Last week, I found myself reading a New York Times article about mortgage giant Fannie Mae. In it, some interviewees voiced concern that "the company had become dangerously large and highly leveraged, with too much debt and not enough equity."
Later in the article, a hedge-fund manager and author said this about the issue:
"Fannie Mae...chronically underestimate[s] the odds of a big move in interest rates that could devastate the value of their portfolios...The fact that they have not blown up in the past doesn't mean that they're not going to blow up in the future."
If that sounds a little like someone has forgotten recent history, it should. Fannie Mae did -- essentially -- blow up a decade ago at the onset of The Great Recession. But the article was written all the way back in 2003. And the hedge fund manager the paper talked to was Nassim Nicholas Taleb.
Taleb is a very difficult person to pin down. As Ralph Nader put it last month: "You cannot pigeonhole him!" But I think that introduction to his insight (and foresight) should suffice to convince even those who have never heard of him before that he's worth listening to.
Taleb is a former trader, a professor at NYU, and the author of several best-sellers including Fooled by Randomness, The Black Swan, Antifragile, and his just-released Skin in the Game. But perhaps its best to classify him as a "flaneur," someone who -- according to the Oxford Dictionary, "saunters around observing society."
Below, we've compiled the entirety of our 45 minute conversation with the exception of our exchange of pleasantries at the beginning and end, and a phone mishap that occurred midway through. It's a very long piece, so if you'd rather just read a few of the highlights, I've included links to a few shorter segments as well.
- Independence Should Be A Required Minimum for Finance Writers...But It's Not
- Google's Need for a Second Life, and Why Taleb Likes Small Cap Stocks
- Steve Jobs, Elon Musk, and Who the Future Will Belong To
- How to Be More Antifragile
Otherwise, grab your coffee and a seat, and enjoy learning from one of the most interesting minds out there today.
Stoffel: I really appreciate you taking the time to have this conversation. It's a huge honor for myself.
Taleb: Thank you; it's an honor for me too. I see you on Twitter and I'm definitely impressed.
Stoffel: Are you OK with me recording this?
Taleb: Yes, of course. The principle of skin in the game says that there's nothing I say about public matters that cannot be recorded.
Stoffel: In that same line of thinking, I wanted you to know that when I write up an article for the Motley Fool -- if they want it to be edited, I'm going to transcribe the entire conversation. It's a great way for me to get more familiar with the topic itself. I might transcribe the interview and publish it on Medium [my editors, clearly, agreed to publish the entire transcript here] so that we both have all of our skin in the game.
Taleb: That's good. Time magazine did an interview with me and then they said, "We can't show you the end."
I said, "I cannot. You're going to edit me."
They said, "Yes, we're going to edit you."
"I cannot run the risk because you could put things in my mouth, and you want me to agree to it beforehand." That's what I said. So it's too risky for me. Things don't work that way, you see?
Stoffel: And I understand you've had that happen a number of times. I read about once in London when you gave an hour-long lecture and for one minute you talked about your own viewpoint on the Precautionary Principle -- and it got completely twisted.
Taleb: Exactly! As if the whole talk was about climate-denying. It made it look like a conference on climate-denying.
But let me tell you what's happening: It seems to me that the conventional press is dead. And let me give you the evidence: we did an embargo on the book [Skin in the Game]. We did this for several reasons. The first one is what I call the IYI syndrome. In the past, my targets in The Black Swan were academic/finance people.
In Fooled by Randomness, the targets were rich idiots. Who -- anyway -- by now are poor. But -- a rich idiot at the time. So, journalists, you see, they loved it: "Someone is going against power, and it's not us." So phase one, they loved it. Although I criticized journalism, they said I was criticizing someone else.
In phase 2, I went against economic people who use the bell curve... and statisticians. And again, journalists cheered.
Now phase 3 -- phase 4 actually -- I went after the classes of people that include some people who review books. Therefore, I did not want to give them the chance to play with the book.
So we did an embargo.
What happened in London is someone managed to get a copy of the book. And sure enough, in succession, on the publication date, you had The Economist, The Financial Times, and The Guardian trying to hammer the book.
In spite of that -- or maybe thanks to that -- the book was the best seller in London. Now, surprisingly, the book was not reviewed in the United States. Nobody heard of it. And guess what? It was also a big surprise in the United States.
Which tells us something: When the press hates you, it doesn't matter. It's a very nice experiment. You can bypass conventional media by staying in the online field.
Stoffel: And you've argued that is actually a return to the way things used to be. It's a very positive development. Yes? Because now there are no gatekeepers.
Taleb: What happened is the information...human nature is misunderstood by these blokes. Information sort of uses you as a carrier.
So think of a parasite. Parasites use some deer or ticks or whatever. There are whole classes of organisms that use some other organism. Or bed bugs -- they use humans by being in the bed to spread and get to other humans.
Information is like that. Information sort of likes to use people to spread. And it doesn't spread through a centralized mechanism. It's a complex system.
I made some mistakes in Fooled by Randomness in my thinking about mass hysteria. It turns out these things tend to be over-hyped. There are some episodes of getting people to believe in something and turn it into a mass movement. It's true that these things have happened in history. But typically, the reliability of the conveyor of information is very easily detected by recipients.
Stoffel: It's like a self-filtering system. The system filters it out over time.
Taleb: Exactly! And I knew that from markets. Markets work with people. And if someone bullshits you for too long, he can talk all he wants -- it doesn't matter.
Some people whisper and you hear what they say. And you can observe that in auction markets: There are some people -- all they have to do is whisper, and their bid shows up. Other people have to shout, and stand up, and dance.
So you figure out the following: We're moving back. For example, The Motley Fool and Medium are conveyors of our conversation. The way Medium is working is: You present information, and people can comment on it. In the past, you could not. You had to write a letter if there was a problem. And not only that, but on top of that, you can write your own article on Medium.
And if you're credible enough, I noticed ... my piece on the IYI, "Intellectual Yet Idiot" -- it has 4 million downloads. So think about it: It's like a newspaper by itself.
How did that happen? Simply because gets at the structure. You have a structure today to replicate what happened in old times.
Stoffel: I remember there was some politician who started referencing it almost the next week. It was like it had taken off just like that.
Taleb: Yeah, what's his name?
Stoffel: Used to be the Republican Speaker of the House.
Taleb: Yes, he wrote a book called Understanding Trump. Of course, the beginning was about Trump, and the rest was about how -- supposedly -- Trump was going to get rid of IYIs.
We're talking about the same politician from Georgia, no?
Stoffel: Yes, and I can't believe I can't think of the name right now. I'll put a note in when I transcribe it. [It was Newt Gingrich]
Taleb: [laughter] Of course the name, most of us have those on the tip of our tongue...
Stoffel: I know, I can see his face...
Stoffel: Anyway... one thing I want to talk about is skin in the game for finance writers like myself.
To give a little bit of background: After I read Antifragile, I realized one thing I did as a finance writer beforehand. If there was a stock that was popular, I knew I could write about it and get a lot of people reading about it. And if it looked like something that was worth investing in, I'd write an article about it.
And I realized that -- later -- if I was writing an article about something, but I wasn't actually putting a significant chunk of my own skin in the game -- then I'm a fraud, basically.
And so that changed my own approach to doing it. I guess you could say I'm a more boring finance writer because there's a much narrower scope of stocks that I write about -- the ones where I have significant skin in the game.
You had a really interesting section in your book about conflicts of interest. We [as a society] wanted to eliminate that so that so finance writers could talk about it, but you say that [conflict of interest] is kind of a lesser of two evils. Am I correct in how I explain that?
Taleb: Yes. So let me explain to you how, as a financial writer, you can have skin in the game.
In The Black Swan, I noticed a a metric about forecasters -- or, securities analysts. They're basically in the same situation -- they are financial writers.
They make forecasts on the price of things -- the earnings or whatever you want. Let's take earnings. They have a forecast of earnings for that company in 2000-and-so-on.
You can tell if there's monoculture with a very simple metric: The variance between forecasters needs to be at least equal to -- if not higher -- to the variance between the average forecast and the random variable.
But what we have is the exact opposite. In other words, the random variable is less volatile than the difference between what happens and the forecast.
Stoffel: Because it's safe. No one loses their job because everyone is doing the same thing.
Taleb: Exactly! That's the clustering.
Now why do people cluster? They cluster to protect their reputation, because it's easier if you're wrong together. They cluster maybe for some psychological reason... whatever it is. But when you trade -- clustering disappears when you trade.
Because those who are wrong go bust. And it's not comparative: In trading, if you go bust, you go bust.
In trading -- effectively -- there's a penalty for being a Me-Too person. Me-Too-ism is heavily penalized in trading. If you imitate others, you're going to be late to the game, and you will also -- of course -- be late in exiting.
So independence is what is required in trading at a minimum. And you should have that with journalists.
Now, the way that you can be a journalist-- and I consider myself in one sense [a journalist], I talk about public matters like Syria and foreign policy and stuff like that -- is:
Every time you open your mouth in a public forum to say something that is not risky -- has no element of risk -- or is meant to improve your image or reputation -- every time you do that, you are compromising your ethics.
Because what's the difference between a bullshit vendor and someone who is saying something -- what's the difference between Socrates and a bullshit vendor?
Stoffel: They have something to lose.
Taleb: Exactly. Socrates was put to death! And so this is my metric. In mathematics, it's very easy to figure out rigor from nonsense. In most sciences you can -- in hard sciences, I mean.
In what's called soft sciences, of course not. OK?
When people ask, "Are you a public intellectual?" I say, "No, I'm a private intellectual... or private person."
But I have a rule on forums: If I'm feeling comfortable, I'm not taking risks to open my mouth. And every time I do that, I feel relief. It's very strange, because some people have what they call the Imposter Syndrome. And I feel relief doing it because... maybe it's because I thought through the whole process that risk-taking is honorable.
And how can you take risk in the modern life?
There's no wars or -- you know -- physical violence threatening me to go protect the neighborhood by doing a night watch. No.
So how do you do it? By taking risks by going against power -- publicly. Particularly when people hate me and so forth. I don't mean when people hate me, but when you get subjected to a smear campaign. Most people in the past were vulnerable -- of course, to reputation -- but mostly vulnerable to physical violence. Today, you are vulnerable to reputational violence.
So a journalist who gets ostracized has a problem. You see? They gang up on you; they call you a racist, a bigot, whatever, if you don't support Al-Qaeda. It doesn't take much to make links.
I don't know if you know what's happening in Syria now, for example.
Stoffel: Well I don't have the background that you do. I don't follow international relations nearly as closely. It's not where I grew up or near where I grew up like you did. But I believe I understand the basics of your position which is: The rebels aren't so much the rebels as they are -- kind of -- puppets for ISIS.
Taleb: No, for Saudi Arabia and the various Islamic regimes. But what's worse is not the fact that they're rebels -- who cares if Syrian rebels were in New York? What's relevant here is how they managed via PR and using PR firms -- initially in London and then New York, and using places like the Brookings Institution -- to not only install at minimum cost -- $20 million a year-- to make anyone who's against the rebels a racist, baby-killers, Putin-ist, something like this, you see? A fascist, racist, baby-killer... that kind of thing. And then, automatically, you get uncomfortable.
So fighting that, to me, is very honorable. In the beginning, you know, like everyone, I was afraid for my reputation. But rapidly, I started feeling that most of the positions that are honorable are the positions that made me subjected, you know, to risk.
And, of course, someone with a good idea may be called the crackpot. They can't do it to me anymore because I have 55 [unclear] publications.
Stoffel: And do you feel like -- you know -- you were a trader for 20 years. You don't rely, to feed yourself, on your reputation the same way that other journalists might. So it seems like...
Taleb: Maybe, maybe.
Also I'm now back to trading. I now trade privately, and I've noticed that I enjoy trading privately a lot more than publicly -- simply because it's an artisanal business, rather than making it in the industrial business.
Although I have some involvement with the industrial aspect of it, I just trade for enjoyment now. And it's pure joy. Even when I lose money -- simply because -- how do I explain it?
It's designed as an artisinal thing...like you're making pottery.
Stoffel: Well, and I like the way that you put it too: You're alive, you're not just an experience machine when you're putting risk on the line.
Taleb: Exactly, yes. For example, yesterday I had -- the only unpleasant moments in my life [are] when I have to do administrative crap, or being in meetings for things not involved or related to -- you know -- my livelihood. But I have to do it just to be a good citizen.
And typically, I trade [laughter], I put in a big trade before the meeting. And it sort of allows me to go through the meeting.
So, it's simple, putting some risk makes me feel alive. It makes me feel like I'm not dead, just bullshitting like I'm bullshitting in the meeting.
Stoffel: So I want to talk a little bit more about Skin in the Game.
I've used your framework of skin in the game for some articles, and I'm just curious about your thoughts. The first would be short-sellers. I wrote an article about how short-sellers have skin in the game -- if it's done in a certain way.
And by that, I mean: There are some people out there who might be short-sellers who publish a piece, cause chaos, sell immediately following, and pocket the difference.
But then there's another class of short-sellers out there who really focus on things. You know, you might say, like Valeant Pharmaceuticals, or even -- I remember Whitney Tilson and Lumber Liquidators. He realized that they were putting carcinogenic materials in their wood. Would that be something that you consider -- that would fall in the category of an honorable way of doing business?
Taleb: In fact, yes. It is honorable. Although it depends on how you do it.
Again, as you're saying, if you do it to -- I think I put it in my book as a footnote, or I think it was already there, but -- if you do a trade not as manipulation, but because it's your belief, and say " by the way, I'm short." Then, it can be honorable.
There is a very famous short around that I won't hide from you that I have -- but you can guess which short. It's a famous short.
Stoffel: I'm not sure I can. But, if I had to guess, I guess it would be Monsanto.
Taleb: No. I have never spoken publicly about this company. But -- assuming that people care about my position -- it's a big, famous short. It's nothing sizable, just enough to make me wake up.
There's something about skin in the game: I cannot look at a screen if I don't have a position. I can't follow what's going on in any markets if I don't have a position.
Stoffel: Well, it's like you said: You're dumber when you don't have skin in the game. I know what I appreciated about your book is that once I started forcing myself to put my skin in the game about what I was writing, I think it made me a better investor, too.
Taleb: Some academics mistook the idea of skin in the game for a mechanism of incentives -- and discovered that the judgment of people doesn't improve when you have more skin in the game.
Now, I don't know how these papers have been done. And psychology -- you know -- is disastrously unrigorous, both empirically and mathematically, particularly when you have probability in it. And so they think incentives don't make you smarter. And I don't know if that's the same thing.
But I don't believe in experiments versus the real world because the real world is richer...
Stoffel: Sure. It's more dynamic...
Taleb: Exactly. And I know something much more serious without taking these experiments -- from the real world. A very simple one is drug addicts: They are a lot smarter when it comes to obtaining drugs.
It's also a matter of intention for me. Talking about a company, I can't [just talk about it] -- I don't connect. If I have a short, I connect. So that puts skin in the game. So the company that is a big squeeze, I connect to it.
Stoffel: Sure. Your heart starts beating. The adrenaline's flowing.
Taleb: Exactly. I don't know what the rules are about speaking, so I won't name the company.
Stoffel: That's OK.
Taleb: I don't know what the SEC rules are. But you can guess which one it is.
Stoffel: I read recently that you gave an interview -- I think it was on Bloomberg -- where you talk about where your own skin is in the game. One thing you wrote is that it is not rational to be long stocks without having some sort of hedge against stocks. That's because their valuations are so high, because there are tail risks...?
Taleb: No -- even if the valuations were low. If the market delivers a crazy valuation, it can deliver a crazy valuation in any direction.
Stoffel: So for your normal person who works as a plumber or an electrician, what is a good hedge against stocks? Just cash?
Taleb: Well, the point is as follows: if your assets are $100 and you allocate $50 to stocks, then you are ergodic -- assuming those $50 are allocated to stocks, you don't want to decrease them at any point in time.
Let me explain the foundation of the problem: All of these analysts who look at you and the stock market assume that if you invest in the stock market, you'll replicate the performance of the stock market. The problem is, if you ever have an "uncle point" -- where you have to liquidate -- then your return will not be the stock market's. It will be the returns to your "uncle point" -- which is negative.
In other words: The market can have a positive expected return, and you have a negative expected return.
It's very similar to Russian roulette. Russian roulette is a very simple example. If you play Russian roulette with a positive expected return of 80% -- or, whatever it is, five out of six?
Stoffel: I haven't played, so I'm not sure [laughter].
Taleb: [laughter] You can't cheat to be dead. So it's the same thing with casinos. If you gamble in a casino at a roulette table, even if you have a positive expectation, you're guaranteed -- eventually, at some point -- to go bankrupt ... even though you had a positive expectation.
Stoffel: And that's the difference between ensemble [average] and time [average], correct?
Taleb: Exactly. Because probability over time depends on what happened right before. Whereas probability of the ensemble doesn't have to worry about what happened before it. So you have that discrepancy...when you invest.
So as an investor you need to think about it in these terms: no investor knows what's going to happen to him or her in the future. You don't know -- I mean, the market may deliver whatever people claim it will deliver. But if you have a drop in the market that may force you to liquidate -- particularly a drop in the market that may correlate with your loss of business elsewhere -- then, automatically, your returns will be the returns from today until that drop in the market. It de-correlates from the market.
And this is not well understood by finance people... unless you trade. I know a lot of people, for example, when I was short bonds. When I'm short bonds, people think that, hey, typically I will lose money if the market rallies. And the opposite actually happens.
I tend to make money when the market rallies although I'm short. Because -- typically -- you pick your points -- maybe you're only short for 30% of the year, not the whole year -- so you're dynamically hedged. And you pick your points, and you go in and out.
So I noticed over time -- for example -- my best returns from markets are the opposite of what the market has done. So negative correlation. That's simply because I'm long the markets, typically. And I like to buy after dips -- just buy after dips... even in a bear market. And of course, get out after the market recovers. Even in bear markets, you can make money.
This is well understood by traders. Traders say the direction of the market doesn't matter much. It's your techniques that matter.
But for investors, the same applies.. unless this is an amount of money that you will never liquidate, and you transmit across generations.
What I've been doing is saying: If you have an investment -- as an institutional investor, forget the individual investor -- and you don't have a tail-hedge protection, then your returns are virtually going to be zero -- over the long run.
Stoffel: Because it's the same as playing Russian roulette...
Taleb: Exactly. If you have tail-hedge protection, then your return will be higher than the market. Because ... you can get more aggressive during the times when people sell.
This is not well understood. My strategies have been to overload with tail options ... and not because you get a good payoff if the market collapses. It's because it allows you to buy when nobody has dry powder.
Stoffel: It's basically the same for an individual investor as having a huge chunk of cash sitting on the sidelines that they can use to buy stocks low. Is that correct?
Taleb: Yes, but the problem is for the individual investor if you miss the rally. You see, I have a larger exposure to the rally -- and my exposure increases via options on the way down. I don't recommend individual investors use options.
The risk of having a lot of cash is that if the market rallies -- for the individual investor, it doesn't work well -- you have all this cash, you missed on a big move.
Stoffel: And you never know when your time is going to come. So you're losing to inflation as well.
Taleb: Exactly. So the idea -- the wisest and most appropriate approach -- is to let the institutional investors have the tail hedges themselves.
Or to do what I call the barbell: to have a smaller amount allocated to the most volatile things, rather than a larger amount allocated to medium-volatile things. There are techniques around it.
It took me 28 years to figure out the flaws in the models proposed by so-called academics -- people without skin in the game.
Stoffel: Like the Scholes model?
Taleb: No -- the Scholes model is for fat tails.
They're all connected, but there's one central thing: Even if you're not using the Gaussian distribution, you're still long. And it's analyzing things as one step rather than analyzing life as a series of steps.
Ironically, that's my first book: Dynamic Hedging. That's my first activity -- dynamic hedging. When you look at the activity, you're trying to figure out, "What's the smartest approach I can have given the opacity of things?"
Stoffel: I have a couple more questions. I was curious as to your thoughts -- and maybe it's something you don't particularly have any thoughts on -- I was wondering if you would agree with the statement that small capitalization companies tend to be more antifragile than large cap stocks?
Taleb: Without looking at the data -- that's best way you could do it, is to test it -- yes.
For the following reason: Think of Google. Assuming Google stays like it currently is -- Google may innovate and might start making cars and have a second life -- but think of the company that has 90% of the market. How much upside do you have?
Stoffel: Very little.
Taleb: Very little. So you become fragile in that sense. At best, you're going to retain your market share, and at worst, you're going to lose a lot of it. We need to mention, of course, that Google might have a second life in another product.
Stoffel: They almost practice your barbell strategy, insomuch as they've got a ton of probably not-going-to-succeed-but-if-they-do moonshot projects that could be needle movers.
Taleb: Maybe. One other thing I would note: The skewness of small companies is to the upside. This we know. I don't know about the returns, I'd have to look at it using my own empiricism, using non-Gaussian models.
But small companies are upside skewed. S&P 500 companies tend to be negative skewed. And the S&P 500 itself is even more negative-skewed than the average skewness of companies. So I would think that small companies have more potential. That's the first statement I would make.
The second one I would make is very simply that the S&P 500 companies today will not replicate what happened in the S&P 500 returns in the past for a simple reason: The life cycle of large corporations is compressed.
Stoffel: Yes. They don't stay in it as long.
Taleb: And that's an indicator of fragility. So you can detect fragility from that.
Now, without entering a more detailed test, that's a picture I have. I like small caps regardless of the returns.
And two, there's also a further statement I would like to make: Small-cap companies definitely will have -- it's quite technical, if you look at the returns of companies that are left-tailed, like skewed left, in other words have more downside than upside -- the average return is rosier using conventional statistical methods. And if you test the reverse, it gets worse.
For example -- and this I mentioned in Antifragile, we even had a graph -- say you're looking at biotech. In biotech, you make a discovery of a huge drug, you can only have more upside. Maybe not this company you're looking at, but the market in general.
So things that have right tails, it's flawed to look at empiricism in a confined way. It's a naive mean.
It's like with wars. When we looked at war we realized that the observed mean is one-third of the real mean.
Stoffel: And that gets to some of your recent writings about how -- while the number of wars might be less, the number of people that will die in one has gone up significantly.
Taleb: But even if that's not the case, it [the historical mean] will reveal itself to be significantly larger simply because the process used shows that it underestimated its own mean.
Let me give you another example: If you are sampling the net worth of Seattle, and you don't have Jeff Bezos and Bill Gates in your sample, you've got a biased sample.
So most samples will be lower than the true mean.
Another one is the Pareto 80/20. It's something like 90-something-percent of observations are below the mean.
With insufficient data you miss on a good mean.
Stoffel: I have a couple more questions that are less investing focused, if you're willing.
Taleb: Yes, of course.
Stoffel: In your previous book, Antifragile, there [are] a number of different things that an average person can do to make themselves more antifragile.
You talked about changing the way you do exercise, you talked about how you fast. I'm curious: What are the practices -- I guess you could call them "Antifragile practices" -- that have made the biggest positive difference for you?
Taleb: Fasting. Although, we're not made to fast in modern society. The particular environments where we are made to fast are environments where food is rare. You get, eventually, food -- but you don't have the chance to overeat too much.
And I've noticed that fasting programs me to be hungry all the time. So that's how you can gain weight although you're fasting. That isn't unhealthy, but it's one discovery I've made which is very unfortunate. In a typical environment, after fasting, you shouldn't get a lot of food. It's conditional on the environment -- you only fast because the environment doesn't give you food.
So that's one thing I've applied -- it's about subjecting yourself to variation.
Another one is thermal variation.
Stoffel: Can you talk about that?
Taleb: Yeah. Go stand outside in the cold. It's simple.
The third one is: Eliminate from your life any kind of dull work. In other words, if work is not intense, just don't do work.
Stoffel: Interesting. I think a lot of people could get behind that.
Taleb: In other words, just don't mark time. Just don't count it as "work." I have a room in my house -- when I'm there, I work. When I'm not there, I don't work. So I try and avoid it, but when I go there, I go there.
One other trick from Antifragile: Lift weights. But I'm still unsure whether the benefits are from gaining muscle or from having muscle. You still cannot disentangle one from the other.
I know that diabetes decreases more from losing weight. The stressor of losing weight is good for you. The stressor of putting muscle on -- I don't know what it is that it supports. Is it the stressor of putting muscles on you or is it simply having muscles?
Stoffel: Well the good thing is we don't need to know to get the benefits.
Taleb: Well, no, you do need to know because you could go through phases of building muscle and then fasting -- like feast and famine -- and phases of resting from it.
So, these are the small things that I've learned. I also learned that if you don't have periods of challenge, you have to create them. So I do math problems. I discovered that it's easier to solve difficult math problems than it is simple ones because of that regulation. You're more motivated.
Stoffel: Well, I don't want to take up too much more of your time, I have one last question...
This question has to do with the future. I know that the future is unknowable, but one thing that I have heard you say with regularity is that you believe that the future will belong to artisans.
Taleb: I hope the future belongs to them. I think it will.
Stoffel: I hope so, too. You've also talked about how Steve Jobs was the most recognizable, mass-scale artisan. Would you throw Elon Musk in that group as well?
Taleb: I don't know....
No -- because Elon Musk doesn't do things. I mean, he does [do things], but he's a different breed. He's a good kind of entrepreneur. But, the artisan is someone like me: You cannot be a promiscuous entrepreneur if you're an artisan. And also, you know where to stop. The problem is Steve Jobs stopped at the product line. The typical artisan knows where to stop.
Food is artisinal. And every single successful restaurant owner I know goes past the first restaurant and opens a second restaurant -- they go to the point of bankruptcy, typically. And I've seen that happen. Artisans typically have the instinct to stop. They say, "OK, I'm satisfied with this."
Whereas if you hire someone [like] McKinsey, they'll end up making you keep going beyond and doing shit. They want you to expand until you end up in bankruptcy.
Stoffel: So an artisan is someone who knows when to stop. That's one of your filters.
Taleb: Exactly. For example, I publish a book every five and a half years. That's my routine. So I don't want to do it faster, and I don't want to do it more slowly. If I were to satisfy the pressures of the market, I would hire assistants and produce one book every year.
The key is: If you need to have a personal assistant -- not a subcontractor for other things, but a personal assistant -- you're not an artisan.
Stoffel: Because you're producing to produce, and not because of something you love?
Taleb: Exactly. You're going beyond your hobby point. You see, an artisan, as you notice, it becomes a hobby. So the distinction between hobby and work is blurred for an artisan. What happens sometimes is a hobbyist starts out, is doing OK, and then it turns into work.
If you make it in business, you have a different set of skills and people are going to want one or the other [an artisan or a business-person].
Stoffel: Well, I know that I will be looking forward to 2023 when the next book comes out then.
Taleb: Well, I don't know. Maybe I'll lose the taste for writing. But, I'm doing technical work in the meanwhile. A book is something that you brew -- it's a completely different product.
Stoffel: Well I hope that when you do it [write another book], if you do it, you'll do it in the same way that you did with Skin in the Game [in which first drafts were openly published on Medium]. I felt like I had read the entire book before it ever got published.
I really appreciate the time to talk. I hope it's not the last time we get to talk.
Taleb: We can talk more whenever you want to. I can't continue right now, but whenever in the future you want to continue, we can continue.
Stoffel: Well, I appreciate the time.
Taleb: OK, thanks very much.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brian Stoffel owns shares of Alphabet (A shares), Alphabet (C shares), Apple, and Tesla. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Tesla, and Valeant Pharmaceuticals. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Lumber Liquidators. The Motley Fool has a disclosure policy.