WEBVTT - Nassim Taleb, Scott Patterson Talk 'Chaos Kings' Book 0:00:00.200 --> 0:00:04.400 Joining us here is not seeing teleeb and Scott Patterson 0:00:04.440 --> 0:00:07.720 and celebration of a brutal book. I really can't say 0:00:08.240 --> 0:00:11.399 enough about this for Global Wall Street. I'm sorry. This 0:00:11.480 --> 0:00:16.120 is the adult book Chaos Kings. Bill Cohen, William Cohen, 0:00:16.800 --> 0:00:20.280 he wrote a book about Duke Lacrosse. It was Bill Cohen, 0:00:20.640 --> 0:00:24.000 just says Scott Patterson. He's done it again, which he 0:00:24.040 --> 0:00:26.080 did in twenty twelve, and with. 0:00:26.120 --> 0:00:27.440 Dark Pools and all that. 0:00:27.760 --> 0:00:29.600 And the problem we got here, David is we can 0:00:29.640 --> 0:00:31.440 spend the next three hours of TALEB. 0:00:32.080 --> 0:00:33.879 But you know we got to give some love here. 0:00:34.000 --> 0:00:38.600 Scott Patterson, who's only here because James Madison University'd be chapel. 0:00:40.520 --> 0:00:43.919 That happened your book in. 0:00:43.920 --> 0:00:48.159 Full disclosure, I'm totally enough, seems camp And knows that 0:00:48.360 --> 0:00:51.879 like Wicked in his camp. So when you set up 0:00:51.880 --> 0:00:57.440 your book, which is the TALEB team like JMU against 0:00:57.480 --> 0:01:01.360 the other teams, some French dude like you, how did 0:01:01.400 --> 0:01:02.880 you set up that polarity? 0:01:03.000 --> 0:01:05.840 Describe the tension of Chaos Kings. 0:01:06.400 --> 0:01:10.479 Yeah, well, it seems belief is that you can't predict markets, 0:01:10.560 --> 0:01:12.959 so you just need to prepare for extreme. 0:01:12.600 --> 0:01:16.360 Events all the time. The Black Swans. 0:01:16.400 --> 0:01:20.440 And I can trast that with another character, a French 0:01:20.520 --> 0:01:26.440 econophysicist named Didier Sornette, who uses advanced physics and other 0:01:26.480 --> 0:01:30.520 mathematical models to try to predict these big events. 0:01:30.560 --> 0:01:34.160 He calls them dragon kings, which technical term. 0:01:34.680 --> 0:01:37.200 Yeah, yeah, I call it Newtonian envig So he's a 0:01:37.240 --> 0:01:38.199 math guy, right. 0:01:38.160 --> 0:01:42.200 Yeah, he's a math guy. He uses some things that could. 0:01:42.040 --> 0:01:46.040 Be used to predict the explosion of rockets and transpose 0:01:46.080 --> 0:01:47.400 that onto financial markets. 0:01:47.440 --> 0:01:50.360 You gotta be kid. Here's the reality, folks. Now, see 0:01:50.440 --> 0:01:54.600 tallav changed the world with John and Nero in Fooled 0:01:54.600 --> 0:01:57.440 by randomness. Everybody else would have retired to. 0:01:57.800 --> 0:02:00.720 Turks and caicos or whatever. He went on to do 0:02:00.800 --> 0:02:03.040 Black Swan. And then you and I sat on the 0:02:03.080 --> 0:02:06.880 stairs of Saint Bart's on Park Avenue, and you described 0:02:07.000 --> 0:02:10.919 anti fragile to me. Now, seeing where is the humility 0:02:11.440 --> 0:02:13.799 among the quants in this great ballmarket. 0:02:14.400 --> 0:02:18.160 The point is you don't need humility. Humility actually is 0:02:18.600 --> 0:02:21.640 not necessary. I don't want people are arrogant. There's just 0:02:21.680 --> 0:02:26.320 got to be paranoid about the right things, namely how 0:02:26.440 --> 0:02:29.800 much our error costs you when it happens that ruined 0:02:29.880 --> 0:02:33.560 problem and uh and and and basically Scott's book is 0:02:33.560 --> 0:02:34.840 about ruined problems. 0:02:35.880 --> 0:02:36.320 Let's see. 0:02:36.440 --> 0:02:38.200 So you could be arrogant about everything, all right, you 0:02:38.200 --> 0:02:41.320 can be wrong all the time, it doesn't matter. You 0:02:41.360 --> 0:02:44.840 got to avoid you gotta avoid ruin the big things. 0:02:44.840 --> 0:02:48.560 You got to be right about the big sources of 0:02:48.680 --> 0:02:52.720 risk and and and the rest take care of itself. 0:02:53.120 --> 0:02:56.160 Could could I get your having come out of the pandemic, 0:02:56.160 --> 0:03:00.320 your perspective on what happened there largely uh, but within 0:03:00.360 --> 0:03:02.560 markets as well, the reaction to what we saw. 0:03:03.320 --> 0:03:07.200 The you mean the pandemic, the reaction to it. Yeah, okay, 0:03:07.240 --> 0:03:07.760 we we were. 0:03:07.840 --> 0:03:12.560 I mean Scott discusses what happened in the pandemic and 0:03:12.560 --> 0:03:16.440 and and how we were obsessing over it. I mean 0:03:16.440 --> 0:03:18.799 when we started the idea of universe, and when Mark 0:03:18.840 --> 0:03:22.679 started Universal, I was the passenger, you know, I was 0:03:22.680 --> 0:03:27.560 a retired passenger. But the name universe I means universal properties. 0:03:27.720 --> 0:03:34.920 And we're talking about some universality of these classes of 0:03:35.080 --> 0:03:40.080 tail uh, the processes that generate large tale events, and 0:03:40.120 --> 0:03:42.720 we call them, I call them grace wants. Hence that 0:03:42.800 --> 0:03:47.920 that's where the name universe came from. So the the 0:03:48.720 --> 0:03:50.560 we were I was obsessing even when I wrote the 0:03:50.560 --> 0:03:54.600 blacks one about pandemics and kept obsessing and he said, okay, 0:03:54.680 --> 0:03:57.400 I didn't remember the interview. Someone asked me, what what 0:03:57.520 --> 0:03:59.920 you have to worry about this and that you can 0:04:00.080 --> 0:04:05.120 worry for Think about some germ traveling on air France. 0:04:06.160 --> 0:04:09.320 Air France, you got good food and if they're bad germs, 0:04:09.320 --> 0:04:11.520 they travel along British air or they got food. So 0:04:11.960 --> 0:04:16.520 that was and sure enough, nothing had happened for one 0:04:16.560 --> 0:04:19.200 hundred years, or for close to one hundred years, right So, 0:04:20.760 --> 0:04:24.400 and people say, well, you know, just like financial risks, 0:04:25.279 --> 0:04:27.919 you know, people perception for risk before the crisis, say oh, 0:04:27.960 --> 0:04:30.040 we don't have to worry about these, they don't happen anymore. 0:04:30.520 --> 0:04:33.680 Sure enough, right, Scott Patterson, you've got you know, one 0:04:33.680 --> 0:04:35.839 of the sections is the Boston section that we could 0:04:35.920 --> 0:04:38.799 problem And the answer is flying blind. 0:04:38.920 --> 0:04:40.880 I mean, you've been doing this for fifteen years at 0:04:40.880 --> 0:04:44.080 the Wall Street Journal, trying to figure out the mathiness 0:04:44.080 --> 0:04:46.520 and the certitude. And I'm gonna wake up and win. 0:04:46.600 --> 0:04:48.960 We're gonna we're number six, We're gonna be number two 0:04:49.400 --> 0:04:50.120 or number one? 0:04:50.480 --> 0:04:52.839 What are we flying blind on? Right now? 0:04:54.640 --> 0:04:59.000 I think that you know, right now, there's obviously a 0:04:59.080 --> 0:05:00.839 huge amount of complace and see. 0:05:01.080 --> 0:05:02.440 In financial markets. 0:05:02.480 --> 0:05:05.600 Yeah, you know, we're hitting records time after time, and 0:05:05.720 --> 0:05:11.080 yet you look outside Wall Street and it looks pretty crazy. 0:05:11.240 --> 0:05:14.960 So there's all sorts of things that could happen. And 0:05:15.160 --> 0:05:17.920 I know Nasim wants to talk about China. I've been 0:05:17.960 --> 0:05:22.120 predicting China would collapse for two decades now, and they don't. 0:05:22.720 --> 0:05:25.320 Right, be careful. Cash flow lives there. My oldest son 0:05:25.480 --> 0:05:28.280 speak care Okay, China's not going to collect. Let's do this. 0:05:28.279 --> 0:05:30.239 We do China. David Gurr in the next section. 0:05:30.320 --> 0:05:34.680 Okay, we've got an extended conversation when nassee Telebin Scott 0:05:34.680 --> 0:05:36.040 Patterson Chaos. 0:05:35.720 --> 0:05:37.279 Kings is a book. Okay. 0:05:37.600 --> 0:05:39.280 You know I asked that question of Scott, and I 0:05:39.400 --> 0:05:42.560 seem to set you up here. We're flying blind, na 0:05:42.680 --> 0:05:46.359 seeing teleb and private equity and private credit. 0:05:46.600 --> 0:05:49.200 It's all the rage. Okay. 0:05:49.600 --> 0:05:53.560 The first thing I have to say that we have 0:05:53.960 --> 0:05:59.640 that problem in the West. Okay, wether individual government. You 0:05:59.680 --> 0:06:03.080 know you can have that. China has that, but you 0:06:03.160 --> 0:06:05.919 must grow. And the problem of the West is that 0:06:06.120 --> 0:06:10.120 we have an s curve of growth or of GDP 0:06:10.440 --> 0:06:14.200 or per capita, and it looks like we're at it 0:06:14.320 --> 0:06:18.760 on the top right of that curve. So it's concave. 0:06:19.200 --> 0:06:23.159 And people have two cars, they have two homes, and 0:06:23.360 --> 0:06:25.839 what do they want, I mean, have perieer watership to them. 0:06:25.920 --> 0:06:29.599 I mean, so the incentive to grow isn't there. So 0:06:29.720 --> 0:06:33.239 here it's a serious problem when you have low growth 0:06:33.320 --> 0:06:36.159 and a lot of that. And the problem is that 0:06:36.640 --> 0:06:42.920 Western you know, economies have never had more debt in 0:06:43.279 --> 0:06:47.760 history as a time where grows became concave simply the 0:06:47.880 --> 0:06:50.960 nature of growth. You grow fast when you're China because 0:06:50.960 --> 0:06:53.400 you got to pull people out of the provinces and stuff, 0:06:53.880 --> 0:06:56.679 and sentative living can still rise and make a difference. 0:06:56.760 --> 0:06:59.400 Now, see, they're not quantic Curt sweets years ago. 0:06:59.800 --> 0:07:04.599 There, our listeners, our viewers there there, they put their 0:07:04.600 --> 0:07:07.120 pants on one leg at a time. How did they 0:07:07.279 --> 0:07:11.840 hedge against your concave tensions that we're in right now? 0:07:12.040 --> 0:07:13.760 How do mere mortals hedge this? 0:07:14.320 --> 0:07:17.440 Okay, the whole thing is, it's not you hedge. If 0:07:17.480 --> 0:07:21.880 you're investing without a tail hedge, you're practically not investing 0:07:22.640 --> 0:07:25.480 because of the ruined problem. And that's what he discusses 0:07:25.640 --> 0:07:28.320 in the book. That's my first statement and the second 0:07:28.360 --> 0:07:33.000 one that people are way too static. They imagine either 0:07:33.720 --> 0:07:40.800 they have a memory that's that's that's either too short 0:07:41.080 --> 0:07:45.200 or or or or has problems updating that they don't 0:07:45.240 --> 0:07:48.440 realize that, for example, what's happening in China that the 0:07:48.520 --> 0:07:52.840 Nature index of publications that's very hard to gain. What 0:07:53.080 --> 0:07:56.440 China used to have one percent today it's in the 0:07:56.520 --> 0:08:01.880 twenties and rising. So tells you that's a leading indicator 0:08:01.960 --> 0:08:05.520 of what technologies may come out of China. So you 0:08:05.640 --> 0:08:12.680 realize that got to look back before seventeen fifty around 0:08:12.680 --> 0:08:16.640 when the Industrial Revolution started starting. So we're starting to 0:08:16.680 --> 0:08:19.320 shift and in eighteen thirty China had eight times the 0:08:19.400 --> 0:08:22.360 GDP of Britain. We're back there as soon it's gone. 0:08:22.480 --> 0:08:27.320 So we're going back now in times like reversing the 0:08:27.440 --> 0:08:30.040 downess of the West, not because the West is doing poorly, 0:08:30.440 --> 0:08:32.199 but because it got one of the work. 0:08:32.440 --> 0:08:35.040 David, we're going to China right now. Nasie's running the show. 0:08:35.280 --> 0:08:37.200 We're doing China here right now. We'll do the stock 0:08:37.240 --> 0:08:40.680 market opening your Formanus David Gern Shina with Scott Patterson. 0:08:40.760 --> 0:08:41.680 Well, Na, see. 0:08:41.559 --> 0:08:43.199 Scott, let me ask you more about you said you've 0:08:43.240 --> 0:08:45.839 been predicting the sort of dissolutionally have been seeing for 0:08:46.120 --> 0:08:49.200 twenty years. What stands out to you about this moment. 0:08:49.200 --> 0:08:51.079 We spent the whole week talking about these kind of 0:08:51.160 --> 0:08:53.800 unprecedented actions, the way they were delivered by the PBOC 0:08:54.000 --> 0:08:56.360 in China. What that says about the actual state of 0:08:56.360 --> 0:08:59.120 the economy there. Talk a bit about that and sort 0:08:59.120 --> 0:09:02.040 of your vantage and also just sort of how much 0:09:02.120 --> 0:09:04.120 varacity we can ascribe to the statistics that we're getting 0:09:04.120 --> 0:09:04.880 out of China. 0:09:05.960 --> 0:09:08.520 Well as to the veracity of the statistics. Who knows, 0:09:09.240 --> 0:09:12.640 you know, they keep doing this, they keep they hit 0:09:12.640 --> 0:09:15.440 a slow down and then they you know. 0:09:15.600 --> 0:09:16.559 Hit the accelerator. 0:09:16.960 --> 0:09:19.680 They've they've pulled you know, after the GFC, a great 0:09:19.720 --> 0:09:23.120 financial crisis, China pulled the entire world out of out 0:09:23.120 --> 0:09:28.560 of that situation by stimulus. You know, who knows how 0:09:28.600 --> 0:09:30.440 long they can keep it up. It's it's a big 0:09:30.480 --> 0:09:33.440 mystery for me. You know, my focus these days is 0:09:33.480 --> 0:09:39.439 on climate and the dominance of China and climate technology 0:09:39.640 --> 0:09:43.160 is astonishing, and that's the future of energy, it's the 0:09:43.160 --> 0:09:47.320 future of vehicles, it's the future of batteries, and they're 0:09:47.400 --> 0:09:49.079 you know, light years ahead of everybody. 0:09:49.240 --> 0:09:50.240 We're trying to catch up. 0:09:50.559 --> 0:09:53.240 Europe's trying to catch up, and that for China is 0:09:53.600 --> 0:09:55.040 a big, big advantage. 0:09:55.120 --> 0:09:56.840 I got to do a shout out here with the 0:09:56.880 --> 0:10:00.439 Wall Street Journal this week with a stunning effort. It's 0:10:00.559 --> 0:10:05.520 newest nuclear submarines sank setting back. It's military modernization. That 0:10:05.600 --> 0:10:09.640 was an incredible story. Out of your shop. Now on 0:10:09.800 --> 0:10:14.199 China again, continue, Aaron Freiberg for Foreign Affairs says, it's 0:10:14.200 --> 0:10:15.840 a Marxist Lendinist regime. 0:10:16.480 --> 0:10:19.200 Nobody in Beijing read fooled by randomness. 0:10:19.600 --> 0:10:22.080 No, But the point is the point is that China 0:10:22.160 --> 0:10:24.439 is in reverse. It's the reverse of Europe. If you're 0:10:24.480 --> 0:10:28.360 small in China, you can do whatever you want. If 0:10:28.400 --> 0:10:31.199 you're big, the government calls you up for a meeting. 0:10:31.400 --> 0:10:31.640 Right. 0:10:31.800 --> 0:10:36.600 So in Europe, if you're small, you're overregulated. You got 0:10:36.679 --> 0:10:40.160 you got like five tax inspectors bringing down your neck, 0:10:40.240 --> 0:10:42.400 you got to get all these permits. If you're big, 0:10:42.960 --> 0:10:45.840 then you own the government, okay, particularly the case in 0:10:45.840 --> 0:10:49.040 France and Germany, everywhere and practically everywhere in Europe. So 0:10:49.600 --> 0:10:52.480 China is a reverse. So they say, okay, it's capitalism 0:10:53.160 --> 0:10:57.559 okay for the small, and communism for the large and 0:10:57.720 --> 0:11:02.160 its effectively, it's not that much. There's you know, a 0:11:02.720 --> 0:11:04.640 centralized economy except for the top. 0:11:04.720 --> 0:11:09.959 So what about America into our fractured election? 0:11:08.800 --> 0:11:13.280 Okay, I don't know about whether the election makes a 0:11:13.320 --> 0:11:17.160 difference in many respects, but we have a problem. And 0:11:17.200 --> 0:11:24.280 that problem is that our debt servicing is increasing and 0:11:24.400 --> 0:11:27.800 I guess that you cross is more than military spending 0:11:28.440 --> 0:11:31.240 more already. Okay, So and it will continue to pay 0:11:31.280 --> 0:11:33.640 interest on that. Now you may say interest rates may 0:11:33.960 --> 0:11:37.760 be lower. I don't think we can go back to 0:11:37.880 --> 0:11:41.800 zero interest rate because zero interest rates Goll's here, all right, 0:11:41.880 --> 0:11:43.640 So we're going to go back to normal interest rates. 0:11:43.679 --> 0:11:46.840 So the dead problem is not going to go away. 0:11:47.040 --> 0:11:50.600 That service is going to keep increasing. And and the 0:11:50.679 --> 0:11:54.720 problem is if the East becomes and that's just China, 0:11:54.880 --> 0:11:58.680 just the East in general becomes powerful and becomes a 0:11:59.000 --> 0:12:02.680 target of for you know, retirement money and stuff like that, 0:12:02.920 --> 0:12:04.560 then the dollar would be in trouble. 0:12:05.360 --> 0:12:05.640 Okay. 0:12:05.679 --> 0:12:09.000 I'm just looking at it from risks to that point. Okay, Well, 0:12:09.160 --> 0:12:11.480 you got to solve that problem, Scott. 0:12:11.480 --> 0:12:14.239 What's the other side of the story here, the mathewness 0:12:14.360 --> 0:12:16.640 and certitude of Zurich, Switzerland. 0:12:18.480 --> 0:12:22.480 Yeah, you're foring to Didda Sornette, the Dragon Kings guy. 0:12:24.000 --> 0:12:27.680 You know, we were talking about China, predicting what happens 0:12:27.720 --> 0:12:31.559 in China. I just you know, after covering financial markets 0:12:31.600 --> 0:12:36.120 and talking to you know, hedge fund managers who twenty 0:12:36.200 --> 0:12:40.000 years ago were billionaires and now they're you know, buzzing 0:12:40.000 --> 0:12:44.520 tables at diners. I you know, this is where I 0:12:44.559 --> 0:12:47.280 come down on the Seams side, is I don't think 0:12:47.360 --> 0:12:49.080 you can predict markets. 0:12:49.240 --> 0:12:51.199 I think it's impossible. 0:12:51.559 --> 0:12:53.120 I think that they're you know, when you look at 0:12:53.200 --> 0:12:57.880 quant trading strategies are very short term, like over the 0:12:57.920 --> 0:13:00.560 course of a few minutes and seconds. Those are the 0:13:00.600 --> 0:13:04.160 only strategies that really survive long term. And even they 0:13:04.280 --> 0:13:06.800 you know, my first book, The Quants, showed how they 0:13:06.800 --> 0:13:10.319 almost blew up in the in the two thousands in 0:13:10.400 --> 0:13:11.840 a period of big d leveraging. 0:13:12.040 --> 0:13:15.800 So basically they're basically getting a higher dimensional bit than 0:13:15.840 --> 0:13:17.599 ask Okay. 0:13:17.360 --> 0:13:18.200 Yeah, they're trading. 0:13:18.520 --> 0:13:22.079 Didn't asked very rapidly, and that's that's good strategy. But 0:13:22.559 --> 0:13:26.520 you know, trading making big bets on your prediction of 0:13:26.559 --> 0:13:29.040 what China is going to do next quarter, next year, 0:13:29.800 --> 0:13:31.720 or you know what the FED is going to do 0:13:32.600 --> 0:13:33.960 this is very, very hard to do. 0:13:34.080 --> 0:13:36.360 My humility or David Gray is it's a once in 0:13:36.400 --> 0:13:39.960 a lifetime event. And you know, years ago in the 0:13:40.000 --> 0:13:42.640 old World, which is where taub is from, you know, 0:13:43.120 --> 0:13:45.160 eleven nine and all that, and over to the continent 0:13:45.160 --> 0:13:48.120 of Europe. You know, they're laughing at us about once 0:13:48.160 --> 0:13:51.920 in a lifetime event. You and I have gotten great? 0:13:51.960 --> 0:13:55.040 Doesn't eve any great, But the answer is there's a 0:13:55.040 --> 0:13:56.600 lot of once in a lifetime events. 0:13:56.720 --> 0:13:58.360 David, I have a. 0:13:58.320 --> 0:14:01.880 Question about young people in this industry, and it's inspired 0:14:01.880 --> 0:14:03.920 by a conversation I had with my friend Robert Smith, 0:14:03.920 --> 0:14:05.640 who is at NPR. He's now running the Night Badge 0:14:05.640 --> 0:14:07.480 of program at Columbia. I said, I was going to 0:14:07.520 --> 0:14:09.200 be talking to you today and he said, here's what 0:14:09.200 --> 0:14:10.680 you should ask him. He pulled up a tweet that 0:14:10.720 --> 0:14:13.840 you filed more than a year ago. Now, the story 0:14:13.880 --> 0:14:16.679 we haven't covered this week is Caroline Ellison of FTX 0:14:16.800 --> 0:14:18.600 getting sentence, going to spend two years in prison, and 0:14:18.600 --> 0:14:22.440 you tweeted about Sam begmanfreed when everything blew up. He said, 0:14:22.440 --> 0:14:24.520 the problem with people like SBF is knowing a tiny 0:14:24.520 --> 0:14:27.800 bit of statistics to pairrot about it, but not understanding processes. 0:14:27.840 --> 0:14:31.440 That is dynamics cross time. Shakespeare has survived nearly half 0:14:31.440 --> 0:14:35.440 a millennium by filtering by time. Then you close. Sam 0:14:35.480 --> 0:14:37.800 Begnfreed worked at Jane Street. You're right to Jane Street. 0:14:37.960 --> 0:14:39.800 He would have flunked my job interview. 0:14:40.080 --> 0:14:42.600 What does the naseum telef job interview look like? 0:14:42.680 --> 0:14:44.000 What do you ask somebody to supply for? 0:14:44.360 --> 0:14:45.320 I understand. 0:14:46.760 --> 0:14:50.040 Some basics thing like ruined problems and understand dynamics. 0:14:50.600 --> 0:14:51.360 So which is the same. 0:14:51.600 --> 0:14:55.200 You know that people, if you have tiny probability of 0:14:55.240 --> 0:15:00.560 losing money, you eventually would go out of business, Okay, 0:15:01.000 --> 0:15:04.040 because over time. So if you're aware of it, that's fine. 0:15:04.080 --> 0:15:06.040 If you're not aware of it, you've got a problem. 0:15:06.520 --> 0:15:10.640 The other one is sizing comes from sizing. Also, if 0:15:10.640 --> 0:15:14.400 you have the edge, you still have probably a one 0:15:14.480 --> 0:15:17.360 hundred percent of blown up if you don't size properly. 0:15:17.440 --> 0:15:21.840 So sizing is very delicate. Two basic things. And the 0:15:21.920 --> 0:15:24.800 third one is about fat tails, the difference between tintails 0:15:24.840 --> 0:15:28.000 and fat tails. And that's pretty much the theme of 0:15:28.160 --> 0:15:33.120 the Black Swan, the remedy and anti fragile and discussion 0:15:33.120 --> 0:15:35.360 of white people don't understanding and skinning the game. Okay, 0:15:35.840 --> 0:15:39.680 so the difference between fat tail and thin tail finance 0:15:39.840 --> 0:15:44.600 is not Gaussian. Now everybody claims, yeah, we know that. Yeah, 0:15:44.600 --> 0:15:47.920 if you know that, then why are you using Gaussian tools? 0:15:47.920 --> 0:15:48.800 What tools do you use? 0:15:48.880 --> 0:15:51.960 What do you suggest people in the street understand the 0:15:52.000 --> 0:15:56.720 parreto eighty twenty? It is very intuitive. You need to 0:15:56.840 --> 0:16:00.880 learn to know some mass but not enough, okay, to 0:16:00.960 --> 0:16:03.040 get to stuck to the You know, if you teach 0:16:03.080 --> 0:16:04.800 people a little bit of math but not enough. 0:16:04.760 --> 0:16:07.960 They go to the Coe. This not Sing's laughing at 0:16:07.960 --> 0:16:09.280 me here right now because he knows that. 0:16:09.360 --> 0:16:12.120 To Thudau David, thank you, Kerr and I don't speak 0:16:12.160 --> 0:16:14.480 before the show. In fact, we're not on speaking terms. 0:16:14.920 --> 0:16:18.480 I'm so glad I brought that up. Not seem but 0:16:18.640 --> 0:16:20.400 you know me on position sizing. 0:16:20.520 --> 0:16:23.960 Position sizing is everything, and right now we're living in 0:16:24.000 --> 0:16:28.120 a MAG seven world where everybody, whether they admit it 0:16:28.240 --> 0:16:31.040 or not, is Scott Patterson's four oh one k at 0:16:31.040 --> 0:16:34.400 the Journal is loaded up with Nvidia and all the 0:16:34.400 --> 0:16:37.720 rest of it not seeing tellt on MAG seven the 0:16:37.840 --> 0:16:39.600 anti position sizing. 0:16:40.560 --> 0:16:44.840 Okay, so I let me give you one one thing 0:16:44.920 --> 0:16:46.080 since I don't have a lot of feats. 0:16:46.480 --> 0:16:47.920 Yeah, I read tweet. I wrote a. 0:16:47.880 --> 0:16:51.000 Tweet saying that if someone gave you twenty four hours 0:16:51.000 --> 0:16:55.640 in advance the newspaper tomorrow's newspaper, that you would go bust. 0:16:56.760 --> 0:17:01.320 And actually someone just tested it. Victor hugg Formultive LTCN, 0:17:01.920 --> 0:17:05.479 who visibly know has long experience in the market, has 0:17:05.560 --> 0:17:09.720 tested it by giving people over fifteen years next day's 0:17:10.480 --> 0:17:13.119 newspaper and tell and giving them you can trade that 0:17:13.160 --> 0:17:15.400 today's price, knowing towards newspaper. 0:17:16.920 --> 0:17:19.240 And people didn't do well. Why. 0:17:20.400 --> 0:17:24.080 One of it is of course sizing. They don't know 0:17:24.119 --> 0:17:26.639 how to size the position right, whether they're right, They 0:17:26.680 --> 0:17:29.320 don't know how right they are because they can't figure 0:17:29.320 --> 0:17:32.120 out how much of it is noise, all right, and 0:17:32.160 --> 0:17:36.159 of course the sizing. So so the just you know, 0:17:36.359 --> 0:17:38.879 heard of the paper yesterday because it starts with my tweet. 0:17:39.160 --> 0:17:41.919 It's interesting to have a tweet turning into a paper 0:17:41.920 --> 0:17:44.919 by someone else, like for someone lazy like me, it's perfect, 0:17:45.119 --> 0:17:48.920 right because tweets I don't an airport's typically right, So. 0:17:49.160 --> 0:17:51.960 And that's not say, that's not how markets work. The 0:17:52.240 --> 0:17:55.840 markets work on anticipation of news events. Oftentimes when you 0:17:55.840 --> 0:17:57.720 you know you see the Fed cut interest rates, the 0:17:57.760 --> 0:18:00.960 market go down, Yeah, because it's already trade on that news. 0:18:01.040 --> 0:18:03.760 There's a fact Tony story and anti fragile all right? 0:18:03.880 --> 0:18:08.800 How people who anticipated the invasion of Iraq or the 0:18:09.840 --> 0:18:14.200 starting of the war against Saddam in nineteen ninety one, 0:18:15.119 --> 0:18:18.720 those what a dissipated? It went bust because guess what 0:18:18.760 --> 0:18:20.000 happened to oil prices? 0:18:20.359 --> 0:18:21.119 They collapsed? 0:18:21.280 --> 0:18:24.120 All right, So it's not figuring out the news. There's 0:18:24.160 --> 0:18:25.840 something more subtle about markets. 0:18:26.440 --> 0:18:28.560 I want to get one more question in a kiss 0:18:28.600 --> 0:18:30.240 Kings and Nassy, and then we've got to talk to 0:18:30.280 --> 0:18:33.679 you about it fractured your old world, your Europe with 0:18:33.760 --> 0:18:37.520 one two three the column conflicts, but I think there 0:18:37.800 --> 0:18:40.919 was Skim Patterson, you have such a history of writing 0:18:40.960 --> 0:18:42.920 of the tension of Wall Street. 0:18:42.920 --> 0:18:43.960 And your experience. 0:18:44.040 --> 0:18:47.719 Is anybody on Wall Street putting the tension and the 0:18:47.800 --> 0:18:51.320 outcome of it of your books into practice or we 0:18:51.440 --> 0:18:53.560 still want a to var, which I. 0:18:53.480 --> 0:18:57.160 Know Nasim loves var. Is anything changed on Wall Street? 0:18:57.280 --> 0:19:00.760 I think that's it's funny. No, I don't think that 0:19:00.840 --> 0:19:03.440 we learn our lessons. I think people are still using 0:19:03.720 --> 0:19:07.600 value at risk even though it just got just I 0:19:07.600 --> 0:19:09.080 mean it was a laughing stock in two. 0:19:08.920 --> 0:19:11.679 Thousand and eight. People look at this and like, oh, 0:19:11.760 --> 0:19:12.400 this is insane. 0:19:12.400 --> 0:19:14.960 We're cutting out five percent of the worst days every year, 0:19:15.040 --> 0:19:18.280 and like that doesn't matter. So yeah, no, I don't 0:19:18.320 --> 0:19:20.480 think we learned list. I wanted to come back to 0:19:20.680 --> 0:19:26.320 the question of an interview asking, you know at a 0:19:26.320 --> 0:19:31.760 hedge fund. Yeah. I spoke to a while back somebody 0:19:32.000 --> 0:19:36.480 who you know at Renaissance Technologies and the big quant 0:19:36.640 --> 0:19:40.200 shop Long Island. One of the questions they asked perspective 0:19:40.200 --> 0:19:45.520 employees is how does the toilet work? Which you know 0:19:45.600 --> 0:19:48.320 you're talking about dynamics. I thought that that's an inod question, 0:19:48.400 --> 0:19:51.120 interesting and the answer is to vacuum. 0:19:52.160 --> 0:19:54.000 I want to devote the rest of the time with 0:19:54.160 --> 0:19:57.399 great honor to all the people from Lebanon that have 0:19:57.440 --> 0:20:00.480 assisted David ger and I and what we see over 0:20:00.480 --> 0:20:04.280 the last weeks, days and indeed courtis and years led 0:20:04.320 --> 0:20:08.800 by Jumana Bricchecci over in Dubai, who has been really 0:20:08.840 --> 0:20:12.320 helpful to us here. Her show is Horizon out of Dubai. 0:20:12.400 --> 0:20:15.679 Look for that now. Seeing you have lived this, you 0:20:15.760 --> 0:20:19.200 were in your family or deputy prime ministers, you were 0:20:19.240 --> 0:20:22.880 involved with it. Out of the Greek Orthodox Christian sphere 0:20:23.000 --> 0:20:28.600 of a Lebanon I remember with great prosperity, it is shattered. 0:20:29.240 --> 0:20:30.040 What did you not know? 0:20:30.160 --> 0:20:32.480 I mean, I was Elebanon two weeks ago, and I 0:20:32.560 --> 0:20:34.879 go to Lebanon, I reside there part of the time. 0:20:35.720 --> 0:20:39.480 So what you see in pictures isn't doesn't map to 0:20:39.600 --> 0:20:41.840 and when you hear about the economy doesn't map to 0:20:41.880 --> 0:20:42.760 what's going on there. 0:20:43.560 --> 0:20:45.159 There've been a. 0:20:45.160 --> 0:20:48.200 Little slowed down by the slowed down by the Gaza War, 0:20:48.720 --> 0:20:54.240 some kind of rise and across all economic sectors in 0:20:54.320 --> 0:20:57.520 Lebanon on a more anti fragile basis. In other words, 0:20:58.040 --> 0:21:02.359 the collapse of the government of lebanon On economically gave 0:21:02.600 --> 0:21:07.440 rise to the centralized municipal power and to a lot 0:21:07.480 --> 0:21:12.639 more entrepreneurship. Okay, because the central bank was conducting a 0:21:12.720 --> 0:21:16.240 ponzi and the ponzi went away, and then suddenly people 0:21:16.280 --> 0:21:20.359 recovered and four years later you know, it's on amend 0:21:20.520 --> 0:21:23.480 and and you can see economic activity across all sectors. 0:21:23.480 --> 0:21:26.399 I mean restaurants, all full new restaurants opening up like 0:21:26.560 --> 0:21:32.480 every day, at least in my in my my neighbor 0:21:32.520 --> 0:21:34.600 is like forty to fifty years past year. I mean 0:21:34.680 --> 0:21:37.639 every day, every week, so so you have you have 0:21:37.960 --> 0:21:41.480 So what the perception of Lebanon from from the outside 0:21:41.800 --> 0:21:45.879 is quite distorted, given that I spent time there. The 0:21:47.119 --> 0:21:51.359 this war I think is I mean, there there is 0:21:51.400 --> 0:21:54.000 a problem. Okay, let's let's say there is a problem. 0:21:54.680 --> 0:22:01.440 The fighting is confined to Hizballah and the State of Israel. 0:22:01.800 --> 0:22:09.160 But but but of course their side effects outside. But 0:22:09.480 --> 0:22:11.800 something tells me that that if you go to a 0:22:11.800 --> 0:22:13.960