Search This Blog

Showing posts with label uncertainty. Show all posts
Showing posts with label uncertainty. Show all posts

Thursday 4 February 2016

First Corbyn, now Sanders: how young voters' despair is fuelling movements on the left


Owen Jones in The Guardian


On both sides of the Atlantic, economic insecurity is fuelling the rise of new movements on the left.

 
Bernie Sanders was neck and neck with Hillary Clinton in this week’s Iowa caucus. Photograph: Yin Bogu/Xinhua Press/Corbis

He’s the septuagenarian powered by youth. The figures behind Bernie Sanders’ triumph in Iowa – in which his grassroots insurgency scored a virtual tie against what he rightly described as “the most powerful political organisation” in the US – are astonishing. Among Iowa Democrats aged between 17 and 29, 84% opted for this unlikely youth icon; among those aged 30-44, Sanders still had a 21-point lead over Hillary Clinton. It was older Americans who flocked to Clinton’s camp: nearly seven out of 10 of those aged over 65. The generations appeared separated by a political chasm.
Here is a phenomenon far from specific to the United States. It is a story of young people facing a present and future defined by economic security, often apparently doomed to a worse lot in life than their parents. They often feel unrepresented, ignored, betrayed or outright attacked by the political elite. They are far more progressive on social issues than their grandparents’ generation. And they are helping to drive movements from Sanders’ to Podemos in Spain, from Syriza to Jeremy Corbyn.

That’s not to exaggerate or oversimplify. A “generation” is itself a sweeping generalisation: it may include the retired white billionaire and the black pensioner shivering in a cold home, or the daughter of a miner and the privately educated young man whose rich parents pay his mortgage deposit. Only a minority of young people are meaningfully politically engaged, let alone politically active, and that includes those who opt for conservative or even far-right parties.

But there’s no question that a swath of disenfranchised youth is powering the new movements of the left. Political attitudes have changed. Labour’s rout last May is often compared to the party’s 1983 disaster; but when Labour was defeated under Michael Foot, the Tories had a nine-point lead among 18- to 24-year-olds, while in 2015, Labour achieved a 16-point lead among 18- to 24-year-olds. What’s more, younger Britons were twice as likely to opt for the leftwing Greens as the rest of the population. While a poll last month found that a derisory 16% of those over the age of 60 think Jeremy Corbyn is doing well, the figure rises to 41% among 18- to 24-year-olds. During the leadership contest that swept Corbyn to power, it’s reported that an influx of relatively young members drove the party’s average age down from 53 to 42.
Is it all just youthful naivete? “In 1984 and 1988,” notes the US journalist Peter Beinart, “young voters backed Ronald Reagan and George HW Bush by large margins,” just as Margaret Thatcher attracted a level of youth support that has eluded David Cameron. The evidence that people become naturally more conservative as they age is not conclusive; indeed, on social issues, older people are often simply keeping the conservative attitudes of their youth. “Change is most often toward increased tolerance rather than increased conservatism,” notes one US study. For older Britons, the left may be associated with the disastrous failure of Soviet totalitarianism and the breakdown of the postwar consensus. For younger Britons, the aftermath of financial collapse and a self-evidently profoundly unequal society may loom larger. It’s the fall of Lehman Brothers, not the Berlin Wall, that may be more significant.

The generations seem to live on different political planets. American youth are far more likely to support immigration than their elders, and to have a positive view of Muslims; and while the over-35s are slightly more likely to believe government does too much, the under-35s are decisively more likely to believe it does too little. Here is a generation that has grown up in a world defined by market failure rather than one shaped by cold war rivalries. As a self-described socialist, Sanders is an exceptionally rare breed of American politician. But it is notable that, while just 15% of Americans over 65 have a positive view of socialism, that rises to 36% among the 18- to 29-year-olds, just three points fewer than those who opt for capitalism.
Yet it is surely economic insecurity that drives today’s young radicalism. A poll last year found that nearly half of so-called “millennial” Americans – those aged 18 to 35 – believed that they faced a “dimmer future than their parents”. Forty million Americans are now saddled with student debt, helping to suppress their living standards and leaving them with less disposable income for, say, a mortgage or a car. Home ownership across the Atlantic – the linchpin of the “American dream” – is now at its lowest level for nearly half a century. The economic recovery is an abstraction for many young Americans, all too often driven into insecure and low-paid occupations with little prospect of rising wages or a standard of living they believe they deserve.

A similar picture could be painted in Britain, of course. Government policies have disproportionately targeted younger people: whether it be the punishing of educational aspiration with the trebling of student fees, the cutting of youth services, the scrapping of the Educational Maintenance Allowance, a minimum wage that discriminates against the young, cuts to youth services or a fall in living standards that older Britons have not had to endure. A young person may find that attending university – which now means accruing a huge pile of debt – does not open doors it once did. Home ownership is at its lowest level for a quarter of a century, and it has particularly plummeted among the young, with evidence that many have given up saving up for a deposit altogether. There are now more private tenants than social tenants, and half of those in an often unregulated private rented sector with what can be income-devouring rents are under 34.

But here is the danger. Like other western nations, Britain is an ageing society, and older voters are both decisively opting for the Conservatives, and turning out to vote in great number. The new movements face a formidable task: to both inspire younger voters to turn out in greater number, and persuade a substantial number of older Britons of their cause. A failure to do so will doom these movements. But the mainstream political elite should not feel complacent. They seem to believe they can abandon the young and face no political consequences. They may find that, one day, they run out of luck.

Tuesday 22 April 2014

Understanding Risk - Risk explained to a sixteen year old



By Girish Menon

Risk is the consequence one has to suffer when the outcome of an event is not what you expected or have invested in.

For e.g. as a GCSE student you have invested in getting the grades required by the sixth form college that you wish to go to.

The GCSE exam therefore is the event.

From an individual's point of view this event has only two possible outcome viz. you get the grades or you don't.

Your investment is time, money and effort in order to get the desired outcome.

The risk is what you will have lost when despite all your investment you did not get the desired grades and hence you are not able to do what you had wanted to do.

From a mathematical point of view since there are only two possible outcomes one could say that the probability of either outcome is 0.5.

Your investment with spending time studying, taking tuitions, buying books.... are to lower the probability to failure to as low a figure as possible.

Can you lower the probability of failure to 0? Yes, by invoking the ceteris paribus assumption. If all 'other factors' that affect a student's ability to take an exam are constant, then a student who has studied all the topics and solved past papers will not fail.

Else, some or all the 'other factors' may conspire to bring about a result that the student may not desire. It is impossible to list all the 'other factors' and hence one is unable to control them. Hence, the exam performance of even a hitherto good student remains uncertain.

If the above example, with only two possible outcomes, shows the uncertainty and unpredictability  in the exam results of a diligent student then one shudders to think about other events where all the outcomes possible cannot be identified.

Let's move to study the English Premier League. Here, each team plays 38 matches and each match can have only three outcomes. When one considers picking a winner  of the league one could look at the teams, the manager etc. But, 'other factors' such as injury to key players, the referee...... may scupper the best laid plans.

When one looks at investing in the shares of a company one may study its books of accounts. Assuming that these books are accurate, this information may be inadequate because it is information from the past and the firm which made a huge killing last season may now be facing turbulent conditions of which you an outside investor maybe unaware of. The 'other factors' that may impinge on a firm's performance will include the behaviour of the staff inside the firm, behaviour of other firms, the government's policies and even global events.

Yet, as a risk underwriter one has to take into account all of these factors, quantify each factor based on its importance and likelihood of happening and then estimate the risk of failure. The key thing to remember is that the quantitative value that you have given each factor is at best only a rough estimate and could be wrong. Which is why every risk underwriter follows Keynes' dictum, 'When the facts change, I change my mind'. George Soros, the celebrated investor, has been rumoured to say no to an investment decision that he may have approved only a few hours ago.

Even if Keynes and Soros may have changed their minds on receipt of new information I am willing to bet that their investment record will show many wrong decisions.

So if the risk in investment decisions itself cannot be accurately predicted imagine the dilemma a politician makes when he decides to take his nation to war.


Hence the best way sportsmen, businessmen and politicians overcome the uncertainty of decision making is by posturing. Pretending that you are the best and everything is within your control. They hope that this will scare away the challengers and doubters and victory becomes a self fulfilling prophecy. Alas! It unfortunately does not work every time either. 

(The author is a lecturer in economics.)

Friday 20 December 2013

It's not zero-hours contracts that are the problem, it's the bosses who abuse them


As someone who has worked a zero-hours contract, I welcome Vince Cable's consultation – and his intention to crack down on exploitation
LibDem Annual Conference
Vince Cable intends to crack down on 'exclusivity clauses [in zero-hours contracts], meaning their workers are guaranteed no hours, but are prohibited from finding work with anyone else'. Photograph: David Cheskin/PA
Vince Cable today launched a consultation on zero-hours contracts, saying he wanted greater fairness, but would not be calling for a complete ban. Having worked a zero-hours contract for just under a year, I think he's right. For many, a flexible contract where you are not obliged to work fits in well with the demands of studying or another job. The problem is not with the contracts themselves, but with the way that employers are abusing them.
It is estimated that about 1 million Britons are on these contracts, and in recent years they have become much more widespread. For those who have a steady source of income that covers rent, food and other essentials, but occasionally need to top it up with extra work (such as students in the summer holidays, or those who have retired), zero-hours contracts can be a good fit for both employer and employee.
The problems arise when companies use zero-hours contracts for nearly all their staff, as a way to cut their own costs and limit the rights that their workers have. The distinction between "worker" and "employee" is a complicated one, but those on zero-hours contracts are usually defined as workers, meaning they have fewer rights than employees. Employees are entitled to statutory redundancy pay and the right not to be unfairly dismissed. Not all workers, however, are.
If you want a job with guaranteed hours, to be forced on to a zero-hours contract denies you the psychological security that comes with knowing how much you will earn in a given month. Insecure employment means that you are constantly worrying about money and making ends meet: you can have plenty of hours one week, and none the next. There is no safety net of a minimum number of hours. There is nothing to stop you from earning nothing.
And some companies have even been using exclusivity clauses, meaning their workers are guaranteed no hours, but are prohibited from finding work with anyone else. Vince Cable has announced that he intends to crack down on these, but it is an indication of how exploitative the current labour market is that they have so far been allowed.
Zero-hours contracts enable companies to transfer the burden of an uncertain economy on to those that they employ. They are assured of a pool of workers from whom they can draw in busy times and ignore in quieter times. At the staffing agency I worked for, we were told that some shifts were "non-cancellation", meaning that cancelling the shift (even from ill health or an emergency) would incur a fine of £10. Yet the company was not restrained by its own rules: once I took a day off my internship to make a non-cancellation shift, as I needed the hours. The day before, I was told numbers had been reduced so I would no longer be needed after all. This short-term cutting of shifts happened often, sometimes just hours before you were meant to start.
A culture in which employers are allowed to treat their workers as disposable cogs in a commercial machine is exploitative, and there needs to be more regulation to ensure that those who want a stable, set-hours contract are entitled to one, while those who need to work flexibly can continue to do so. The needs of businesses should not take precedence over the rights of those that work for them – even in an economic situation that seems to have lapped up most of our principles with it.

Wednesday 16 October 2013

Oprah is wrong. Atheists can experience wonder and awe

Those who believe in God do not have a monopoly over possession of that magnificent sense of the sublime

Frank Furedi in The Independent

In one sense Oprah Winfrey was absolutely right when she lectured the humanist swimmer Diana Nyad about the inconsistency of the outlook of atheism with a sense of awe. For Oprah, a woman of faith, the sense of wonder and awe are inextricably intertwined with religion and God.
Indeed since the emergence of the Judeo-Christian tradition, awe is the mandatory reaction that the true believer is required to have towards God. From this perspective the sense awe and wonder is bounded and regulated through the medium of religious doctrine. In contrast, those of us who believe that it was not God but humans who are the real creators are unlikely to stand in awe of this allegedly omnipotent figure.
Although in the 21st century the term awe and awesome are used colloquially to connote amazement and admiration historically these words communicated feelings of powerlessness, fear and dread. The Oxford English Dictionary tells us, that awe means ‘immediate and active fear; terror, dread’. The OED explains that from its original reference to the Divine Being it has acquired a variety of different meanings, such as ‘dread mingled with veneration’ and ‘reverential or respectful fear’. All these meanings signal one important idea which that ‘fearing’ and ‘dreading’ are inherently positive attributes to be encouraged.
The religious affirmation of fear and dread of a higher being is indeed alien to the humanist view of the world. But does that mean that Oprah is right and that atheists cannot wonder and awe? Not at all. Those who believe in God do not have a monopoly over possession of that magnificent sense of the sublime that catches us unaware in the face of the truly mysterious. Atheists and humanist experience wonder and awe in ways that sometimes resembles but often differs from the way that the religious people respond to the unknown.
We all have the capacity and the spiritual resources to experience the mysteries of life and the unexpected events that excite our imagination through a sense of wonder. Those who stand in awe of God internalise their sense of wonder through the medium of their religious doctrine. Their response can possess powerful and intense emotions. But the way they wonder is bounded by their religious beliefs and their conception of God.  In a sense this experience of spiritual sensibility is both guided and ultimately dictated by doctrine and belief. Historically those religious people who dared to go beyond these limits risked being denounced as heretical mystics.
In contrast to the way that religion does wonder, atheists and humanists possess a potential for experiencing in a way that is totally unbounded. Humanists do not stand in awe of the mysteries of God but truly wonder at the unknown. Through the resources of the human imagination (humanities) and of the sciences the thinking atheist realises that every solution creates a demand for new answers.  That’s what makes our wonder so special. Instead of dreading and fearing, it empowers us to set out on the quest to discover and understand.
Experience shows that the capacity to wonder is a truly human one. Toddlers and young children do not need God to wonder at the mysterious world that surrounds them. At a very early stage in their life they express their sense of astonishment and wonder without effort or a hint of embarrassment. Thankfully most of us continue to be motivated and inspired by the mysteries of life.
One final point. There are of course some new atheists who insist on living in a spiritual-free world. From their deterministic perspective everything is explained by neuro-science or our genes. But what drives them away from wonder is not their atheism but their inability to engage with uncertainty. In that respect they are surprisingly similar to those who embrace religious dogma to spare themselves the responsibility of engaging with the mysteries that confront us in everyday life.

Sunday 8 September 2013

Keep the pause button on GM pressed


JACK A. HEINEMANN in The hindu
  

Questioning a technology, especially of the kind that has serious unknowns and lacks clear social benefits, is not an attack on science

Jairam Ramesh, former Environment Minister for India, made the brave decision in 2010 to tell his then apex regulator of genetically modified organisms (GEAC) that it had failed to properly use available science to determine the safety — to human health and the environment — of Bt brinjal, created using genetic modification (GM). His decision followed careful evaluation of the science.

I was involved in Ramesh’s review. I read first hand the scientific evidence in my area of expertise provided to the GEAC and its responses. I was heartened to see that his decision was validated by the esteemed scientists that made up the Supreme Court Technical Expert Committee who have advised the Court on the need for better research and better process before continuing to release GM crops into the environment or using them as food.

Creating confusion

G. Padmanaban (“Sow the wind, reap a storm,” The Hindu, September 2) believes that the events surrounding the evaluation of Bt brinjal and now extending to other kinds of GM plants is an assault on science. He confuses science with technology. Science is the process of knowledge creation (or discovery) whereas technology is the means of knowledge application. This confusion causes some scientists to defend technologies that are questioned because they perceive questions on the technology as an attack on science. It is not.

There is much knowledge discovered or to be discovered that cannot be applied wisely — at least not now. GM plants are among the technologies that have both serious scientific unknowns and lack a clear social benefit — at least for now.

For over 30 years, GM has been promised to produce plants that will resist the stresses of drought, heavy metals and salt, that will increase yield, reduce the use of toxic pesticides and even fix their own nitrogen. To be fair, some GM crops have reduced the use of some toxic insecticides for a brief period. To be precise, though, none of these promises has been sustainably delivered to farmers.

Why not? Well, it isn’t complex regulation holding them back. By the year 2005, over 1,000 applications were approved to field trial stress-tolerant GM plants in the United States alone. None ever progressed out of the testing phase. The explanation for this is likely because stress tolerance is not a solution to the causes of stress. No matter how tolerant you make the plant to drought, using it in soil low in organic matter and unable to hold water will eventually further deplete the soil of moisture and the plant will struggle or die. GM is an attempt to use genetics to overcome the environment. This never works for long. That is why some call GM a distraction from investing in real solutions to the problems faced by real farmers.

A symptom

Herbicide use is increasing in the U.S. since it adopted GM maize (corn), soybeans and cotton. Insecticide use is down by a small bit, but extremely high compared to countries such as France which do not use GM crops. Western Europe’s maize yields match or exceed the U.S.’ yields using less pesticide. The yields in wheat and oilseed rape are increasing at an even faster rate in Western Europe than in the U.S. and Canada. This indicates a dangerous trend: those countries choosing to innovate in agriculture using GM are demonstrating lower productivity increases and greater dependence on chemical inputs in all crops compared to economically and environmentally comparable countries choosing to not use GM crops.
What is it about investing in GM products that seems to undermine other technologies in agriculture? GM products attract the strictest intellectual property (IP) rights instruments possible in agriculture (e.g., process patents). The use of those instruments concentrates investment and drives out simple but even more effective technologies.

Now every government research centre and public university seeks to compensate for the fall in direct public investment through licensing royalties from IP and the creation of partnerships with the private sector. This necessarily changes the kinds of questions they favour being asked by their researchers, the kind that will be supported by institutional resources or rewarded with promotion. With these policies in place we shouldn’t be surprised that every problem looks like it has a GM solution even to researchers who claim to have no entrepreneurial motivations.

Prof. Padmanaban’s ambition for a crop that provides all nutritional needs and grows everywhere demonstrates the poverty of the GM approach to hunger and malnourishment. Such a crop would quickly become obsolete as it would also serve as a wonderful meal for every conceivable form of pest. Meanwhile, it would undermine both biological and agricultural diversity as it became a weed in its own right.

Instead of that approach, supporting communities with education on nutrition and farmers with technologies that build up their soils, manage pests with little or no application of pesticide and manufactured fertilizers gives them the means and independence to grow a variety of crops and livestock to meet their dietary needs and sell their surplus in local markets.

This investment in agriculture is not as good at making intellectual property, but better for growing food. To properly support India’s mainly small holder farming requires removing the penalties and incentives on the public scientist to develop primarily technologies that bring direct revenue to their institutions. Instead, invest in them with public money and measure their success by the yields of farmers, the reduction of pesticides and fertilizer they use, and the increase in their wealth and health.

No missed opportunities

India is not missing out on the benefits of GM. So far, there haven’t been any proven to exist, or proven to be sustainable. GM crops are not designed to increase intrinsic yield and the largest scale and longest term studies bear out that they don’t yield more. Meanwhile, the cost of GM seeds is the fastest growing expense for U.S. farmers who are simultaneously suffering from weeds resistant to the herbicides excessively used on GM crops and pests resistant to the insecticides over-used in Bt crops. That likely would be India’s experience had it commercialised Bt brinjal which was developed with the least effective form of Bt for the target pest.

In addition, the safety issue still lingers over these products. It shouldn’t. The science needed to establish their safety exists and is affordable but it must be applied dispassionately and transparently. That is all Jairam Ramesh asked.

Claiming that GM crops are demonstrated safe by the absence of specific health claims from Americans is glib. There are no validated health surveillance programmes in the U.S. which could both detect and diagnose the cause of the most likely manifestations of harm if they do exist.

Meanwhile, more research studies accumulate with evidence of adverse effects, some quite serious. These studies require replication, but they run into roadblocks or fail to find new funding. Most often these studies report low level health effects using animal feeding studies, so it is not clear whether the effect would be the same, more or less in humans and more or less likely to be caused using GM plants cooked and processed, as humans eat them, rather than raw or processed the way they are provided to test animals.

Hunger, pestilence, and economic failure are the images of fear increasingly being used to drive acceptance of GM crops. Ignorance, anti-science, ideology and hypocrisy are the insults used to counter questions about the safety of GM crops coming from scientists and the public. What is right for India’s agriculture is too important a question to leave to fear and insult to decide. I think that both Ramesh and the scientists of the Technical Expert 
Committee knew this when they asked India to pause on the use of GM products. Pause so that all voices can be heard. Reflect on what the problems are and whether technologies solve them or mask them for a time, or even make them worse later.

Saturday 17 December 2011

Why pretend we know everything? It's time to embrace uncertainty


It is certainty that we need to worry about, as extreme ideologies prosper in these uncertain times
David Cameron at the EU summit
Who knows if David Cameron's refusal to sign the EU treaty is a good thing or not. Photograph: Yves Herman/Reuters

I don't know what I am talking about. And, quite frankly, you should be relieved that I know that I don't know. The world is full of people proclaiming about stuff they don't know much about. My trade depends on it. Pundits, politicians and economists, too, all depend on some kind of bladder-busting meta-analysis to keep us quiet. In fact, they are just winging it.

Too many nights I have watched economists on television being treated with undeserved reverence. "Economics is largely a made-up pseudo-science!" I want to scream. After all, it has been almost entirely useless in predicting the mess we are in. Indeed, by coming up with grotesque calculations whereby rich people's investments were effectively risk-free and financed by the jobs and homes of the poor, many economists were cheerleaders pre-crisis.

This is not another anti-bank rant. It is now self-evident that banks did some bad stuff, but the diplomatic immunity they were granted was not merely political. Anyone who makes out that they know what they are doing and can turn a fast buck and believes, yes really believes, in something – anything, themselves even – is facilitated by society. And, yes, this is usually backed up by a narrative of questionable facts.

What is valued is certainty. What is devalued in such a world is uncertainty. Those who aren't sure are weak. Poor. Faithless. Uncertainty is often worrying and feminised. Real men know real things. So they have been lining up to tell us that David Cameron's refusal to sign the EU treaty is the best thing ever to have happened, or the worst thing ever to have happened, when, actually, no one is quite sure. Reconciling a belief in the democratic process with the recognition that the euro is still in big trouble and Greece may well go anyway, means it is impossible to line up clearly in the Eurosceptic versus Europhile shadow boxing. It is up in the air.
As this year has been a news tsunami, it would be far more interesting to acknowledge what we did not know rather than what we did. Most experts did not predict the riots, the Arab spring, the extent of the economic meltdown. I recall meeting a learned professor in Tel Aviv three years ago who explained that Iran not Egypt was now the centre of the Arab world and everything would start there. Like many others, I thought recession would produce some kind of resistance but had no idea how that would manifest itself. As for the financial crisis, our lack of foresight is mind-boggling.

But in public, and especially in politics, an admission of uncertainty is seen as problematic. At a dinner I attended a few years ago, a young politician was asked a question to which he had no answer. He said: "I don't know about that; I will go away and find out." It was Ed Miliband as it happens, and I was impressed. But the guys I was with crowed: "We got him there!" This relentless reduction of politics to point-scoring, this public-school obsession with certainty, is a turn-off. Look where it leads. Not so long ago, George W Bush said that if America "shows uncertainty and weakness in this decade, the world will drift towards tragedy. This will not happen on my watch." Apart from war, this "certainty" helped to produce the debt crisis.

It is certainty that we need to worry about, as extreme ideologies prosper in these uncertain times. Yet there have always been ways of thinking that properly refute certainty. The school of "weak thought" coming out of Italy via Gianni Vattimo follows a clear line from Nietzsche onwards that pushes against finality, and urges us to understand historical circumstance. "There are no facts, only interpretations and this too is an interpretation," Vattimo has said.

The work of Nassim Taleb also confronts us with the idea that the economic models used by the banks were based on the idea of stability. The ecology of the banking system could not predict risk properly at all (although Taleb did, actually). Then we have a genius such as Zygmunt Bauman, who has long been telling us that we live in "liquid modernity", that individuals can no longer plan careers and progress in linear, certain ways. Yes, it is like the weather: changeable.

Of course those who most understand the value of uncertainty are scientists themselves. As the delightful Jon Butterworth wrote this week, science has nothing to fear from uncertainty. The sexy little Higgs Boson particle, which may have flashed up in the data in Cern (I imagine it as a burlesque sort of particle) has meant we have listened to physicists telling us very excitedly about how much we just don't know.

This has been wonderful. The opposite of political discourse: to hear clever people talking about the limits of their own knowledge. How weighed down is public life with its emphasis on certainty. How dumbed down is belief. The big divides are not between different beliefs, but the differing degree of certitude in which those beliefs are held.

No one knows. No one has the answers. Uncertainty is where we are. It is to be embraced. Christopher Hitchens, when asked which word he had most overused, said he was shocked to find on rereading his work that it was "perhaps".

I love that. Perhaps, right now, is the best word. I'm sure of that. Perhaps.

Monday 2 June 2008

Nassim Nicholas Taleb: the prophet of boom and doom

 


A noisy cafe in Newport Beach, California. Nassim Nicholas Taleb is eating three successive salads, carefully picking out anything with a high carbohydrate content.

He is telling me how to live. "The only way you can say 'F*** you' to fate is by saying it's not going to affect how I live. So if somebody puts you to death, make sure you shave."

After lunch he takes me to Circuit City to buy two Olympus voice recorders, one for me and one for him. The one for him is to record his lectures – he charges about $60,000 for speaking engagements, so the $100 recorder is probably worth it. The one for me is because the day before he had drowned my Olympus with earl grey tea and, as he keeps saying, "I owe you." It didn't matter because I always use two recorders and, anyway, I had bought a replacement the next morning.

But it's important and it's not, strictly speaking, a cost to him. Every year he puts a few thousand dollars aside for contingencies – parking tickets, tea spills – and at the end of the year he gives what's left to charity. The money is gone from day one, so unexpected losses cause no pain. Now I have three Olympus recorders.

He spilt the tea – bear with me; this is important – while grabbing at his BlackBerry. He was agitated, reading every incoming e-mail, because the Indian consulate in New York had held on to his passport and he needed it to fly to Bermuda. People were being mobilised in New York and, for some reason, France, to get the passport.

The important thing is this: the lost passport and the spilt tea were black swans, bad birds that are always lurking, just out of sight, to catch you unawares and wreck your plans. Sometimes, however, they are good birds. The recorders cost $20 less than the marked price owing to a labelling screw-up at Circuit City. Stuff happens. The world is random, intrinsically unknowable. "You will never," he says, "be able to control randomness."

To explain: black swans were discovered in Australia. Before that, any reasonable person could assume the all-swans-are-white theory was unassailable. But the sight of just one black swan detonated that theory. Every theory we have about the human world and about the future is vulnerable to the black swan, the unexpected event. We sail in fragile vessels across a raging sea of uncertainty.

"The world we live in is vastly different from the world we think we live in."

Last May, Taleb published The Black Swan: The Impact of the Highly Improbable. It said, among many other things, that most economists, and almost all bankers, are subhuman and very, very dangerous. They live in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk-management systems. Bankers and economists scorned and raged at Taleb. He didn't understand, they said. A few months later, the full global implications of the sub-prime-driven credit crunch became clear. The world banking system still teeters on the edge of meltdown. Taleb had been vindicated. "It was my greatest vindication. But to me that wasn't a black swan; it was a white swan. I knew it would happen and I said so. It was a black swan to Ben Bernanke [the chairman of the Federal Reserve]. I wouldn't use him to drive my car. These guys are dangerous. They're not qualified in their own field."

In December he lectured bankers at Société Générale, France's second biggest bank. He told them they were sitting on a mountain of risks – a menagerie of black swans. They didn't believe him. Six weeks later the rogue trader and black swan Jérôme Kerviel landed them with $7.2 billion of losses.
As a result, Taleb is now the hottest thinker in the world. He has a $4m advance on his next book. He gives about 30 presentations a year to bankers, economists, traders, even to Nasa, the US Fire Administration and the Department of Homeland Security. But he doesn't tell them what to do – he doesn't know. He just tells them how the world is. "I'm not a guru. I'm just describing a problem and saying, 'You deal with it.'"

Getting to know Taleb is a highly immersive experience. Everything matters. "Why are you not dressed Californian?" he asks at our first meeting. Everything in Newport Beach is very Californian. I'm wearing a jacket: it's cold. He's wearing shorts and a polo shirt. Clothes matter; they send signals. He warns against trusting anybody who wears a tie – "You have to ask, 'Why is he wearing a tie?'"
He has rules. In California he hires bikes, not cars. He doesn't usually carry his BlackBerry because he hates distraction and he really hates phone charges. But he does carry an Apple laptop everywhere and constantly uses it to illustrate complex points and seek out references. He says he answers every e-mail. He is sent thousands. He reads for 60 hours a week, but almost never a newspaper, and he never watches television.

"If something is going on, I hear about it. I like to talk to people, I socialise. Television is a waste of time. Human contact is what matters."

But the biggest rule of all is his eccentric and punishing diet and exercise programme. He's been on it for three months and he's lost 20lb. He's following the thinking of Arthur De Vany, an economist – of the acceptable type – turned fitness guru. The theory is that we eat and exercise according to our evolved natures. Early man did not eat carbs, so they're out. He did not exercise regularly and he did not suffer long-term stress by having an annoying boss. Exercise must be irregular and ferocious – Taleb often does four hours in the gym or 360 press-ups and then nothing for 10 days. Jogging is useless; sprinting is good. He likes to knacker himself completely before a long flight. Stress should also be irregular and ferocious – early men did not have bad bosses, but they did occasionally run into lions.

He's always hungry. At both lunches he orders three salads, which he makes me share. Our conversation swings from high philosophy and low economics back to dietary matters like mangoes – bad – and apples – good as long as they are of an old variety. New ones are bred for sugar content. His regime works. He looks great – springy and fit. He shows me an old identity card. He is fat and middle-aged in the photo. He looks 10 years younger than that. "Look at me! That photo was taken seven years ago. No carbs!"

This is risk management – facing up to those aspects of randomness about which something can be done. Some years ago he narrowly survived throat cancer. The change in his voice was at first misdiagnosed as damaged vocal cords from his time on the trading floor. It can recur. Also he has a high familial risk of diabetes. He is convinced the diet of civilisation – full of carbs and sugar – is the problem. The grand doctors who once announced that complex carbohydrates are good for you are, to him, criminals responsible for thousands of deaths.

So, you are wondering, who is this guy? He was born in 1960 in Lebanon, though he casts doubt on both these "facts". The year is "close enough" – he doesn't like to give out his birth date because of identity theft and he doesn't believe in national character. He has, however, a regional identity; he calls himself a Levantine, a member of the indecipherably complex eastern Mediterranean civilisation. "My body and soul are Mediterranean."

Both maternal and paternal antecedents are grand, privileged and politically prominent. They are also Christian – Greek Orthodox. Startlingly, this great sceptic, this non-guru who believes in nothing, is still a practising Christian. He regards with some contempt the militant atheism movement led by Richard Dawkins.

"Scientists don't know what they are talking about when they talk about religion. Religion has nothing to do with belief, and I don't believe it has any negative impact on people's lives outside of intolerance. Why do I go to church? It's like asking, why did you marry that woman? You make up reasons, but it's probably just smell. I love the smell of candles. It's an aesthetic thing."

Take away religion, he says, and people start believing in nationalism, which has killed far more people. Religion is also a good way of handling uncertainty. It lowers blood pressure. He's convinced that religious people take fewer financial risks.

He was educated at a French school. Three traditions formed him: Greek Orthodox, French Catholic and Arab. They also taught him to disbelieve conventional wisdom. Each tradition had a different history of the crusades, utterly different. This led him to disbelieve historians almost as much as he does bankers.

But, crucially, he also learnt from a very early age that grown-ups have a dodgy grasp of probability. It was in the midst of the Lebanese civil war and, hiding from the guns and bombs, he heard adults repeatedly say the war would soon be over. It lasted 15 years. He became obsessed with probability and, after a degree in management from the Wharton business school at Pennsylvania University, he focused on probability for his PhD at the University of Paris.

For the non-mathematician, probability is an indecipherably complex field. But Taleb makes it easy by proving all the mathematics wrong. Let me introduce you to Brooklyn-born Fat Tony and academically inclined Dr John, two of Taleb's creations. You toss a coin 40 times and it comes up heads every time. What is the chance of it coming up heads the 41st time? Dr John gives the answer drummed into the heads of every statistic student: 50/50. Fat Tony shakes his head and says the chances are no more than 1%. "You are either full of crap," he says, "or a pure sucker to buy that 50% business. The coin gotta be loaded."

The chances of a coin coming up heads 41 times are so small as to be effectively impossible in this universe. It is far, far more likely that somebody is cheating. Fat Tony wins. Dr John is the sucker. And the one thing that drives Taleb more than anything else is the determination not to be a sucker. Dr John is the economist or banker who thinks he can manage risk through mathematics. Fat Tony relies only on what happens in the real world.

In 1985, Taleb discovered how he could play Fat Tony in the markets. France, Germany, Japan, Britain and America signed an agreement to push down the value of the dollar. Taleb was working as an options trader at a French bank. He held options that had cost him almost nothing and that bet on the dollar's decline. Suddenly they were worth a fortune. He became obsessed with buying "out of the money" options. He had realised that when markets rise they tend to rise by small amounts, but when they fall – usually hit by a black swan – they fall a long way.

The big payoff came on October 19, 1987 – Black Monday. It was the biggest market drop in modern history. "That had vastly more influence on my thought than any other event in history."

It was a huge black swan – nobody had expected it, not even Taleb. But the point was, he was ready. He was sitting on a pile of out-of-the-money eurodollar options. So, while others were considering suicide, Taleb was sitting on profits of $35m to $40m. He had what he calls his "f***-off money", money that would allow him to walk away from any job and support him in his long-term desire to be a writer and philosopher.

He stayed on Wall Street until he got bored and moved to Chicago to become a trader in the pit, the open-outcry market run by the world's most sceptical people, all Fat Tonys. This he understood.
His first book, Dynamic Hedging: Managing Vanilla and Exotic Options, came out in 1997. He was moving away from being a pure trader, or "quant" – a quantitative analyst who applies sophisticated maths to investments – to being the philosopher he wanted to be. He was using the vast data pool provided by the markets and combining it with a sophisticated grasp of epistemology, the study of how and what we know, to form a synthesis unique in the modern world.

In the midst of this came his purest vindication prior to sub-prime. Long-Term Capital Management was a hedge fund set up in 1994 by, among others, Myron Scholes and Robert C Merton, joint winners of the 1997 Nobel prize in economics. It had the grandest of all possible credentials and used the most sophisticated academic theories of portfolio management. It went bust in 1998 and, because it had positions worth $1.25 trillion outstanding, it almost took the financial system down with it. Modern portfolio theory had not accounted for the black swan, the Russian financial crisis of that year. Taleb regards the Nobel prize in economics as a disgrace, a laughable endorsement of the worst kind of Dr John economics. Fat Tony should get the Nobel, but he's too smart. "People say to me, 'If economists are so incompetent, why do people listen to them?' I say, 'They don't listen, they're just teaching birds how to fly.' "

Taleb created his own hedge fund, Empirica, designed to help other hedge funds hedge their risks by using a refined form of his options wins – running small losses in quiet times and winning big in turbulent markets. It did okay but, after a good first year, performed poorly when the market went though a quiet spell. He's still involved in the markets, but mainly as a hobby – "like chess".

Finally, with two books – Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life, and The Black Swan – and a stream of academic papers, he turned himself into one of the giants of modern thought. They're still trying to tear him down, of course; last year The American Statistician journal devoted a whole issue to attacking The Black Swan. But I wouldn't bother. A bad but rather ignorant review in The New York Times resulted in such a savage rebuttal from Taleb on his website, www.fooledbyrandomness.com, that reviewers across the US pulled out in fear of his wrath. He knows his stuff and he keeps being right.

And what he knows does not sound good. The sub-prime crisis is not over and could get worse. Even if the US economy survives this one, it will remain a mountain of risk and delusion. "America is the greatest financial risk you can think of."

Its primary problem is that both banks and government are staffed by academic economists running their deluded models. Britain and Europe have better prospects because our economists tend to be more pragmatic, adapting to conditions rather than following models. But still we are dependent on American folly.

The central point is that we have created a world we don't understand. There's a place he calls Mediocristan. This was where early humans lived. Most events happened within a narrow range of probabilities – within the bell-curve distribution still taught to statistics students. But we don't live there any more. We live in Extremistan, where black swans proliferate, winners tend to take all and the rest get nothing – there's Bill Gates, Steve Jobs and a lot of software writers living in a garage, there's Domingo and a thousand opera singers working in Starbucks. Our systems are complex but over-efficient. They have no redundancy, so a black swan strikes everybody at once. The banking system is the worst of all.

"Complex systems don't allow for slack and everybody protects that system. The banking system doesn't have that slack. In a normal ecology, banks go bankrupt every day. But in a complex system there is a tendency to cluster around powerful units. Every bank becomes the same bank so they can all go bust together."

He points out, chillingly, that banks make money from two sources. They take interest on our current accounts and charge us for services. This is easy, safe money. But they also take risks, big risks, with the whole panoply of loans, mortgages, derivatives and any other weird scam they can dream up. "Banks have never made a penny out of this, not a penny. They do well for a while and then lose it all in a big crash."

On top of that, Taleb has shown that increased economic concentration has raised our vulnerability to natural disasters. The Kobe earthquake of 1995 cost a lot more than the Tokyo earthquake of 1923. And there are countless other ways in which we have built a world ruled by black swans – some good but mostly bad. So what do we do as individuals and the world? In the case of the world, Taleb doesn't know. He doesn't make predictions, he insults people paid to do so by telling them to get another job. All forecasts about the oil price, for example, are always wrong, though people keep doing it. But he knows how the world will end.

"Governments and policy makers don't understand the world in which we live, so if somebody is going to destroy the world, it is the Bank of England saving Northern Rock. The biggest danger to human society comes from civil servants in an environment like this. In their attempt to control the ecology, they don't understand that the link between action and consequences can be more vicious. Civil servants say they need to make forecasts, but it's totally irresponsible to make people rely on you without telling them you're incompetent."

Bear Stearns – the US Northern Rock – was another vindication for Taleb. He's always said that whatever deal you do, you always end up dealing with J P Morgan. It was JPM that picked up Bear at a bargain-basement price. Banks should be more like New York restaurants. They come and go but the restaurant business as a whole survives and thrives and the food gets better. Banks fail but bankers still get millions in bonuses for applying their useless models. Restaurants tinker, they work by trial and error and watch real results in the real world. Taleb believes in tinkering – it was to be the title of his next book. Trial and error will save us from ourselves because they capture benign black swans. Look at the three big inventions of our time: lasers, computers and the internet. They were all produced by tinkering and none of them ended up doing what their inventors intended them to do. All were black swans. The big hope for the world is that, as we tinker, we have a capacity for choosing the best outcomes.

"We have the ability to identify our mistakes eventually better than average; that's what saves us." We choose the iPod over the Walkman. Medicine improved exponentially when the tinkering barber surgeons took over from the high theorists. They just went with what worked, irrespective of why it worked. Our sense of the good tinker is not infallible, but it might be just enough to turn away from the apocalypse that now threatens Extremistan.

He also wants to see diplomats dying of cirrhosis of the liver. It means they're talking and drinking and not going to war. Parties are among the great good things in Taleb's world.

And you and me? Well, the good investment strategy is to put 90% of your money in the safest possible government securities and the remaining 10% in a large number of high-risk ventures. This insulates you from bad black swans and exposes you to the possibility of good ones. Your smallest investment could go "convex" – explode – and make you rich. High-tech companies are the best. The downside risk is low if you get in at the start and the upside very high. Banks are the worst – all the risk is downside. Don't be tempted to play the stock market – "If people knew the risks they'd never invest."

There's much more to Taleb's view of the world than that. He is reluctant to talk about matters of human nature, ethics or any of the traditional concerns of philosophy because he says he hasn't read enough. But, when pressed, he comes alive.

"You have to worry about things you can do something about. I worry about people not being there and I want to make them aware." We should be mistrustful of knowledge. It is bad for us. Give a bookie 10 pieces of information about a race and he'll pick his horses. Give him 50 and his picks will be no better, but he will, fatally, be more confident.

We should be ecologically conservative – global warming may or may not be happening but why pollute the planet? – and probablistically conservative. The latter, however, has its limits. Nobody, not even Taleb, can live the sceptical life all the time – "It's an art, it's hard work." So he doesn't worry about crossing the road and doesn't lock his front door – "I can't start getting paranoid about that stuff." His wife locks it, however.

He believes in aristocratic – though not, he insists, elitist – values: elegance of manner and mind, grace under pressure, which is why you must shave before being executed. He believes in the Mediterranean way of talking and listening. One piece of advice he gives everybody is: go to lots of parties and listen, you might learn something by exposing yourself to black swans.

I ask him what he thinks are the primary human virtues, and eventually he comes up with magnanimity – punish your enemies but don't bear grudges; compassion – fairness always trumps efficiency; courage – very few people have this; and tenacity – tinker until it works for you.

"Let's be human the way we are human. Homo sum – I am a man. Don't accept any Olympian view of man and you will do better in society."

Above all, accept randomness. Accept that the world is opaque, majestically unknown and unknowable. From its depths emerge the black swans that can destroy us or make us free. Right now they're killing us, so remember to shave. But we can tinker our way out of it. It's what we do best. Listen to Taleb, an ancient figure, one of the great Mediterranean minds, when he says: "You find peace by coming to terms with what you don't know." Oh, and watch those carbs

Taleb's top life tips

1 Scepticism is effortful and costly. It is better to be sceptical about matters of large consequences, and be imperfect, foolish and human in the small and the aesthetic.

2 Go to parties. You can't even start to know what you may find on the envelope of serendipity. If you suffer from agoraphobia, send colleagues.

3 It's not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.

4 Wear your best for your execution and stand dignified. Your last recourse against randomness is how you act — if you can't control outcomes, you can control the elegance of your behaviour. You will always have the last word.

5 Don't disturb complicated systems that have been around for a very long time. We don't understand their logic. Don't pollute the planet. Leave it the way we found it, regardless of scientific 'evidence'.

6 Learn to fail with pride — and do so fast and cleanly. Maximise trial and error — by mastering the error part.

7 Avoid losers. If you hear someone use the words 'impossible', 'never', 'too difficult' too often, drop him or her from your social network. Never take 'no' for an answer (conversely, take most 'yeses' as 'most probably').

8 Don't read newspapers for the news (just for the gossip and, of course, profiles of authors). The best filter to know if the news matters is if you hear it in cafes, restaurants... or (again) parties.

9 Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.

10 Answer e-mails from junior people before more senior ones. Junior people have further to go and tend to remember who slighted them.







Get Started!