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HatTip to Dave Lull

Nassim Taleb, author of “Black Swan,” said ballooning debt in the U.S. and the risk of asset bubbles in China make the Russian economy look comforting by comparison.

“When I look at the future, I feel comforted by a country like Russia,” Taleb said today in Moscow at a conference organized by Trioka Dialog. He said he feels “a little nervous about China, and very nervous about the United States.”

Russia has “resilience” after going through “several crises over the past hundred years,” whereas the U.S. “can’t sustain shocks,” said Taleb, whose 2007 best-seller argued that most people underestimate the frequency of rare events that have a major effect on markets.

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HatTip to Dave Lull!

I spoke to best-selling author Nassim Taleb on the phone who wrote the famous business book the “Black Swan,” which identifies situations that have mathematical multiplier effect due to their unforeseen power. In the 2008 banking crisis it was $60 trillion of exposure to vast leveraged debts that the financial system could not handle.

Taleb says the U.S. government made the same mistake with Mubarak that it has done with its large scale banks. It has funded him since the peace accord with Israel, so much so that he became too big to fail, and the only choice now left is to bail him out against the will of Egyptians themselves. This may buy some time, but similar to the massive exposure of a Lehman Brothers, Mubarak may very well turn out to be the next black swan.

His two lay books, Fooled By Randomness and The Black Swan, are only samples of his work.  If you want to judge him, read his technical book Dynamic Hedging, and his published papers, starting at SSRN.com:

http://papers.ssrn.com/sol3/cf_d… (There are actually 14 papers total, but 6 aren't showing up on this page.  Search the main search field on SSRN.com for ‘Taleb’ for the complete list)

His website also has a section on his scholarly work as well:

http://fooledbyrandomness.com/

Regarding his credibility in academia, besides Terry Tao's informal endorsement (or whatever you consider Terry's static sidebar link to Taleb's main non-book work to be), the late Berkeley statistician David Freedman also commented in a posthumously published paper that "efforts by statisticians to refute Taleb proved unconvincing."

http://en.wikipedia.org/wiki/Dav…

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To find these investments, Khosla explained some of his operating principles: Don’t trust forecasts. Don’t believe the experts. And invest in companies that have a 90% probability of failure.

Khosla is working on a paper called the Black Swan Thesis of Energy Transformation. Just as Nassim Taleb spelled out in his book The Black Swan, Khosla believes that something improbable, impactful and retrospectively predictable will happen to change the way we use energy. An important ingredient: it needs to scale and meet the Chindia (China and India) price. Cell phones have already been adopted at an incredible scale in India such that there are twice the number of people in India with access to cell phones than people with access to toilets.

Risk is a hugely important element in Khosla’s strategy. “I tell my guys, only bring me tech stuff that has a 90% probability of failure.”  His point: if you have enough companies with a high chance of failing, most will fail but one will success and be the winner. “My willingness to fail gives me the ability to succeed,” he said. “I don’t mind failing but when I do succeed, it better be worth succeeding.”