It is hardly an exaggeration to say that, with increasing affluence, economics has moved into the very centre of public concern, and economic performance, economic growth, economic expansion, and so forth have become the abiding interest, if not the obssession, of all modern societies. In the current vocabulary of condemnation there are few words as final and conclusive as the word “uneconomic”. If an activity has been branded as uneconomic, its right to existence is not merely questioned, but energitically denied. Anything that is found to be an impediment to economic growth is a shameful thing, and if people cling to it, they are thought of as either saboteurs or fools. Call a thing immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations; as long as you have not shown it to be “uneconomic”, you have not really questioned its right to exist, grow and prosper.

I wish I had read E.F. Schumacher 2 years earlier. This is not the right time for me to be reading him, but I can’t help myself. Maybe, it is just destiny.


Posted on September 6, 2004, in Uncategorized. Bookmark the permalink. 10 Comments.

  1. i must thankyou for this.

    How Nassim Taleb turned the inevitability of disaster into an investment strategy

    it was an amazing read. and almost makes me want to explore the share market. are there people like this in india ?

    • Lol!! To imagine that something I posted made someone want to explore to share market!! Must be the heights of irony…

      Are there people like this in India? Hmm…not that I know of, but could be I guess. I think the Indian markets are far less quant driven; it’s more speculative over here, and old fashioned Gujarati shrewdness helps. Hedge funds are bit part players in the Indian market. But with the entry of many of the big US players over the last few years, it is getting more sophisticated for sure.

      Rofl!!! Sorry, but that was just hysterically ironical.

      • Must be the heights of irony…

        why so ?

      • I actually detest the way capital markets work today. IMHO, there is no inherent reason why a particular share is valued at a certain price, whatever the pundits may say.

        As much as I find the methods of Nassim Taleb fascinating (from a purely academic perspective), this is the just the sort of thing that pisses me off. It reflects a world view that has no concern for the intrinsic value of a good, a product, or of a company. It might work, but in my book, it is an ethically bankrupt way to make a living.

        To put it simply, I have a philosophical difference with his (and there are many like him) methods. By himself, he would make no difference, but since there are a gazillion like him, (employing varying tactics of course), they can easily screw up the natural order of things. And they do.

      • hmmm
        but isnt he just treating it merely as a system ? an analytical perspective ?
        surely it is a matter of perspectives, and taking a subjective or objective view of a system

        i hope we can continue this discussion, i think it is turning interesting

      • Yes, he is treating it as a system. An analytical persppective? Again, yes. To him, it is all Math. Not just for him, but for all the quant gurus sitting in their respective offices, it is all math. Each one chooses his own set of equations, which is about the only difference in their approaches.

        In the beginning when the first breakthroughs in quantitative finance was made, it was with the intent of framing mathematically, factors like a company’s future performance, the effect of yesterday’s price on tomorrow’s price, the effect of an unexpected meltdown, what if a stock was split, and maybe, even people’s greed – essentially, the ability to quantify a multitude of “what-if” questions.

        From a purely academic perspective, I think that is fine enough. My problem is when this is put in practice, it has a cumulative effect that has little to do with the intrinsic value of a good, it translates into nothing more than what some may call “scientific betting”.

        You seem to think that it is just a matter of taking a “subjective” vs “objective” view of a system.

        First, it depends on what you think of as a system. A quants trader thinks of the system as “this basket of securities” that he is concerned with, in my opinion, the system is much more far reaching than such a simplification. If there was one quants trader in the entire universe who thought so, fine enough, but if every one of them believes so, the sum total of their collective actions, impacts not just their basket of securities, but far more than that, it affects how decisions are taken, it affects the “true value” of a particular thing (company/commodity/whatever), it affects nations themselves. To pretend that such ramifications are none of my business is to be naive at best, and uncaring at the worst. Warren Buffet protested vehmently when “options and futures (derivative instruments)” were being thought of in the early 70s, today they abound, and often, for no rhyme or reason. A whole host of other derivative instruments abound too.

        Personally, I cannot take an “objective” view of such a system, or look at a system in such narrow terms. In fact, I think objectivity is an over-rated concept. It is important, and it applies in some respects, but we are objective about far too many things today.

        To me, it is quite similar to the dilemma posed by GM foods. Different areas of course, but primarily, the issue is the same. It depends on your outlook to life – it it purely scientific/quantitative, or is there a philosophical/moral element to it? I think, by and large, the investment banking/hedge funds sector has chosen to adopt the first outlook. The consequences of such an outlook are far reaching, and often ends up in a cycle of “how can we limit the damage”. It leads to a fundamentally unstable system, that needs artificial props to keep it up.

      • i will take some time and respond in more peaceful times
        but we shall keep this discussion open, if you are fine with it

      • No probs. Glad to discuss it. Helps me put my thoughts on paper too.

      • It depends on your outlook to life – it it purely scientific/quantitative, or is there a philosophical/moral element to it?

        I think you just summarized the entire argument in that one sentence. And this is the most difficult question of all, one that is never encouraged in a business school, or any other school for that matter. The difference in research and academics between today and 100 years ago was the aspect of taking a philosophical and moral outlook. Be it economics, medicine, material sciences, history – people today are afraid to take a moral stand on any issue for the fear of appearing unscientific or subjective. I suppose specialization has played its part, forcing people to take a system for granted in order to play around with the nitty grities within that system, instead of taking time to evaluate whether the system by itself is a good one.

        I was just started watching Part 2 of Commanding Heights when I saw your post! A very interesting comment was made by Hayek which is probably relevant to this comment: “The greatest thing to be appreciated about the socialist intellectuals was that they had the courage to be idealists.”

      • what interested me was his perspective of it as a system, merely that his approach appeals to me in colouring the system as an analytially decipherable one

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