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npr interview taleb/mandelbrot

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  • V.Z. Nuri
    [fwd] PBS just did an interview w/ Nicholas Taleb, author of THE BLACK SWAN, and Benoit Mandelbrot (fractal genius) about the current economic crisis. Here s
    Message 1 of 1 , Oct 21, 2008

      PBS just did an interview w/ Nicholas Taleb, author of THE BLACK SWAN, and Benoit Mandelbrot (fractal genius) about the current economic crisis.

      Here's the MP3:


      Here's some transcribed portions:

      Taleb: "I don't know... if we're entering the most difficult period since, not since the Great Depression -- since the American Revolution".

      Q: The most serious situation we've been in since the American Revolution?

      Taleb: Yeah.

      Q: Professor Mandelbrot, can that possibly be true?

      Mandelbrot: It's very serious.

      Q: More serious than the Great Depression possibly?

      Mandelbrot: Possibly. I hope not.

      Taleb: Never in the history of the world have we faced so much complexity combined with so much incompetence and understanding its properties.

      Taleb: Now you understand why I'm worried. I hope I'm wrong. I wake up every morning - actually I don't wake every morning now, I start to wake up at night the past couple weeks hoping I'm wrong. Begging to be wrong. I think that we may be experiencing something that is vastly worse than we think it is.

      Q: And we think it's pretty bad.

      Taleb: It's worse.

      Discussion of how a shock to the system can have much worse consequences across the world.

      Taleb: I am convinced the package recently of $700 billion is pocket money. Because you don't understand.. they don't understand that the ripple effect that hedge funds have, okay, that the banks not lending to hedge funds will force hedge funds to liquidate positions.

      Q: Sell off-

      Taleb: Sell off positions. These positions sold off by hedge funds will impact other entities.

      Q: Driving down the price.

      Taleb: Driving down the price, driving down some prices. That... a supermarket, okay, needing funding will not be able to find a bank solvent enough to lend them money against inventory to make payroll, okay. You may have chain reactions we never imagined before. These come from the intricate relationships in the system we don't understand.

      Mandelbrot says he sleeps a bit better than Taleb, but still doesn't sleep very well.

      The questioner then basically hopes the system will somehow just right itself. Mandelbrot says anything is possible.

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