July 4, 2025 • 23 mins
Every day we're inundated with headlines that are seemingly unbelievable. Multiple major wars are ongoing. Politics is erratic. Markets are scrambling everyone's brains. So how should we live and feel good? How should we think about the world around us, and the various perceived risks out there. In yet another episode from our live Odd Lots special in New York City last month, we speak with famed author Nassim Nicholas Taleb, the scientific advisor at Universa Investments, who shares his perspective on all things.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:18):
Hello, Odd Lags listeners, You are listening to another episode
that was recorded live in New York City at our
event on June twenty sixth. This time it's with the
one and only Nassim Nicholas Taleb, distinguished Scientists and advisor
at Universa Investments.
Speaker 3 (00:34):
Yep, we talked to him about how to live a
good life in a time of immense volatility. Take a listen, Nasseine,
what's your definition of a good life? What should we
be aiming for?
Speaker 2 (00:45):
Uh?
Speaker 4 (00:47):
I mean a lot of people think that we're programmed
to be happy and stuff like that. In fact, we're
programmed to feel useful. That's a good life. Or I mean,
you don't have to be march to feel useful. As
a matter of fact, martyrs go too far and if
you look at their death typically in history, you realize
(01:08):
it could have waited a decade and the problem was
solved the self myself, right, So think of all the
wars and hey, but the Vietnam War to care itself
or the rether so whatever. So let's forget about martyrdom,
except of course, in narrow cases where you save someone.
So the ideas to be useful to others. And then
(01:29):
the idea is, you know, to share your mistakes as
you grow an age, to share your mistakes with society
so they can build on it. That's my idea of
a good life. For a lot of people, good life
is headonic in the sense that they have a chef
flown in from Europe to eat some complicated food that
(01:50):
our friend here you know, would not approve be you know,
not nonstakes and complicated things with bland names. And so
that's that's a hedonic approach to things. Mine is you
feel useful, So whether you have a family and you're
providing for them, or if for a lot of people
who don't have a family yet or may not have
(02:11):
a family, because in the past most people didn't have
a family. A lot of people were orphans, a lot
of people were had had children who then survive. So
the idea is to be useful to the community in general.
Speaker 2 (02:26):
So we talked about this in the market context at
the very beginning, But does you know I feel this
poll to basically always look at my phone to monitor
the latest headlines. Sometimes I don't think like I'm the
best parent because I'm looking at my phone and I
should be with my family. As you mentioned, how do
we be useful? We're you're bombarded any time. We're just
(02:51):
being bombarded with events beyond our control.
Speaker 4 (02:54):
Okay, yeah, but but you're we're better off than we
were today forty years fifty years ago before many were born,
may perhaps even new right, So you don't realize that
we spent about a century in front of a TV
set or reading papers, where you're receiving end but not
(03:18):
providing anything in return. So it was a centralized information
era that started, you know, was modernity, and you realize
you succeed the families eating their dinner in front of
the tea set. Basically you're receiving information, whereas organically in
the past, the way we dealt with information was by
trading it. It's like Twitter. You you give information, you
(03:42):
receive information. So you go to the barber, someone gives
you information, and then you go to buy fish. You
give the fish smonger information and then rumors start going.
So and now we're close to that period because you're
not just receiving stuff, you're also tweeting. You knows, although
you're piles I'm sure tells you not to tweet. That's correct,
(04:03):
that's okay, it's true.
Speaker 3 (04:06):
When we're trying to get Joe's attention, send a d
M respond.
Speaker 4 (04:10):
I'm sure he's tweeting. So you're feeling you're not just
receiving noise, but you're crazy. I'm contributing. I'm exactly to
the noise.
Speaker 2 (04:17):
Thank you so very validated.
Speaker 3 (04:19):
Wait, but do you personally enjoy being on Twitter? Because
I read some of your tweets, and you know, sometimes
you seem a little angry.
Speaker 4 (04:26):
No, a little I we're tweeting now in front of
all of you, the tweets would look angry, but my face. Wait,
I'm often giggling when I'm tweeting. All right, I'm often giggling.
So the idea is to separate your your public persona
(04:47):
from your private life.
Speaker 2 (04:49):
By the way, before we forget, before you leave tonight,
someone DM me and said can you please ask? And
the seem to unblock me on Twitter.
Speaker 4 (04:56):
So I got these all the time, probably.
Speaker 2 (04:58):
The remind me before you it seemed like a nice guy.
Speaker 4 (05:03):
They all say, oh sorry, I had a drink or
wish to actually because of bitcoin, because I chained blocked.
When you have a smear campaign, you chain block, so
the friends if someone bullies you, or block the friends
as well. It was possible at the time.
Speaker 3 (05:22):
Wait, how many people here have been personally blocked? Find
the seemed to lab.
Speaker 4 (05:30):
Not that many, not that many, A small number. Because no, no, no,
because I stopped I stopped a couple of years ago
from using the chain blocker one because it had a
lot of type to error that the false positives. And
the other reason is because when Elon took Twitter, he
(05:53):
banned these uh bots, so so they can't operate anymore.
You got to manage like the third party. Yeah, exactly
if I could use to block someone their friends, the
friends of their friends, the friends and friends of the
friends and all of that.
Speaker 2 (06:07):
So are you surprised that in a year of just
like unbelievable headlines seemingly day after day, multiple wars going on,
(06:31):
not to mention the trade war and all of that
everything else, doge et cetera, that the markets are not.
Speaker 4 (06:38):
There. Let me compose a tweet that maybe I'll post.
Is for Trump one. Okay, Trump one was taken literally
by his enemies, by his uh and metaphorically by his friends. Okay,
Trump too is taken metaphorically by his enemies and literally
(07:01):
why his friends explained. So whatever he's saying now he's
pretty much doing. Did you believe that he was gonna
start these tariffs? They make no sense. I mean, it
makes sense to get elected in Pennsylvania. But but I mean,
but it's not the kind of thing you do really
And and it turned out he meant it. It was
(07:21):
not just you know, a vague, it's really an order metaphor.
It was real. He wants tariffs. So maybe he wants
to destroy the American economy. Maybe that's his wish, and
you can probably put a dent and yeah, but at
all time, sorry the stock market. First of all, you
(07:41):
have to separate the health of American company. I get
that from the income of the American who went to
stop and shop or is the thing in your area
that whole food? You guys go to Whole Food, but
normal people go to Costco whatever. And then you look
at your bill, right, and the bill went up practically
(08:02):
for everything, and their income did not. And text breaks
to come are not going to help those who don't
shop at hole food because it's the the poor people.
You don't pay taxes anyway. So you're not going to
get a break from that. So the idea is there's
a lunacy in these terairs. I can understand that we
(08:23):
need to protect pharma. We have some strategic interest in this. Okay,
we'll protect the industry. You want to make sure it
don't depend on China for other things. But it's a
lunacy to try to switch with four percent unemployment in
America plus or minus from high margin. You guys are
(08:46):
all hard margin, all right, to low margin or high
margin audience. Yeah, we have a high margin audience to
low margin, right occupations. So now we're going to make socks.
You mentioned the high margin, so it's making making films.
You're gonna make socks. And and then also misperception, the
whole process, a lot of things in basic you know,
(09:12):
trade accounting, like they SAP, they're ripping us off. I mean,
I'm a dentist, all right, and I go buy my bread.
It's ripping me off, all right, I should make my
own bread. And then the pressure for the bakers should
be a dentist. So the whole, the whole idea not
it doesn't stand on. And then plus they have you know,
(09:35):
someone is not very intelligent or not very skilled, and
you can detect that at it's like arbitrages. You guys
are from financial audience, and we call that trading against themselves.
They do a series of trades that end up being
closing a loop in circular but was a loss, all right.
They used to call that Texas trades. But I think
that the state of Texas has been unfairly you know,
(09:59):
the saying, yeah, Texas trade in general. One of them
is Texas heads. Right. So the so, for example, they
have terriffs on components that you would use to build
a computer in your basement in New York. Okay, but
if you bought an Apple products, then there's no tariff
(10:22):
although that's made them. Everything's made overseas manufacturers. Okay, So
this is an inconsistency. So there are plenty like that.
And that's also what's his name? The Secretary of Treasury
is like the Secretary of not treasury, secretary of commerce
is Yeah. He definitely someone should hire him for comedy
(10:42):
because he was saying, first of all, you want he
he doesn't inconsistency. He didn't realize he said, oh, we're
going to raise so much money from tariffs and and
and then when you ask him, you mean that the
economy will not adapt to your tariffs by by replacement.
He didn't take it. And he wants us to produce
(11:02):
to pay teris on bananas, so we don't have substitutes.
Or he spoke about wine. He said, Oh, people buy
American wine. But what happens if French the price of
French wine goes up? Okay, there's something called substitution. I
don't know if people do that. In Europe, they teach
high school economics. I mean for children where they teach
(11:24):
from substitution. All right, so it's elementary me. I mean,
I'm saying that he Trump should have hired if you
could find people who have some skills. All right.
Speaker 5 (11:36):
I can't wait to develop my skills growing my own bananas.
Banana are TARKI are our tarky. Sorry, I can't talk tonight.
Speaker 4 (11:43):
Okay.
Speaker 3 (11:44):
I was going to ask you always preach skin in
the game, yes, unlike US journalists.
Speaker 5 (11:51):
So I got to ask, you're still an advisor to Universa.
Speaker 3 (11:55):
What's been going on there? What are your returns?
Speaker 4 (11:57):
Like?
Speaker 3 (11:58):
Give us all the numbers?
Speaker 4 (11:59):
Okay? No, I so this is not the place to
discuss numbers you won't get all right, but you can
get a general approach and philosophy that I have now
to describe and in a format, compressed format of what
we do and how we do it, we can safely
(12:22):
say that as usual, whatever we're doing work okay in
the sense that the idea, the idea, and I mean
seri the idea. The idea is that you got to
look at the return of that hedge. You got a
return of the portfolio that was hedged, because sort of
like when you when you have an insurance on your house,
(12:43):
all right, you look at the package house plus insurance.
You don't look at insurance as a tradable thing today,
I'm not going to have insurance tomorrow I will have
or how is that pain on? You? Look at the package? Okay,
insurance allows you to buy bigger house because you know
you're your total risk is lower in case of stuff
like that. So it's the same situation. And the stock
(13:05):
market rallies, which means that not only did the hedge
do okay, but it wasn't needed, so you like making
money on your insurance. So net that story continued, and
we've been doing it now for time flies, we're twenty
twenty five. That's twenty five minus. Oh it's a lot,
(13:28):
all right, So doing it for eighteen years nine eighteen
nineteen years, directly it was universe and then before of
course the iteration before and it is, it's the same story.
We didn't change strategy for a second, and we will
not change strategy. So basically that's what we do is
the same thing. It's just a's getting bigger. That's it.
Speaker 3 (13:51):
Well, wait, there are a lot more volatility events nowadays.
Do you not adapt to that at all?
Speaker 4 (13:57):
Or so let me tell you if you look, first
of all, I don't look at volatilely as volatiley and
in my technical work and universa doesn't look at you
look at for example, you can have a tail event
and then you can have or you can have regular volatively.
So a lot of people are overall by regular volatily
and typically what they call regular volatility is I learned
(14:20):
the linguistics of that business is when the market goes down,
they don't And in the old days of losing money,
I would say, well, the markets are volatile. Voltale doesn't
mean it's going up. Volato is not an absolute, uh
mean deviation voltle is negatively recerned, all right, So so
a lot of perception of things of volatility by exactly
(14:42):
I mean your professional journalists. Of course very important that
way you can reveal uh, bad stuff when it's made
and things like that.
Speaker 3 (14:51):
But but didn't it seem to say something nice about journalis.
Speaker 4 (14:54):
Yeah, no, no, there are a lot of things. That's
an important vision. But but but very often there's the
scaling doesn't doesn't quite match, like for example, people in journalism,
and this I wrote about in full by randomness, you
should have newspapers, and the lengths of newspapers. Now you
don't have new paper, but you understand what I mean.
(15:16):
There should be on days like the stock market crash
or on the last couple of weeks, newspapers should be
that big and the rest of the time should be
half a page. But they have the same length, all right,
So that's the scaling problem in journalism. In other words,
you have the news fourteen and a half minutes plus
you know, of course the bloomberg at in the middle.
(15:38):
So the I mean that news bulletin should be variable
with with with the events. You see. The idea the
same thing with market movement. So I don't think that
we are experiencing the read vaulty compared to what could
have happened and what we have seen with explosive markets.
Speaker 2 (15:56):
Yes, so as mentioned multiple wars going on. We had
the COVID shock, we had the inflation shock. We have
massive changes happening in the political landscape, including right here
in New York City. Is there an underlying reason in
your view why it feels as though big things are happening.
Speaker 4 (16:20):
No. My whole point is that to go back to tail,
to what we call about fat tail fat tales means
the smallest number of events explains the largest number of deviations.
For example, if you take a thousand people and you
have inequality, one person will have most of the money. Likewise.
(16:43):
Few historical days have most of the information likewise, So
this is entirely normal. But the point is you can't
you can predict ahead of time that you're going to
have when you're going to have these days, or you're
going to have the structure of it is though very
very stable. It is things followed them to follow a
power law.
Speaker 5 (17:04):
So, oh, I'm going to ask a very basic question
that I'm sure you get asked all the time. But
we are all nevertheless very interested in your answer. By definition,
black swans, I guess are unpredictable and impossible to forecast.
But what black swans do you see on the horizon?
Speaker 4 (17:22):
Okay, so yeah, leverty phrase lety phrases. Okay, there's something
called grace WANs. All right, So great pandemics were grace
wants or or you know, grace swans means events that
have these characteristics. A very small number of events determine
(17:45):
large part of the total effect, like small small number
of events, small number of wars, I've killed most of
the people, stuff like that, pandemics. So there's grace ones
and you can say they have a structure, you predict
them ahead of time. No, okay, but we do as
you can figure out if an environment is fragile or not.
(18:06):
And in fragile environments you can say, okay, this is
prone to break if there's a shot, Like in two
thousand and seven, we knew that the banks were fragile.
Why they were net short volatility. That's sort of my
fragility work in anti frasule. To answer your question, I
wrote anti fragile, which on its own became a monster right.
(18:27):
But the whole idea is to figure out what can
be have cascading effects from shocks. Okay. As I wrote
in The Black Swan, it's foolish to say what color
truck is going to break a fragile bridge, Okay, but
it is not foolish to say this bridge is fragile,
(18:48):
it's going to break one day, don't cross it, don't
don't or or or invite your enemies to Okay, Okay.
Speaker 3 (18:55):
What areas of fragility do.
Speaker 5 (18:58):
You see right now?
Speaker 4 (18:59):
So? The first one? Okay, so the first Yeah, the
first one is we have a I don't know if
you're aware of it. Maybe people aren't aware yet that.
I don't know if we know have a deficit, right,
and you know that you have to borrow, you know,
(19:19):
to pay for the interest rates for the interest of
you know, the the the debt that you've had before.
And at four norse four percent interest rates, four to
five percent interest rate, this is significant. It means you
can have a snowballing effect. You have to borrow more
and more. And you know that they're not fixing the
(19:41):
budget problem except verbally, Hey, we're going to fix the budget.
It's all the same story. The structure of the political
system unfortunately is driving us there. Okay, So this is
one source of fragility. One main source of fragility, okay,
is that the political system is not adapted to the
that kind of thing. So what happened in the Western world,
(20:02):
it's not just a case of the United States. It's
a case of the Western world. Because you've got to
look at it, as are describing anti fragiles, think of
an escort, like China can have rapid growth because they're
pulling people out of their beautifully landscaped countryside to put
them in apartment blocks. That maybe it's not pleasant for
the people, you know, to live in in boxes, but
(20:27):
that greener is a huge amount of economic growth. Okay,
So a lot of people going up the so called
development scale. You're you're on the convex part of the escort, okay.
The West is on the concave part of the escort.
So which means that you mean you have two cargo
(20:47):
mostly except your New Yorkers live in small boxes like
like like poor people in middle ages, but outside New
York City and a really most people have two car
garages stuff like that. So you you we can't you
can't grow right, and you don't have poor people, so
you have to import them from El salvad or Panama
a lot of people. You don't have poor people, so
(21:08):
so you don't to create that kind of thing, and
and and even and now you don't want them anymore.
You know, they don't want everybody, you know. So so
we have a problem. Is that gross in America is
structurally declining. Well, at the same time, the dead burden
is structurally increasing. You see that that applies to the
(21:32):
rest of the developed woral Because you've developed your arriving
to the destination, why are still borrowing? The problem is
most countries tend to borrow when they're already rich, when
they don't need it anymore. Just like people see like
people on wall streets. These people are on wall streets,
they probably borrow a lot now that's already rich, all right,
whereas poor people don't borrow. So that's a big problem.
(21:54):
That's number one problem. The second one is China is
representing a larger larger share of GDP of the world,
and so you've got to think that geopolitics aren't got
to be the same. And you don't want to live
you know, in the wrong century. Thanks you this century
thinking of a different century.
Speaker 3 (22:14):
All right, this seems to love. Yeah, thank you so much.
Speaker 4 (22:17):
Thanks, Thanks, thanks to call me, and thanks for the stake.
So next time, let's make sure either have organ foods
or bring wines.
Speaker 2 (22:27):
We'll definitely thank you so much.
Speaker 3 (22:32):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (22:38):
And I'm joll Wisenthal. You can follow me at the
Stalwart follow or producers Kerman Rodriguez at Carman Ermann dash
oll been At at Dashbot and kill Brooks at Killbrooks.
Form more Oddlogs content, go to bloomberg dot com slash
odd Lots, where we have a daily newsletter in all
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(22:58):
slash outline.
Speaker 3 (22:59):
And if if you enjoy odd Lots, if you like
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Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:18):
Hello, Odd Lags listeners, You are listening to another episode
that was recorded live in New York City at our
event on June twenty sixth. This time it's with the
one and only Nassim Nicholas Taleb, distinguished Scientists and advisor
at Universa Investments.
Speaker 3 (00:34):
Yep, we talked to him about how to live a
good life in a time of immense volatility. Take a listen, Nasseine,
what's your definition of a good life? What should we
be aiming for?
Speaker 2 (00:45):
Uh?
Speaker 4 (00:47):
I mean a lot of people think that we're programmed
to be happy and stuff like that. In fact, we're
programmed to feel useful. That's a good life. Or I mean,
you don't have to be march to feel useful. As
a matter of fact, martyrs go too far and if
you look at their death typically in history, you realize
(01:08):
it could have waited a decade and the problem was
solved the self myself, right, So think of all the
wars and hey, but the Vietnam War to care itself
or the rether so whatever. So let's forget about martyrdom,
except of course, in narrow cases where you save someone.
So the ideas to be useful to others. And then
(01:29):
the idea is, you know, to share your mistakes as
you grow an age, to share your mistakes with society
so they can build on it. That's my idea of
a good life. For a lot of people, good life
is headonic in the sense that they have a chef
flown in from Europe to eat some complicated food that
(01:50):
our friend here you know, would not approve be you know,
not nonstakes and complicated things with bland names. And so
that's that's a hedonic approach to things. Mine is you
feel useful, So whether you have a family and you're
providing for them, or if for a lot of people
who don't have a family yet or may not have
(02:11):
a family, because in the past most people didn't have
a family. A lot of people were orphans, a lot
of people were had had children who then survive. So
the idea is to be useful to the community in general.
Speaker 2 (02:26):
So we talked about this in the market context at
the very beginning, But does you know I feel this
poll to basically always look at my phone to monitor
the latest headlines. Sometimes I don't think like I'm the
best parent because I'm looking at my phone and I
should be with my family. As you mentioned, how do
we be useful? We're you're bombarded any time. We're just
(02:51):
being bombarded with events beyond our control.
Speaker 4 (02:54):
Okay, yeah, but but you're we're better off than we
were today forty years fifty years ago before many were born,
may perhaps even new right, So you don't realize that
we spent about a century in front of a TV
set or reading papers, where you're receiving end but not
(03:18):
providing anything in return. So it was a centralized information
era that started, you know, was modernity, and you realize
you succeed the families eating their dinner in front of
the tea set. Basically you're receiving information, whereas organically in
the past, the way we dealt with information was by
trading it. It's like Twitter. You you give information, you
(03:42):
receive information. So you go to the barber, someone gives
you information, and then you go to buy fish. You
give the fish smonger information and then rumors start going.
So and now we're close to that period because you're
not just receiving stuff, you're also tweeting. You knows, although
you're piles I'm sure tells you not to tweet. That's correct,
(04:03):
that's okay, it's true.
Speaker 3 (04:06):
When we're trying to get Joe's attention, send a d
M respond.
Speaker 4 (04:10):
I'm sure he's tweeting. So you're feeling you're not just
receiving noise, but you're crazy. I'm contributing. I'm exactly to
the noise.
Speaker 2 (04:17):
Thank you so very validated.
Speaker 3 (04:19):
Wait, but do you personally enjoy being on Twitter? Because
I read some of your tweets, and you know, sometimes
you seem a little angry.
Speaker 4 (04:26):
No, a little I we're tweeting now in front of
all of you, the tweets would look angry, but my face. Wait,
I'm often giggling when I'm tweeting. All right, I'm often giggling.
So the idea is to separate your your public persona
(04:47):
from your private life.
Speaker 2 (04:49):
By the way, before we forget, before you leave tonight,
someone DM me and said can you please ask? And
the seem to unblock me on Twitter.
Speaker 4 (04:56):
So I got these all the time, probably.
Speaker 2 (04:58):
The remind me before you it seemed like a nice guy.
Speaker 4 (05:03):
They all say, oh sorry, I had a drink or
wish to actually because of bitcoin, because I chained blocked.
When you have a smear campaign, you chain block, so
the friends if someone bullies you, or block the friends
as well. It was possible at the time.
Speaker 3 (05:22):
Wait, how many people here have been personally blocked? Find
the seemed to lab.
Speaker 4 (05:30):
Not that many, not that many, A small number. Because no, no, no,
because I stopped I stopped a couple of years ago
from using the chain blocker one because it had a
lot of type to error that the false positives. And
the other reason is because when Elon took Twitter, he
(05:53):
banned these uh bots, so so they can't operate anymore.
You got to manage like the third party. Yeah, exactly
if I could use to block someone their friends, the
friends of their friends, the friends and friends of the
friends and all of that.
Speaker 2 (06:07):
So are you surprised that in a year of just
like unbelievable headlines seemingly day after day, multiple wars going on,
(06:31):
not to mention the trade war and all of that
everything else, doge et cetera, that the markets are not.
Speaker 4 (06:38):
There. Let me compose a tweet that maybe I'll post.
Is for Trump one. Okay, Trump one was taken literally
by his enemies, by his uh and metaphorically by his friends. Okay,
Trump too is taken metaphorically by his enemies and literally
(07:01):
why his friends explained. So whatever he's saying now he's
pretty much doing. Did you believe that he was gonna
start these tariffs? They make no sense. I mean, it
makes sense to get elected in Pennsylvania. But but I mean,
but it's not the kind of thing you do really
And and it turned out he meant it. It was
(07:21):
not just you know, a vague, it's really an order metaphor.
It was real. He wants tariffs. So maybe he wants
to destroy the American economy. Maybe that's his wish, and
you can probably put a dent and yeah, but at
all time, sorry the stock market. First of all, you
(07:41):
have to separate the health of American company. I get
that from the income of the American who went to
stop and shop or is the thing in your area
that whole food? You guys go to Whole Food, but
normal people go to Costco whatever. And then you look
at your bill, right, and the bill went up practically
(08:02):
for everything, and their income did not. And text breaks
to come are not going to help those who don't
shop at hole food because it's the the poor people.
You don't pay taxes anyway. So you're not going to
get a break from that. So the idea is there's
a lunacy in these terairs. I can understand that we
(08:23):
need to protect pharma. We have some strategic interest in this. Okay,
we'll protect the industry. You want to make sure it
don't depend on China for other things. But it's a
lunacy to try to switch with four percent unemployment in
America plus or minus from high margin. You guys are
(08:46):
all hard margin, all right, to low margin or high
margin audience. Yeah, we have a high margin audience to
low margin, right occupations. So now we're going to make socks.
You mentioned the high margin, so it's making making films.
You're gonna make socks. And and then also misperception, the
whole process, a lot of things in basic you know,
(09:12):
trade accounting, like they SAP, they're ripping us off. I mean,
I'm a dentist, all right, and I go buy my bread.
It's ripping me off, all right, I should make my
own bread. And then the pressure for the bakers should
be a dentist. So the whole, the whole idea not
it doesn't stand on. And then plus they have you know,
(09:35):
someone is not very intelligent or not very skilled, and
you can detect that at it's like arbitrages. You guys
are from financial audience, and we call that trading against themselves.
They do a series of trades that end up being
closing a loop in circular but was a loss, all right.
They used to call that Texas trades. But I think
that the state of Texas has been unfairly you know,
(09:59):
the saying, yeah, Texas trade in general. One of them
is Texas heads. Right. So the so, for example, they
have terriffs on components that you would use to build
a computer in your basement in New York. Okay, but
if you bought an Apple products, then there's no tariff
(10:22):
although that's made them. Everything's made overseas manufacturers. Okay, So
this is an inconsistency. So there are plenty like that.
And that's also what's his name? The Secretary of Treasury
is like the Secretary of not treasury, secretary of commerce
is Yeah. He definitely someone should hire him for comedy
(10:42):
because he was saying, first of all, you want he
he doesn't inconsistency. He didn't realize he said, oh, we're
going to raise so much money from tariffs and and
and then when you ask him, you mean that the
economy will not adapt to your tariffs by by replacement.
He didn't take it. And he wants us to produce
(11:02):
to pay teris on bananas, so we don't have substitutes.
Or he spoke about wine. He said, Oh, people buy
American wine. But what happens if French the price of
French wine goes up? Okay, there's something called substitution. I
don't know if people do that. In Europe, they teach
high school economics. I mean for children where they teach
(11:24):
from substitution. All right, so it's elementary me. I mean,
I'm saying that he Trump should have hired if you
could find people who have some skills. All right.
Speaker 5 (11:36):
I can't wait to develop my skills growing my own bananas.
Banana are TARKI are our tarky. Sorry, I can't talk tonight.
Speaker 4 (11:43):
Okay.
Speaker 3 (11:44):
I was going to ask you always preach skin in
the game, yes, unlike US journalists.
Speaker 5 (11:51):
So I got to ask, you're still an advisor to Universa.
Speaker 3 (11:55):
What's been going on there? What are your returns?
Speaker 4 (11:57):
Like?
Speaker 3 (11:58):
Give us all the numbers?
Speaker 4 (11:59):
Okay? No, I so this is not the place to
discuss numbers you won't get all right, but you can
get a general approach and philosophy that I have now
to describe and in a format, compressed format of what
we do and how we do it, we can safely
(12:22):
say that as usual, whatever we're doing work okay in
the sense that the idea, the idea, and I mean
seri the idea. The idea is that you got to
look at the return of that hedge. You got a
return of the portfolio that was hedged, because sort of
like when you when you have an insurance on your house,
(12:43):
all right, you look at the package house plus insurance.
You don't look at insurance as a tradable thing today,
I'm not going to have insurance tomorrow I will have
or how is that pain on? You? Look at the package? Okay,
insurance allows you to buy bigger house because you know
you're your total risk is lower in case of stuff
like that. So it's the same situation. And the stock
(13:05):
market rallies, which means that not only did the hedge
do okay, but it wasn't needed, so you like making
money on your insurance. So net that story continued, and
we've been doing it now for time flies, we're twenty
twenty five. That's twenty five minus. Oh it's a lot,
(13:28):
all right, So doing it for eighteen years nine eighteen
nineteen years, directly it was universe and then before of
course the iteration before and it is, it's the same story.
We didn't change strategy for a second, and we will
not change strategy. So basically that's what we do is
the same thing. It's just a's getting bigger. That's it.
Speaker 3 (13:51):
Well, wait, there are a lot more volatility events nowadays.
Do you not adapt to that at all?
Speaker 4 (13:57):
Or so let me tell you if you look, first
of all, I don't look at volatilely as volatiley and
in my technical work and universa doesn't look at you
look at for example, you can have a tail event
and then you can have or you can have regular volatively.
So a lot of people are overall by regular volatily
and typically what they call regular volatility is I learned
(14:20):
the linguistics of that business is when the market goes down,
they don't And in the old days of losing money,
I would say, well, the markets are volatile. Voltale doesn't
mean it's going up. Volato is not an absolute, uh
mean deviation voltle is negatively recerned, all right, So so
a lot of perception of things of volatility by exactly
(14:42):
I mean your professional journalists. Of course very important that
way you can reveal uh, bad stuff when it's made
and things like that.
Speaker 3 (14:51):
But but didn't it seem to say something nice about journalis.
Speaker 4 (14:54):
Yeah, no, no, there are a lot of things. That's
an important vision. But but but very often there's the
scaling doesn't doesn't quite match, like for example, people in journalism,
and this I wrote about in full by randomness, you
should have newspapers, and the lengths of newspapers. Now you
don't have new paper, but you understand what I mean.
(15:16):
There should be on days like the stock market crash
or on the last couple of weeks, newspapers should be
that big and the rest of the time should be
half a page. But they have the same length, all right,
So that's the scaling problem in journalism. In other words,
you have the news fourteen and a half minutes plus
you know, of course the bloomberg at in the middle.
(15:38):
So the I mean that news bulletin should be variable
with with with the events. You see. The idea the
same thing with market movement. So I don't think that
we are experiencing the read vaulty compared to what could
have happened and what we have seen with explosive markets.
Speaker 2 (15:56):
Yes, so as mentioned multiple wars going on. We had
the COVID shock, we had the inflation shock. We have
massive changes happening in the political landscape, including right here
in New York City. Is there an underlying reason in
your view why it feels as though big things are happening.
Speaker 4 (16:20):
No. My whole point is that to go back to tail,
to what we call about fat tail fat tales means
the smallest number of events explains the largest number of deviations.
For example, if you take a thousand people and you
have inequality, one person will have most of the money. Likewise.
(16:43):
Few historical days have most of the information likewise, So
this is entirely normal. But the point is you can't
you can predict ahead of time that you're going to
have when you're going to have these days, or you're
going to have the structure of it is though very
very stable. It is things followed them to follow a
power law.
Speaker 5 (17:04):
So, oh, I'm going to ask a very basic question
that I'm sure you get asked all the time. But
we are all nevertheless very interested in your answer. By definition,
black swans, I guess are unpredictable and impossible to forecast.
But what black swans do you see on the horizon?
Speaker 4 (17:22):
Okay, so yeah, leverty phrase lety phrases. Okay, there's something
called grace WANs. All right, So great pandemics were grace
wants or or you know, grace swans means events that
have these characteristics. A very small number of events determine
(17:45):
large part of the total effect, like small small number
of events, small number of wars, I've killed most of
the people, stuff like that, pandemics. So there's grace ones
and you can say they have a structure, you predict
them ahead of time. No, okay, but we do as
you can figure out if an environment is fragile or not.
(18:06):
And in fragile environments you can say, okay, this is
prone to break if there's a shot, Like in two
thousand and seven, we knew that the banks were fragile.
Why they were net short volatility. That's sort of my
fragility work in anti frasule. To answer your question, I
wrote anti fragile, which on its own became a monster right.
(18:27):
But the whole idea is to figure out what can
be have cascading effects from shocks. Okay. As I wrote
in The Black Swan, it's foolish to say what color
truck is going to break a fragile bridge, Okay, but
it is not foolish to say this bridge is fragile,
(18:48):
it's going to break one day, don't cross it, don't
don't or or or invite your enemies to Okay, Okay.
Speaker 3 (18:55):
What areas of fragility do.
Speaker 5 (18:58):
You see right now?
Speaker 4 (18:59):
So? The first one? Okay, so the first Yeah, the
first one is we have a I don't know if
you're aware of it. Maybe people aren't aware yet that.
I don't know if we know have a deficit, right,
and you know that you have to borrow, you know,
(19:19):
to pay for the interest rates for the interest of
you know, the the the debt that you've had before.
And at four norse four percent interest rates, four to
five percent interest rate, this is significant. It means you
can have a snowballing effect. You have to borrow more
and more. And you know that they're not fixing the
(19:41):
budget problem except verbally, Hey, we're going to fix the budget.
It's all the same story. The structure of the political
system unfortunately is driving us there. Okay, So this is
one source of fragility. One main source of fragility, okay,
is that the political system is not adapted to the
that kind of thing. So what happened in the Western world,
(20:02):
it's not just a case of the United States. It's
a case of the Western world. Because you've got to
look at it, as are describing anti fragiles, think of
an escort, like China can have rapid growth because they're
pulling people out of their beautifully landscaped countryside to put
them in apartment blocks. That maybe it's not pleasant for
the people, you know, to live in in boxes, but
(20:27):
that greener is a huge amount of economic growth. Okay,
So a lot of people going up the so called
development scale. You're you're on the convex part of the escort, okay.
The West is on the concave part of the escort.
So which means that you mean you have two cargo
(20:47):
mostly except your New Yorkers live in small boxes like
like like poor people in middle ages, but outside New
York City and a really most people have two car
garages stuff like that. So you you we can't you
can't grow right, and you don't have poor people, so
you have to import them from El salvad or Panama
a lot of people. You don't have poor people, so
(21:08):
so you don't to create that kind of thing, and
and and even and now you don't want them anymore.
You know, they don't want everybody, you know. So so
we have a problem. Is that gross in America is
structurally declining. Well, at the same time, the dead burden
is structurally increasing. You see that that applies to the
(21:32):
rest of the developed woral Because you've developed your arriving
to the destination, why are still borrowing? The problem is
most countries tend to borrow when they're already rich, when
they don't need it anymore. Just like people see like
people on wall streets. These people are on wall streets,
they probably borrow a lot now that's already rich, all right,
whereas poor people don't borrow. So that's a big problem.
(21:54):
That's number one problem. The second one is China is
representing a larger larger share of GDP of the world,
and so you've got to think that geopolitics aren't got
to be the same. And you don't want to live
you know, in the wrong century. Thanks you this century
thinking of a different century.
Speaker 3 (22:14):
All right, this seems to love. Yeah, thank you so much.
Speaker 4 (22:17):
Thanks, Thanks, thanks to call me, and thanks for the stake.
So next time, let's make sure either have organ foods
or bring wines.
Speaker 2 (22:27):
We'll definitely thank you so much.
Speaker 3 (22:32):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (22:38):
And I'm joll Wisenthal. You can follow me at the
Stalwart follow or producers Kerman Rodriguez at Carman Ermann dash
oll been At at Dashbot and kill Brooks at Killbrooks.
Form more Oddlogs content, go to bloomberg dot com slash
odd Lots, where we have a daily newsletter in all
of our episodes, and you can chat about these topics
twenty four to seven in our discord Discord dot gg
(22:58):
slash outline.
Speaker 3 (22:59):
And if if you enjoy odd Lots, if you like
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for listening.
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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