Welcome, ladies and gentlemen, to the latest installment in our series, the Bloomberg Global Asset Owners Forum. We are delighted you could join us today. My name is Eric Schatzker. I'm an editor at large Bloomberg here in New York City. And our guest today. Is none other than Nassim Taleb, you may know Nessim as the options trader he once was or perhaps as a distinguished professor of risk engineering at New York University, or more likely, as the author of best selling books, including The Black Swan.

Nessim, welcome. Are you there? Thank you.

Nice to have a conversation with you again.

Great to see you as always. And to see him, I want to tell everybody that not only are you not here with me in New York City or in northern Lebanon, and you've taken time out of your busy schedule to be with us and we're very grateful. Thank you. I'm going to be conducting a virtual fireside chat with Nessim, and on your screen, you'll see there is a way to submit questions. Please do and I will do my best to incorporate them into our conversation.

That will be no portion set aside for explicit audience Q&A. I want to see these. They're going to pop up on my screen and as I say, I'll try to work them into our conversation. Nessim, I want to begin by reminding people what you are not you're not a strategist. You're not an analyst. You're not a soothsayer. More than anything else, I think of you as an independent thinker. Some people might call you a contrarian. I'd also describe you as a philosopher or mathematician, the logician and a student of volatility and risk.

Tell me, how would you describe yourself as someone who deals with probability? Definitely not a contrarian, but a lot of things I agree with. But I would say someone who deals with risk and probability, they'll risk and probability. And also as an adviser to Universite Investments. Simmons is a firm that specializes in providing tail risk protection to investors, and that's the subject we're going to delve into a little bit later in our conversation.

But right now, Nessim, I want to remind people across the Atlantic, pardon me, of the tail risk across disciplines has been my specialty forever. And when I look at it, I think in terms of covid, in terms of risk and I came from finance and of course, became a little more multidisciplinary later.

Multidisciplinary is an understatement.

Nessim, one of your gifts is revealing to people the fallacies of their assumptions, right. Assumptions about predictability, assumptions about resiliency, assumptions about authority, let's say, and and of course, prompting them to look at the world they inhabit in a different and often surprising way. You've written about the misconceptions. I might call them the fallacies. In fact, you've called them the fallacies that sprung up to explain the pandemic and to predict its course. And your criticism is directed at academics, but it applies much more broadly in my question to you is this what is it that people are getting so wrong about?

Condemning this will summarize because we engage in a public scientific debate with professor at Stanford who was thinking, you know, early on the position that it was was there was no evidence it was harmful. And therefore, we had to argue from the standpoint of logical fallacies, there's a difference between absence of evidence, evidence of absence.

And this, of course, we went to a full fledged scientific debate that covers many, many aspects. The first fallacy is, of course, that you should not react early.

You see, our point is the cheaper is much cheaper to react very early to the pandemic than wait. People don't realize that. The second point that pandemics have the farthest failed attributes you can find and think. In other words, most of them are going to be of no consequence. And the few of them, maybe just one, will be the monstrous consequence. So you really cannot ignore them. It's what we call the tail wagging the dog. That's the second misconception is third misconception.

And that's a very severe one, is to think there's a trade off between the economy and the pandemic. In other words, that the closing that reacted to the pandemic has an economic cost, forgetting that the pandemic, it's a pandemic itself that's inflicting these costs on US society and series of things that flow from this misunderstanding. And we managed to publish in Nature Physics PMOS, the main journals, parts of that debate, and it's still going on scientifically with a group of friends and collaborators to try to explain to people that just as you deal with a portfolio and Taylorism, just like you would deal with your house and the tail risk of losing your house, you should react early when it's very cheap and have built a national insurance against pandemics.

So so let's let's bring in a real world example. The United States, as you know, has as attracted a great deal of attention for the failings of its response to the pandemic. Where would you say the misconceptions of the fallacies that that you've just described were evident in the way that this country responded to the pandemic? We started reacting in January and January. The Trump administration took it seriously by shutting down the border with China, but they did not.

The follow through is that you do not need a full lockdown or anything. You need to find the most efficient way to reduce the multiplicative growth effect of a pandemic. At the time, that was that prevailing thinking to compare numbers like so many people died of covid and how many people are dying, drowning in a swimming pool. So why are we paying so much attention to something that a lot of people and the way we explained it is no things scale differently.

If I drown in my swimming pool, my neighbor is not likely to drown in her or his swimming pool. But if I die of covid, my neighbor is vastly more likely to die of it. And the third neighbor is even more likely to die for multiplicative growth. Now, what do you do in the presence of something that has such multiplicative effects? You try to bring down the multiplication, it turned out, and we started suggesting face masks.

And there were a lot of mistakes with suspects initially instead of studying how the biology works, because you're not going to get it easily that way, they could take years before we figure out we looked at the data and countries where facemasks are custom. And we also looked at something very simple as that. And I said it on your program. If I were a face mask and your face mask, we don't reduce probability. But an a face mask protects you by, say, 50 percent.

We reduce the probability of infection by 75 percent. And furthermore, if a face mask produces a viral load by only half, only half, you may reduce the probability detection by 99 percent because of non-linearity. Because of the virus is very viral load. So you have to do anything to cut the viral load at the local level and to cut the super spreaders. And and that was a tactical strategy, cut the super spreaders, face masks and constrain some movement.

And the governments worldwide were very slow outside of China, of course, and Asia, where they have a lot more risk and more of a risk culture. The governments were slow and then the more you wait, the more it's going to be costly. Had we had protests in February, I think we would be having this conversation. We'd be talking now about the election or bull of something else because it wouldn't have been a thing here, just like it's no longer a thing in Asia if we had face masks.

So so we have to focus strategically. And what can the multiply and cause the multiplicative effect to be less acute. And they are simple solutions, super spreader events, everything that they'll come up superspeed events, i.e. a urologist conference, not something not very glamorous, but this bring a lot of people from all around the world to Las Vegas. Where they come in and re spread, so these kind of things, so it doesn't take much to figure out the small little tactical effects that you have to do.

That that you need to talk to a very small technical measures that you need to to to to weaken the effect of the pandemic. If we think about things in probabilistic terms, the same are firms such as JP Morgan and Goldman Sachs doing the right thing by ordering traders back to the office? I mean, I I mean, I don't think it makes a big difference, because overall you need the confidence of restaurant door. It's you need the confidence of the regular citizen who will no longer rent apartments on forty fourth floor of the building with only two elevators.

Three elevators take for one hour and forty five minutes to get to your place once in a while. So you have to bring that back. People have the illusion that government actions are causing the slowdown of economic activity. But you can see the numbers in Sweden and Sweden. The government just gave fake guidelines and nothing. I mean, few things were mandatory and sure enough, restaurants were empty. And New York City is not the government or the local government that bankrupted the restaurants.

It's a risk aversion of government workers. So there is one of the facts here that that we realize is running covid it is the legal system as well. So what happened is that when you ask when when we ask why are they reacting so much for covid? When, when, when? Maybe it's not as much of a killer as as other disease we've had in the history of the times of different. Every time a plane crashes, you see?

Billions and hundreds of billions are spent. By to make the flying safer, so so we are so they are classes of things for which because a consumer can switch from flying to driving, although it's not wise, they can still do it. And the same thing, the consumer prefers to work from home then or prefer to eat at home that night in the restaurant. And the individual the employee from from home. And we're going to think so of a safety.

Is something quite central in determining the behavior of people, and that risk aversion is greater today than it was 20, 30, 40 years ago, and that's a very costly economic case. So it's not the fault of governments. It's just how the system is built. So already has a we've style. Go ahead. So we have to do now is imagine a system that's more robust, these kind of shocks, rather than try to pass around things that are existing.

So. You know, our viewers and listeners may be familiar with a concept that you coined Nessim A. fragility. Yes. And as you point out, right, this pandemic is putting many of our systems, our social systems, our political systems, our economic systems under extreme stress.

Which of those systems in your mind is passing TALOS Antifragile test in which systems are failing?

So I'm going to have a positive answer and then a sort of less positive answer. So let me start with the good news to me. And antifragile system is a system that is better off after a shock.

OK, and it looks like the world today is vastly more robust to the next pandemic than it was a year ago. So should we get that lab in or that we are deceased, OK, or that antibiotic resistant bacteria that escaped from some hospital and that we can control? We got that one. We are really equipped to face it. So we are better off in that sense. In other words, that you have you know, we did the dress rehearsal and now we train like some people are trained to face the next pandemic.

So that's that's a good news. And another good news is that the parts of the economy that are fragile, very fragile, have been sort of wrecked by I mean, not fully because they're fed, but their businesses are not robust that that have been shaken by the the pandemic, sometimes not enough. For example, the airlines, they like you know, they like to spend their cash instead of keeping it for the rainy day. They like to spend their cash buying back their stock and they're stuck with no cash, so or less cash than they would like to have.

They didn't face that possibility. So anyway, so there are sectors that are now better off. And then, of course, we have we're using this platform. And I don't think that you and I would have ever imagined having a using these zoom or other techniques. And so many conferences are taking place offline and the educational system is improving at much cheaper costs. Also, there are some benefits from the shock, but the way I explain antifragile is as follows.

If I jump one meter, it's very good for my bones. It's very good for my body, my system. It's a very good stressor that would make me stronger for the next time. But if I jump 100 meters or 20, it's not that good. So what you want is prevent, prevent that big shock, you see. And and it looks like like people aren't aware of the need to do that. And there's still this course having gotten how to handle such a pandemic.

But it's much easier to kill it in the egg than have to deal with it later. And and also the cost of the pandemic may be greater. I'm not talking about economically health wise than we think because we have so many unknowns like maybe morbidities. We don't know how they play out in the future by people who have very mild symptoms but seem to have something know that stays in the system. And we don't know the long term health cost and the economic cost of that.

So they are sort of bigger at risk other than mortality in that pandemic that we don't see. And and then and we're still fragile to that. And the discourse doesn't seem to have incorporated. Can we extend some of that thinking or explore the consequences or implications of that thinking the same for investments? And what I mean specifically is, is if we're better prepared for a pandemic because we understand that not being prepared is too costly. Is that going to it seems that what follows logically from that is that the money that was previously used, say, by airlines to buy back stock or to pay dividends or whatever the case may be, is now going to be saved, held back to prepare for the next disaster.

It's actually because that money because that money won't circulate as it might have otherwise. It's going to have a depressive impact on growth and a constraining impact on financial returns. Is that is it logical to think that way?

No, I don't think so, because I think that the companies some people have the illusion that increasing that and avoiding having cash is good in the long run for companies because it allows more spurring economic activity that could create fake growth, because growth backed by that is not really stable growth. But I would say a few things about I mean, what what is what's happening in the economy that is positive. Look around you and let's classify thing in three categories.

No one, companies and countries and areas and whatever in pursuit of organizations and whatever it was that were helped by the pandemic, the list is endless. OK, that's the first category. The second category is things that were harmed by the pandemic. But odds are and the nonpregnant way say if you're a dentist or a hairstylist, you know, there are a lot of things that that, of course, would come back as they were before, because I substitute my own I don't have a lot of hair, but I can cut my own hair or draw in my own.

So that second category and then the third category of industries and companies that are permanently maimed by the pandemic, you say so. So to to go back to your third category is New York City's office space and to go back this length now, I can really feel the answer to or complete the answer to J.P. Morgan and other firms forcing employees back that trying to give lip service to New York City. But but I don't think that it would be like it was before.

You say that cities are very fragile. They depend on very little. I mean, some few things can go wrong and make a city desirable anymore. And then, of course, it starts a bad cycle of, you know, higher taxes and more people leaving. And I think that places like New York City, I mean, where we was based in the area. Right. Are going to suffer and telecommuting or whatever we call remote work, but our names are giving now is definitely going to mean these places.

So these are the three categories in general. And, of course, countries we can talk about with cities, with locations we can talk about areas that we can talk about, industries that that's classification seat. Where are you in that classification? I'm sure Bloomberg is in the first one because, you know, you don't deliver physical services and of course, your business has benefited or should you benefit from that in the aftermath? Now, one of the consequences of the pandemic appears to be a reversal of globalization, companies and countries are shortening and simplifying supply chains, trying to bring production back onshore from offshore.

And unless I'm woefully mistaken, you know, based on our past conversations and your past writings, you would see that as a big positive. My correct.

OK, so what happens is that when people say I'm against globalization, they probably don't know what they're talking about. The causational billion to two billion people out of poverty. See, and and the second thing that against globalization, what does it mean? You mean you want to live in autarchy or somewhere on a farm? On a farm or like like trade with with your with a town nearby or something. So I'm using those degrees, the degrees of globalization.

And someone, you know, identified in the category of very pro globalization would be a little more to the right. And some people are more to the left of that that some benchmark than they are. So what I think will happen is a smart reorganization of the globalization. We need specialization very badly, need specialization, but there are things that, for example, you may need to have locally just simply out of safety and and the supply chain is very fragile.

So it matters a lot if you're dealing with medication, if you're dealing with with things that are necessary for your local industry, because a little village somewhere stops. The whole process is fragile, but it doesn't matter much if you're dealing with toys or things that are less essential. So I think that we're going to have a organization, what we call globalization, to preserve the system. The whole idea is how can we preserve the system by making it more robust, by identifying the source of the fragility.

I like this 80 20 rule that 20 percent of the things contribute to 80 percent of maturity. And within that, it's one percent to 50 percent of fatalities come from one percent of things. So that one percent the thing is, there's nothing small and that's what we should focus on and start with you. Where where are those? We talked a bit about them already, but where would you say, you know, the locus of that fragility is right now?

What have you been able to invest in, if you will, of the pandemic? What what does it taught us about fragility? I mean, there's one one one thing that was that was completely, absolutely absurd is to have one single country and within the country in one single area and I one in the country, nor that you guys produce such a high ratio of essential antibiotics. OK. And so that's already a concentration. So it's not a big deal.

You know, you have three or four countries and produce some locally. If once you make a list of essential medication and then the second one is a supply chain, got both too fragile because you have companies looking in different places, each one specializing in subcomponent. And there is a fragility. One of them collapses. Everybody collapses. So based on that, you identify them. But that's not the job of the government to do that. Companies who are relying on a fragile supply chain got harm.

And the problem with those who do not will will thrive. And so we will have a Darwinistic process by which companies that are wiser will survive and do better in the long run. Naseem, you've explained to me, and no doubt to countless others why it's essential for investors to buy televis protection.

Yes, and as I understand it, the reasons are twofold. One is, of course, to insure against catastrophic loss, and the second is to comfortably take market risk in the pursuit of maximum returns.

Knowing, of course, that you're protected against catastrophic loss. If I got that right. Exactly. So the idea behind everything I've done all my life, it started when I when I began as a trader and Mark from Universite, the same experience when when he saw this trader has to be told, take all the risks you can, but make sure you hear tomorrow. Which is exactly the opposite of the culture in modern finance, as taught in schools and used by quantum theorists, but effectively applied by every trader that you want to make sure you survive and take a lot of risks rather than you have a tail risk like like banks and that three thousand seven now of the government supporting them.

But they have the huge tail risk. Some other you have stable income, but you go bankrupt, rather have more partake of the returns. But make sure you never go bust because you have a floor of that. So that's the general idea. But again, to not advocate unconditional and foolish tail risk, it's very hard to do. And and sometimes that makes more sense to do it. I mean, it's a way I mean, the example of a specific form of tail risk hedging a subspecialty, they always focus on the tail.

And of course, there's the experience of two decades of this. But so so the so I don't just advocate to go just to tail risk blindly, but nevertheless, I will tell you it is necessary to do it. Just like I have a question for you about monetary policy.

Isn't monetary policy as it's being practiced by today's Fed, in effect, trying to provide catastrophe insurance? Because what we have seen happen is that unlimited liquidity has reflected asset prices over the past six months.

Yes.

And it has encouraged so much risk taking that until recently, stock market indices were at record highs.

Yes. So, I mean, you can hear a lot of people complaining about just printing money and the general process of printing money. And this, of course, I share the concern, but there's something few are seeing in it. And that's at the federal VSP. What is a crisis for the crisis there, just like a forest fire to eliminate firms early that should be said, should not be there to accelerate the evolutionary process so that firms that should go bust early should go bust now when the cost will not be high on their shareholders, on their own or some employees on everyone.

And you start you start it. So give you a chance, as I say, in California, to start again and start again and start again. So you fail early. So that's the process by which those who need to fail, you don't have a favorite by allowing it to fail early. What the Fed has been doing is the reverse is injecting tons of money to keep afloat firms that should not be should not be around and then delayed. That failure eventually will happen, eventually going to stop doing that.

And that's that's not part of the discussion in this country. That's wrong, because we had the highest rate of bankruptcy. You see, because there's a high rate of bankruptcy in America and the reason you're speaking, of course, about the United States and not Lebanon. Yes, no, no, not the problem. But I forgot that was the 12th century monastery here. So the the United States and particularly within the United States, the tech sector has the highest rate of bankruptcy.

Fine. So bye bye. Bye bye. Fiddling with this. Plus, the other thing is we I don't know if if on one of your shows, when we're discussing the election years ago and that for three or five years ago and Donald Trump and I told you, listen, some it may bring socialism to America. You would have never spoken to me again. Donald Trump. Is that because I thought it's covered, too, that it's why is Donald Trump the first American president to do universal basic income, as you saw, and acquire stakes in corporations because the Fed bought paper?

OK, the fact that they did not or overtly buy stocks is irrelevant. They bought paper from companies. That's that's not socialism. Acquisition of the tools of production. And making sure everybody has an income that Florida income, these are some of the central aspects of socialism, regardless of. What government have had an American socialist on the right, on the left, anything covid run ran the show, and what policies were enacted by the US government were driven by corporate, so driven by the environment.

So which is quite which is something quite, quite unpredictable and quite unpredictable. So but we're still in the middle of the pandemic and the investor will ask himself or herself and perhaps with good reason, why should I buy catastrophe insurance? Why should I hedge my tail risk when the Fed is underwriting the market?

Because, again, I'm going to give you a second saying that I received 30 some years ago. Thirty five. So I'm going to go.

Now, we've lost the scene, just hang on a second. Hang on a second, we're going to wait till your audio connection comes back and came back the last time, I'm assuming it's going to come back again. Let's just talk to you and me, are you can you hear me? Yeah, I can hear you. OK.

OK, so you were answering my question about and you were about to tell me what you learned. Thirty five or forty years ago and you were lamenting your advancing age. But what is the point that you were going to make or not.

So that I was told nobody is bigger than the market. Even the Fed, that's the point. Even the Fed eventually, no, it is bigger than I think about it. You've got the policy of the Fed is gone. I mean, it would be too easy if you just have a fed by know part of that. Doesn't work that way. Eventually, you may. You may not lose control of interest rates, you may find no bias for your bonds and you cannot an economy where just based on that kind of purchasing of paper by the those who print money is not sustainable.

So there are a couple of questions I've been getting over the course of this conversation from some of the people who have tuned in and they concern things like the point that you made about the zombie companies, for example, and they concern things such as the accumulation of enormous amounts of federal debt and the monetization by central banks such as the Fed. That's happening right now. Zombie companies exist. The federal government is incurring more and more debt. It's being monetized by the Fed.

What happens? What what what is the precipitating event or series of events that causes that construct to begin to collapse?

First, let's say that covid stays one scenario, covid stays. And what scenarios is out? OK, it's covid continues. At some point you may see a very weird case of stagflation coming from these policies because there's no free money. As I say, there's no free lunch speculation coming from this. And if it stays and let's say that growth will come from that, I believe that even if it continues, we will find ways to adapt to have huge growth in some places.

And we have had growth and a lot of places. So we may have adaptation, but the second case, covid stops. OK, now the policies are going to be inflationary, relicense inflationary. What do you do? Either they will try to control interest rates to put it at the level where to fight inflation or under pressure from pension funds. You know what? I work all my life not to earn zero interest rates on my money that vanish.

So they start raising interest rates. And when witness what we witnessed and at some point, like the third or fourth semester during the Trump administration, in order to start raising rates, would witness something like that with having volatility. And the biggest danger is Beckman's bonds. Who's going to buy a bond knowing you have inflation? You see, nobody will buy the back. So so what happens is they will print money to buy their own bonds, as many countries have tried that.

And history gives you 20 or 30 episodes of such failures. One difference and that so far the reserve currency in many countries is the US dollar. This is not a permanent situation. So, I mean, at some point, the reserve currency or the Teria check Checo. OK, and last time I checked, it's no longer a reserve currency, any reserve currency at the time of Christ in a state where people pay them a check. Well, that's no longer the case.

So you've got to realize that this is not a permanent solution. Look what happened to the British pound. And you know what it was at some point, the currency. And so you have a lot of that. So I think that that there are so many things that can go bad that you can explain that probably other things that we haven't seen, that it's not a wise situation and it's not wise to be in stocks, a tail hedge. It's not wise to not be in stocks.

This is what was even more interesting, is that if you're not a stock, you know, the same flailing around you and if you're in stocks and so you have high uncertainty. And high tail uncertainty, it's not like a high uncertainty and stocks can only go up, that's fine. That's not sort of certainty is when you may have a compensating effect that goes the other way. And I remember if that was so easy to rewind, I think I remember when I started trading where interest rates were and Paul Volcker spent years, years, years to bring down inflation.

It's not easy to contain inflation. Or maybe so, yeah, that raises an important question, it's not as if monetary policymakers are ignorant to the risks of inflation. Even the Fed is talking about the possibility of inflation. But my question to you on that subject is this when inflation comes, will it be a linear, which is to say manageable event or will it be a nonlinear event?

So if we look at the history and all it takes is a couple of Google searches and you look at history, inflation, very often it's deflation in the beginning. And then you have hyperinflation and it's like a jumps sort of like this, very non-linear, and I've seen many people march from so much perspective from universally the case of the ketchup bottle where nothing comes out, nothing comes. And then you splash ketchup everywhere. So you have a lot of that non-linearity and finance and inflation usually is a very weird, non-linear response.

But let me now ask you again about the in that situation. And typically, if you believe that you don't need tail risk hedges because the Fed is giving you that they always catch. And if you believe that and people believe that, then the terrorists hedging, pricing. Should be considerably favorable. You know, for the buyer. Even right now. What if you believe that? Yeah, of course, if it's price, then so so there is a paradox there that if you think you don't need it, it's cheaper.

So just get it. If you think you don't need. And the reason I ask that question is because many people don't come to the conclusion that they need terrorist protection until after the catastrophic event in March was a catastrophic event, tail risk hedges paid off massively. And then people the light bulb went off and some investors thought, oh, I didn't have any tail risk protection. I'm down 30 percent on the month. I need to buy terrorist protection.

But lo and behold, at the beginning of April, terrorist protection was exorbitantly expensive, less expensive now. Exactly. So so I always advise people to buy insurance before the fire. Fire insurance before the fire, then during the fire. Or don't buy insurance. Don't try to buy insurance the day before the hurricane lands in Texas or due to the hurricane hurricane as a whole after the hurricane. Naseem, one of these strategies investors have adopted in part in an effort to insulate themselves from some of the risk that has and the volatility more precisely that has played out in public markets is to allocate more money, a greater share of the money that they oversee to private equity, private credit, other forms of private investments such as infrastructure, let's say.

Can we talk about the the importance of the distinction between the kind of risks that one undertakes in private markets and the kinds of risks that one undertakes in public markets?

So the I again, to answer the positive one, that private markets have a huge virtue is to insulate you from the analyst. The Wall Street analyst who fails to understand the risk, so so let's say that we have two sisters and one of them's making four dollars year and none of the plants have insurance. OK, and her sister had identical business. She makes three dollars a share that she has everything as church. She has lines of credit. She has cash in the bank and everything.

Wall Street will favor the first system. The bad risk in the short run, and then, of course, the lenders go bust and that's unavoidable. And of course, no company will come in all in favor of that because of lax skin in the game. That was my last book that analysts don't really I'm not survivors. They're not part of the realistic prospects of surviving risk taking. And then they like cosmetic things and a good story. So you escape that.

By being insulated from the market, we could do good things and survive. Our family businesses and businesses are going to market and obviously you've got an S&P five hundred the median duration in the S&P 500 today is 11 years. Interesting, so so it makes sense to be in front of. Now the bad news, the bad news that many people engaged in going to private equity, but not for that reason. It's you see, they go into private equity because they can lock up investors for a while, the leverage and that kind of thing.

So so here we have to be a little careful with.

I see, so let's just, if you don't mind, cover that one more time, the misconception, the main misconception about most people who put money into private equity or private credit or whatever is, is what exactly the misconception is that the I mean, the private equity is a great vehicle for long term returns.

OK, insulated from the vagaries of the stock market. OK, so that's commendable. But the thing is, sometimes people do that to hide. Because you can you can make this tape for five years, you lock up investors for a while, a credit to either engage in monstrous debt, which is harmful in the long run or in being insulated from the accountability to investments for a while. So that's a bad part of a private private equity. But again, I'm not an expert on the private sector.

I get a tail risk person. But some strategies you can only do in private equity and all private equity is as good. Nessim, another question from our audience, what would you say is the most underestimated or perhaps I might say underappreciated risk in financial markets today? I would say. That the dollar ceases to be a currency, a reserve currency. That would be a risk or would be less of a reserve currency, so not recognizing that, not recognizing the possibility that the US dollar will cease to be the world's reserve currency is is the underappreciated risk.

Exactly.

Because then then we have a lot tougher time borrowing. We have a long which would have a tougher time borrowing, sure. Speaking of the US government or anybody who needs to borrow money in U.S. dollars, but it may bring financial discipline.

Well, at what cost, of course, at what cost, but it may from actually this. Naseem, we have to talk about politics a little bit, at least, because in forty two days the United States will be holding a federal election. It's a it's an event of great consequence, not just to this country, but to the entire globe. You told me back in twenty seventeen that President Trump was misunderstood. In fact, you said, and I'm quoting you directly, there's a logic to Trump.

Do you still see the same logic to Trump today as you did then?

I would say less so. But at the time I was seeing some logic to dealmaker.

He's a dealmaker. He likes to make deals. And that continued. I mean, he doesn't think in terms of, you know, running in an administration as much as I'd like to do deals. And and that continued visibly. He made being a real estate developer, he made them offer or try to make an offer to buy Reno or Portia's. The agreement was that was part of the deal making thing. And he engaged in some deal making in the Middle East, thereby not far from here, you know, between Israel and a few.

So that was some deal making that has been taking place. He, of course, failed. And the deal making with the Iranians because the initial idea with the Iranians was, hey, don't cancel the deal, I'm going to bully them to a better deal for America. And visibly, that did not happen. So there's that dealmaking aspect of Trump that continue and you can see the logic there. But also there's some erratic things you see and that that I do not understand.

So let's understand, such as make some observations what kinds of observations we can make about Trump today.

So, for example, you come in and you want to destroy the military, whatever it's called, the military industrial military establishment, but then increase defense spending, something not very logical. You want to pull troops out of Syria, whether you want to kill the president, you want to pull troops out of Afghanistan, which is good, but then they're still there. And and you want to make the big peace between the U.S. and Israel have never been, you know, neighbors like from Israel, I think, to Rome.

It's probably the sort of distance that it is to make. Making peace between countries that far apart isn't as big a deal. We need the big central thing between the Iranians and the Israelis. And then a lot of people would be happier then, and we're nowhere close to that. So but I think what I mean is I could see a logic in Tehran and then I start seeing contradiction I did not see before. And there were bothersome also hiring the hawk.

I mean, someone who wants to pull troops and stuff, hiring a hawk as a national security adviser, that I am not firing them to hire someone who is a little more balanced. Why hire a hawk? I mean, there some contradiction that appeared after our conversation. And made me a little queasy about predicting what he would do. I mean, you still see the general behavior of this erratic opponent there. And there is no like administration or party behind to see what's next.

And then also the attitude of it. I mean, we when we issued our memo at twenty six, they were the administration was extremely favorable to closing the borders and they did closable from China initially and then after that started having a lax attitude for the thing. So they are contradiction. I don't understand. Nessim, we've almost run out of time, but I want to close with something a little bit different. I'm not sure if you saw, but recently, John Cleese, a name that might pop into your head of Monty Python fame.

Right. The British comedian Monty Python fame said that he adores everything that you right now.

This is a guy who loves philosophy, loves David Hume. He loves playwrights. He's clearly a very literate individual. But it's not what most people would expect from a British comedian such as John Cleese to say that he loves everything that Nassim Taleb writes. This pandemic has given people an opportunity because they're not traveling as much to do, a lot more reading. They've obviously watched a lot more Netflix as well.

But I want you to take John Cleese his role.

Tell us what you're reading, what you've read lately that excites you. Give people something to take away from this conversation other than your insights. Give them give them something to read.

OK, so I've been reading a lot of history. OK, so mostly what started as covered. And then when you learn to read, read the history, particularly the one of the Ottoman Empire, because we're talking about this area that was on a Silk Road and that's where both the plates Justinian Plague and the Great Plague went through. So you have an idea about human behavior and wisdom that the ancients had dealing with pandemics that was lost today. So I've been reading history books or history papers or history accounts about that period of study, which is studying this plague and all the way through now.

And that's why I'm reading a lot of history and I think it's solitary history. I stopped reading fiction years ago and it's been lost in wild Italian, not just to improve my time, but I've been focusing on history. And when you study history, it makes you wiser because you can you can you can see the logic through it, sort of the behavior of those who really did well. And we can do well with this pandemic. But the ancients did very well.

They know how to handle it immediately. Just build a so-called dasari and quarantine's and to try to help the business people do business as usual on the minimum constraint, but nevertheless protect the population. And they were much more successful than they are today. Well, I hope people take your advice the same, because we could all use a little more wisdom this time, I want to take this opportunity to thank you very much for joining me here at this latest installment of Bloomberg's Global Asset Owners Forum.

Ladies and gentlemen, we're so glad you could be with us. Hope you enjoyed the conversation and that you will join us the next time.