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To: Paul Kern who wrote (75952)	4/8/2009 8:53:49 AM
From: Dale Baker	Read Replies (2) \| Respond to of 118717

Taleb has become a mystical preacher now; a few of his proposals are sensible, and others are lost in the clouds somewhere. So Wal-Mart and Exxon are now the most fragile companies in America? They must be, they are the biggest. And how do we cleanse ourselves of our entire business and economic establishment, some kind of purifying purge? Where are the smart ones to replace them, coming on the alien spaceship perhaps? And we should ignore a loss of confidence, hmmm. So first assets can be dumped in panics, banks will close when their balance sheets become worthless and the FDIC can't bail them all out and....well, there is no end because everything comes to a halt after that. But we will be spiritually pure. And then the smart aliens will come save us. Does he wear a robe and chant and burn incense when he recites all this? :<)

To: Paul Kern who wrote (75952)	4/8/2009 10:25:00 AM
From: bluezuu	Respond to of 118717

I think you could get a long way toward stability by: 1) Not allowing banks to purchase another bank's debt. 2) No insurance on debt. 3) Limit leverage.

To: Paul Kern who wrote (75952)	4/8/2009 11:22:51 AM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 118717

I am with Dale that a lot of what Taleb says is his own breed of irrational mystical mumbo jumbo. I would claim that even his "Black Swan" claim to fame is a misnomer, since a lot of smart people saw it coming and warned about at least parts of it. True "Black Swan" is a gamma ray burst striking Earth from black hole in other galaxy - no prediction and puff we are all gone. With that said, I believe that businesses are driven into fragility through our ever optimized economical landscape. One example is cash. A business that holds cash (and not debt) is much more resistant to downturn. However, everything in business world pushes businesses to hoard debt and not cash. Cash does not earn high returns, so business' ROE is lower leading to lower valuations. Cash does not contribute to growth leading again to lower valuations. Cash makes business attractive as a takeover target. Cash does not make tax writeoffs. And so on. There are a lot of other examples: high-leverage, derivatives and derivative hedges, single product concentration, just-in-time sourcing and production, agile workforce management, etc. Most of these make sense when everything is going fine, but when low probability economic state occurs, the "common state" policy breaks spectacularly. Unfortunately, I am not sure there is a solution to this. Some businesses will stay "old school" conservative and will be less affected by uncommon events. But overall the drive is towards more efficiency and optimization, which brings a lot of fragility. :(