Long read: The World in Which We Live

Nassim Nicholas Taleb, formerly an options trader, shot to fame as an author with his book ‘Black Swan’ published in 2007, just before the global financial crisis, a black swan event in itself. His other books Fooled by Randomness, Antifragile and Skin in the Game are must-reads as well. This piece is a transcript of Taleb’s lecture at the annual meeting of the Ron Paul Institute last month, which went viral. If you prefer to listen than read, you can access it here . Taleb’s speech delivery isn’t the greatest as he himself acknowledges but he is amongst the foremost thought leaders in the world, especially the world in which we live, as the title of the speech turns out to be. He makes seven distinct points about the world we live today. We feature a couple of them here but recommend reading the piece or listening in entirety. Taleb’s reading of history coupled with his unique ability to connect the dots in a succinct way makes it worth our time:

“The first one is about concentration, a distinctive feature of the modern world, often tied to what I called the Black Swan problem. We now see winner-take-all effects everywhere, owing to connectivity. Imagine an island with many species but a high density per square meter. Compare that to a continent, where opening up space leads to fewer species per meter becausesome will eventually dominate. This mirrors cultural and economic life today.

Take books, for instance. Everyone reads the same ones — think Harry Potteror, for music, The Beatles. In publishing, a few authors prevail. You either sell 20 million copies or you’re working at Starbucks (unless you boycott the firm, as I do personally). This concentration applies to opera singers too. In the past, they could make a living locally because there were no audiovisual recordings. Now, a few stars capture most of the income.

This concentration isn’t inherently bad — it’s just part of market mechanisms, the way things work. The problem arises when it becomes sticky at the top. The road from a college dorm to dominating through Google was once short, and search engines like AltaVista could disappear in minutes, replaced by the newly universally adopted Google. But now, replacing Google is harder because dominance is entrenched, which is unhealthy. This leads to what some like Varoufakis call technofeudalism.

Concentration also applies to viruses. COVID spread globally in about a week, dominating the planet. Compare that to the bubonic plague, which took years to travel from what was Constantinople to Northern England and never reached the Americas due to limited connectivity. Today’s hyper-connectivity amplifies concentration, which is only pathological if we cling to an archaic, early 20th-century textbook understanding of economic, social, cultural, and biological life.

In wealth, for example, only 20% of billionaire families in the U.S. remain after 20 years, but in Europe, it’s the reverse — concentration is getting stickier, and we’re heading toward the more stultified European version globally.

Comment 1: Capitalism works not just by allowing upward mobility, but by accelerating its downward equivalent.”

He then talks about the rise of China and S curves in economies. But his take on immigration is worth reproducing here: “There has never been a society that welcomed immigration for its own sake, for reasons beyond its economic utility. The West grew wealthy, then ran out of people willing to clean bathrooms, fix roofs, babysit noisy spoiled brats, and mow lawns. It would be prohibitively costly to ask a dentist to spend two days a week gardening for balance. Nor do many youngsters in the middle class dream of growing up to be janitors. So the poor must be imported — reluctantly.

Comment 3: Immigration in small doses is socially benign; immigration in large doses threatens the museum-state perception of the locals as a discontinuity from past history and feels like an invasion, even if it is not.

The United States and Europe became structurally addicted to cheap immigrant labor, building oversized houses with expansive lawns and labor-intensive upkeep. A sharp reduction in this supply would trigger hyperinflation, owing to the nonlinear effects of such squeezes. Remember 2022.

Every Western political party that won office on an anti-immigration platform has ended its term with more immigrants than before. Giorgia Meloni is a recent example.

In that light, recent moves to deport immigrants appear largely symbolic — gestures aimed at winning elections. Some are simply vicious, driven by the urge to humiliate immigrants for its own sake.

Can the West dispense with immigrants? Not without crushing its own global GDP — an option unaffordable to economies already burdened with accumulated deficits. It may be a rational choice in theory but, in practice, almost no one is willing to pay that price.

Note again, I have nothing against closed xenophobic ethnostates per se (so long as they don’t invade others and mind their own business); but under modern conditions one cannot have both such a state and accumulated debt requiring economic growth.

We end up in the strange situation of xenophobic people importing labor for their own purposes while voting against immigration — a sort of tragedy of the commons.

Comment 4: The perception of the number of immigrants tends to be biased considerably higher than reality, perhaps because of salient differences and their visibility from their concentration in dense central areas (a saliency bias).

The proportion of Muslims in Europe tends to be under 1/20, ranging between 1/10 and 1/100 in most countries — yet casual perceptions tend to be almost one order of magnitude higher.

Note on Highly Skilled Immigration: There is a marked difference between Europe and the United States in terms of reverse brain drain — the inflow of highly skilled immigrants — which explains the growth differential between the two environments. The U.S., with its more generous (though less equalitarian) academic compensation packages and fewer restrictions on retirement, has consistently drawn Europe’s most aggressive and productive scientists.

At the Tandon School of Engineering of NYU, where I spent more than fifteen years, the near-totality of both faculty and graduate students were foreign-born.

Comment 5: Reversing the direction of brain drain (via visa restrictions) may in fact help the countries of origin by keeping talent locally.”

He goes on to talk about the role of social media, government and scale.