FT.com Comment Opinion - Ten principles for a Black Swan-proof world

BreadcrumbFinancialCOMMENT OPINIONFT Home > Comment > OpinionTen principles for a Black Swan-proof worldBy Nassim Nicholas Taleb JobsPublished: April 7 2009 20:02 | Last updated: April 7 2009 20:021. What is fragile should break early while it is still small. Nothing should ever become too bigto fail. Evolution in economic life helps those with the maximum amount of hidden risks – andhence the most fragile – become the biggest.2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed outshould be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the1980s, the socialists took over the banks. In the US in the 2000s, the banks took over thegovernment. This is surreal.3. People who were driving a school bus blindfolded (and crashed it) should never be given anew bus. The economics establishment (universities, regulators, central bankers, governmentofficials, various organisations staffed with economists) lost its legitimacy with the failure of thesystem. It is irresponsible and foolish to put our trust in the ability of such experts to get us outof this mess. Instead, find the smart people whose hands are clean.4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financialrisks. Odds are he would cut every corner on safety to show “profits” while claiming to be“conservative”. ...