March 18, 2012

Nassim Nicholas Taleb: Big banks are not paranoid enough

Nassim Nicholas Taleb is the author of books such as "The Black Swan" and if you are interested in reading more about him, you can look at our market profile of him here: Nassim Nicholas Taleb - The Black Swan.

In the speech he says that the reason to why banks today are having trouble is because they are too big. The big banks used to be smaller and their employees used to be more paranoid - they didn't want to use any complicated instruments such as derivatives. They hated everything they didn't understand and they hated everything with an equation in it. You need an equation to calculate the value of a most derivatives. The big banks are today more international, arrogant, and the probability they will blow up has increased - as we saw in 2008.

In the end, he's critical to the banking sector. He doesn't like the idea that taxpayers has to support the banks when they have trouble, and when the banks don't have any trouble, the employees get a big bonus.