidence that you know this is your claims of ancestry is not doesn't hold right okay right the no the idea I mean in my new work I talk about using genetic arguments is so bogus because wom been mixing the most of what we have is a Eurasian population particularly Western Eurasia mix of four population groups that kept mixing over time you see so what youan you going to stop the mixing you see you know like hey we found the right combination people are mixing you see now they're probably mixing faster than before but there's something quite uh important about that Minority rule is that you notice that places like turkey mhm”
Taleb's teaching approach prioritizes deep reasoning over memorization: he prefers the 'Russian approach' to mathematics (taking things to maximal simplicity without loss of rigor) over the French approach (abstraction for its own sake). This makes ideas more accessible and memorable.
“I I I typically get bored getting into details well maybe you can collaborate with someone maybe but your dumbbell uh analogy barbell yeah I have actually I do my muks on the web and they last about 8 minutes things thought seems in probability yeah well well 8 minutes is a good uh chunk of time for someone to be able to process digest Etc before moving on evidence for that the most understandable thing yeah I I have a much more Russian approach to math than the French one okay the French I honestly don't what that means the French try to make things take things to the highest level of abstraction okay whereas the Russians try to take something to his maximal Simplicity but not Beyond got it got it”
Skin in the game is fundamentally about contact with reality that filters out incompetence and poor decision-making over time. Without skin in the game, people can remain incompetent and continue making bad decisions indefinitely.
“so skin game is a filter in the system you see so if you're not if you can in if you can cause harm okay and receive harm you're not going to do it for long because it will filter you out of the system you see this is why we didn't have a lot of Wars because War mongers were filtered out of the system they couldn't survive as they do in Washington today MH you see so that's one dimension but there are other things there epistemological dimensions is that you can't really capture a process intellectually without having contact with reality you skin in the game”
Taleb only publicly discusses topics on which he has peer-reviewed publications in reputable journals, because he observed that famous authors can be 'clueless about their subject' yet maintain credibility through marketing (e.g., Hari). This is a professional 'skin in the game' decision: publishing requires evidence and rigor.
“I realized that very quickly that schand was correct by genetics now let me tell you what I did again skin in the game I don't like to talk publicly about something unless I have done work professionally in it in a peerreview journal and and I decided on that policy after the Black Swan okay why because people putting me in categories when the Black Swan was out there other authors these come and go but you don't realize they have uh the survival you know but at time people thought they were hot and I realize they have they're clueless about their subject okay I mean one one famous person now is Hari for example no he has no idea what he's talking about okay so so the way so so I realize that I want someone if I'm going to read someone that person must be also published in a peer review uh framework okay why not because uh the peer peer review is a filter but not it's it's necessary but not sufficient why because I want to make sure that there is a rigor of thought that there was evidence and stuff like that”
In the books Fooled by Randomness, two characters exemplify different attitudes to risk: John is a successful trader riding high but next thing disappears (overconfident); Nero is more solid and robust because he's aware of ruin problems. One can generalize ruin problems across many domains—you cannot engage in Russian Roulette even if 5/6 chambers are empty because the consequences are irreversible.
“tulip was a more introspective fellow yeah and uh and John was was one of those people you run uh into on Wall Street and they're riding high but next thing they're going to disappear and whereas Nero whereas Nero is more solid more robust because he's aware of the ruin problems okay and you can generalize ruin problems a lot of things”
Taleb's approach to discussing controversial topics: he only speaks publicly about something if he has done peer-reviewed professional work on it. He avoids the trap of becoming a category/celebrity where clueless authors circulate with high visibility. This is why he began publishing in genetics peer-reviewed journals before discussing Palestinian genetic identity.
“I realized that very quickly that schand was correct by genetics now let me tell you what I did again skin in the game I don't like to talk publicly about something unless I have done work professionally in it in a peerreview journal and and I decided on that policy after the Black Swan okay why because people putting me in categories when the Black Swan was out there other authors these come and go but you don't realize they have uh the survival you know but at time people thought they were hot and I realize they have they're clueless about their subject”
There is a clear demarcation between thin-tailed and fat-tailed distributions: if two randomly sampled people have a combined height of 4.1 meters, the most likely distribution is ~205cm + ~205cm; if two people have combined net worth of $100 million, the most likely distribution is ~$100M + ~$0, not $50M + $50M.
“here can can see the demarcation the best example is when I give the the the the height the cumulative height let's say I have a really tail event I sample two people randomly and I have a total height of 4.1 M what's the most likely distribution well it's not going to be 10 cm 4 M right it's going to be 205 205 but if you sample wealth and have two people and they happen to have $100 million in total net worth what's the most likely distribution it's not 50 and 50 it's close to 100 million and zero like 100 million minus a few dollars zero plus a few dollars”
The subexponential (middle) class is defined by accident-driven or memoryless processes, exemplified by crocodiles: a crocodile has a 40-year life expectancy at birth, at age 10, at age 40—always 40 more years—because lifespan depends on random accidents (predation, disease) not aging. Light bulbs rated for 5,000 hours still have 5,000 hours remaining after 5,000 hours of use.
“the accident part should never be neglected the uh so that that part the accident part has simple property let's say the life expectancy as a crocodile is 40 years okay You observe a crocodile at Birth 40 years age 10 40 more years age 40 40 more years because it's a it's an accident driven it's accident driven or memoryless MH you see it's like saying you you just observed natural Calamity not hurricane because these are periodic but um the probability having another one hasn't changed you see sometimes has increased so sort of light your light bulb has 5,000 hours and and you bought it 5,000 hours ago it still has 5,000 hours”
A clear demarcation between Gaussian and fat-tailed distributions: if you randomly sample two people and their total height is 4.1 m, the most likely split is 2.05m + 2.05m (middle-concentrated); but if two people's net worth totals $100 million, the most likely split is ~$100 million + ~$0, not $50m + $50m (extreme-concentrated).
“here can can see the demarcation the best example is when I give the the the the height the cumulative height let's say I have a really tail event I sample two people randomly and I have a total height of 4.1 M what's the most likely distribution well it's not going to be 10 cm 4 M right it's going to be 205 205 but if you sample wealth and have two people and they happen to have $100 million in total net worth what's the most likely distribution it's not 50 and 50 it's close to 100 million and zero like 100 million minus a few dollars zero plus a few dollars”
China is already the largest economy in real terms (not GDP nominal), based on energy consumed and real economic capacity; the exchange rate is artificially low and Western metrics underestimate China's size; China has more growth potential because it still has large population to bring to middle class while the West is saturated.
“and if you look at numbers properly uh China is already the largest economy it's not the US right the exchange rate is way artificially low and if you look in terms of energy consumed and all of that China is already you know and China has more growth because they got more people to bring up to middle class and India as well so the S of gravity is going to be more in the East”
The correct response to fat-tailed risks from extremistan (pandemics, catastrophes) is not to forecast but to 'react very quickly, figure out how to kill it in the egg by preventing spreading'—using the precautionary principle and early panic to cut transmission, not wait-and-see approaches.
“you have to react very quickly in the presence of these uh risks from extremist stand fat tail risks you have to react very quickly figure out how to kill it in the egg by preventing spreading and he wanted us to wait to see the impact I see where say okay we have now about 50 years of of mathematical Frameworks okay that we got to use it's not because you're ignorant of these Frameworks that we should wait wait and see because you published in medicine so there's a problems with these guys”
Academic research frequently falls into ruin-ignoring errors because academics don't 'trade'—they don't face financial consequences for being wrong. This lack of 'skin in the game' insulates them from reality, allowing incompetent theories to persist.
“a lot of strangely a lot of academic research Falls for these errors that's why a root skin in the game because they don't trade like right now there's a new treasury secretary in the United States and what's her name before him she's clueless right about risks and all of that because she wasn't in the real world she wasn't trading world for fous equations and and something can be wrong and stay forever because nobody wrote about it because I read about the same and Scott whatever says we have to worry about ruin problems and and and and of course because he was a Trader he understands ruin you understand the Dynamics”
Buildings in the West (e.g., New York) look good from outside but have poor-quality service areas and stairs because 'nobody is going to see it'; contrast with someone with soul in the game who would maintain the same standard everywhere because consistency feels right, not because it's rewarded.
“whereas if you look at buildings the way they're built in the West in New York they look great from the outside and then you take the service uh elevator or you take the the stairs and you realize the shab's construction for the state because nobody's going to see it absolutely whereas he would have had something else so Sol in the game is one that Beyond”
Jack Welsh (former GE CEO) was a fraud: he would buy/sell companies within a portfolio, selecting which profitable ones to sell for personal gain while retaining unprofitable ones, creating adverse selection. He collected enormous bonuses based on cosmetically good earnings; GE stocks subsequently fell >90%, but he kept the bonuses.
“all these Heroes of Corporation what's his name this guy what's his name um Jack Welsh he was a fraud yeah I was saying that when he was alive so this is why I can continue it's not like but he was a fraud but it took a long time for me to figure out he was a fraud he why was he a fraud he would he would manufacture U cosmetically uh good earnings uh you collect companies right you buy companies some of them make money some of them don't the one that make money because of the the accounting valuation he would sell them for a profit and then he would keep the rest so it's an adverse selection right in the portfolio and then sure enough it showed up few years later and the companies went down by like more than 90% And but he collected bonuses and became a billionaire based on some kind of package so you had the upside without the downside”
Formula One racing exemplifies perfect skin in the game and accountability: every team member (from race strategist to tire monitor to pit crew) is immediately accountable, knows performance in real-time, and responds with emotional investment. There is perfect transparency of individual contribution and collective result.
“the way the team works there's so much accountability there's so high expectations everyone lets everyone know when they didn't do their job well and everyone knows if they did their job well or not and functions as an orchestra from the race strategist in the moment to monitoring the tire temperatures and what the competitors are doing to the engineers who were thinking about the fluid dynamics around the car to the race car driver themselves and all of it has to work perfectly yeah and you can see it even in the pit crew they're they're glued their eyes are glued to the TV watching their race or what's happening with them and they're getting upset they're getting happy every moment by moment and when comes in they are they're just on fire ready to go they got to get that tire changed in under 3 seconds and um and the whole thing works”
You must consider the downside (no recovery) in strategy design, not just the upside. Many academic researchers fail because they lack skin in the game—they can be wrong without consequence, so they propagate errors. A recent US treasury secretary was clueless about ruin risks because they were an academic theorist, not a trader who has skin in the game.
“this is what it's called the putting the Dynamics in the game okay but a lot of strangely a lot of academic research Falls for these errors that's why a root skin in the game because they don't trade like right now there's a new treasury secretary in the United States and what's her name before him she's clueless right about risks and all of that because she wasn't in the real world she wasn't trading world for fous equations”
Corporations without owner involvement attract 'empty suits'—people skilled at appearing like CEOs rather than actual competence. The more someone looks like a CEO should, the more likely they are an empty suit. This contrasts with founders who have skin in the game.
“and the more person looks like a c CEO the more likely he or she would be an empty suit”
Western building construction exhibits lack of soul: buildings look great from the outside but the service elevators and stairs reveal shabby construction inside (cosmetic appearance without substance). This contrasts with craftspeople who obsess over quality invisible to the customer because they care about the work itself.
“whereas if you look at buildings the way they're built in the West in New York they look great from the outside and then you take the service uh elevator or you take the the stairs and you realize the shab's construction for the state because nobody's going to see it absolutely whereas he would have had something else”
Risk-sharing through communal structures (like Phoenician and Arab trading caravans where all parties share losses from theft/attack at caravan's end, and maritime law's 'appropriation' principle where all stakeholders share ship losses) is more resilient than pure capitalism's separation of entities. Modern capitalism tried to eliminate this distribution, creating concentrated risk.
“I have to think of the thing about how uh there's a communal scan game and and teamwork MH but I spoke about risk sharing and that's uh that was important from our practices both Phoenician and the Arab one that you know when when you had a caravan and uh for the Arabs and um and there theft of you know at the tail end you know PR to you know a lot of uh uh being held up at the end someone's going to come take that they all share the cost I see and uh but the uh the Greek called rodian law is based on Phan Phoenician practice that if a ship sinks it's not just the owner of merchandise who loses uh the property but there's something called appropriation the owner of the ship the buyer the seller and the Whoever has Financial investment in it they all share the cost MH so the the this thing distribution was uh communal in other words you communal you bear the cost of a loss that that some of it still exists in the maritime law because you know the law is fuzzy but capitalism is trying to do away with it”
Individual intelligence and group intelligence don't scale the same way: a group of geniuses can have a terrible system while less individually brilliant people in good structures can function well. Mediterranean societies work better at the village/family level; Northern European societies work better at the institutional/collective level. This suggests organizational intelligence depends on social structure, not just individual talent.
“the intelligence of group isn't the same as intelligence of one individual Intelligence being def find that some kind of Effectiveness and you know some no matter how you define it uh intelligence so in the East we're Mediterranean societies good city states uh or Villages and uh and things function better okay at the individual level you see houses are clean from the inside but the collective doesn't work very well where Europe it's a reverse so we tend to be here overeducated but it doesn't work well I mean think of s of uh Milan don't have large corporations m in Italy see all the corporation are in Bel Milan and you know that Corridor lombardia and and pedmont pedmont and venito and then as you go south you have few fewer becomes Artisan but so they're made to be Artisans right small Workshop uh whereas large corporation require different mentality you see so maybe there's this effect I don't know about teams right how and the end is important in other words more is different”
The center of gravity of the world has shifted before: it was centered in China and India before the Industrial Revolution, moved to Europe post-Industrial Revolution, and is now shifting back to the East. This is not new but a return to historical patterns of economic centrality.
“traditionally it was here at the center gravity of the world moved from China India to the Europe only after the Industrial Revolution after discovery of America then Industrial Revolution so remember that the Roman Empire had to move East because that's where the money was so so I think that there's a headwind it's not like I'm not uh preaching in the desert there's a headwind and people soon will stop going to Europe because to go to Europe to work you know European are leaving Europe for work um scientific researchers concentrated now in China already all right and if you look in terms of energy consumed and all of that China is already you know and China has more growth because they got more people to bring up to middle class and India as well so the S of gravity is going to be more in the East so turkey and Iran but particularly turkey turkey have been growing”
The Western world is in decline (not due to external threat but internal saturation): the system has become overloaded; incentives for growth have diminished as needs are met. The center of gravity is shifting east (China, India, Turkey) where populations still need development. The East will outpace the West.
“there's another thing is I truly believe in decline of the West not because of uh anything except call saturation because after a while uh the system becomes overloaded as start having some properties like on the es curve they got too much of everything so they they the incentive is not there compared to the east MH so uh I want to bring back Lebanese to come back here right if they can so that's sort of like what what what my my my my real agenda is to make people study here the US uh now still has good scholarship but it first of all thanks to foreigners because most professors I I was in an engineering school in the US and we didn't have any uh domestic uh Talent zero nor domestic students yeah especially in the stem disciplines it is here it's the first place here where I don't see you know uh that effect okay non non locals”
Taleb is committed to helping the Levant region improve, not pursuing personal career advancement. He wants to attract Lebanese diaspora back to the region, believing the center of global economic gravity is shifting east (China, India, Turkey), not staying in the West, making the Levant strategically positioned.
“the thing is I don't really care about my my own uh I mean I don't want life has been good to me financially and um academically own standpoint so I don't so we're not paying you millions of dollars to EXA I don't need no no in other words I don't need to uh uh I have nothing I mean I'm not interested in my own career I was actually not very interested in my own career and these are the times where you do the best yeah just like by now by by um criticizing the Israeli uh the whole structure okay by criticizing Israel uh you know you open yourself up to a lot of uh professional harm I couldn't care less okay it's not like I'm taking a lot of risk I couldn't care less right that's natural so I so what what do I care about okay and promoting my book I couldn't care less honestly by now I couldn't I mean I like to produce them I like them to be beautiful I don't want them to circulate actually sometimes I get irritated when I see him in airports you see I want to so anyway so I'm when I'm interested is is is in it's like uh a grandfather interested in uh you know the new generation but except you generalize beyond your own family so I'm interested in the welfare of the Levant in general right and and how you can help right that's it so I think that helps and then also there's another thing is I like it here the food the people the you know I like it so I want to help as much as I can you know the lant”
Group intelligence and scaling: intelligence of a group is not the same as intelligence of individuals. Some Mediterranean societies (villages, city-states) function well individually and in small groups but don't scale; some European societies function poorly in small groups but have better large-scale institutions. Effective scaling requires different mentalities. Switzerland works better at teams/institutions but its individual-level intelligence is not necessarily higher.
“I've looked at a scaling notion okay why is it that some people are more effective some societies composite of edges can have a greatly functioning system and how sociey compos of geniuses have terrible system terrible because how things scale and the intelligence of group isn't the same as intelligence of one individual Intelligence being def find that some kind of Effectiveness”
Taleb's personal motivation for engaging with Lebanon and the Levant: he doesn't need wealth or career advancement (has been successful), so he's motivated by genuine concern for regional welfare. He wants to bring Lebanese back from diaspora and promote the Eastern Levant as a center of gravity for future development, contrasting with perceived Western decline.
“you know the thing is I don't really care about my my own uh I mean I don't want life has been good to me financially and um academically own standpoint so I don't so we're not paying you millions of dollars to EXA I don't need no no in other words I don't need to uh uh I have nothing I mean I'm not interested in my own career”
Taleb's mathematical approach: he uses Russian mathematics (maximal simplicity without going beyond) rather than French mathematics (maximum abstraction). This reflects a preference for concrete, transparent thinking over formal rigor that obscures intuition.
“I have a much more Russian approach to math than the French one okay the French I honestly don't what that means the French try to make things take things to the highest level of abstraction okay whereas the Russians try to take something to his maximal Simplicity but not Beyond got it got it”
The book 'Fooled by Randomness' uses examples of Tulip and John the trader to contrast introspective, self-aware Tulip (aware of ruin problems) with John (riding high but destined to disappear). This illustrates how survivorship bias misleads us about trader success.
“you've um you uh you highlighted maybe two two persons in uh uh Fooled by Randomness I think John the trader John and uh Nero yeah as kind of examples of these can you just briefly tell us tulip was a more introspective fellow yeah and uh and and John was was one of those people you run uh into on Wall Street and they're riding high but next thing they're going to disappear and whereas Nero whereas Nero is more solid more robust because he's aware of the ruin problems okay”