Don’t Trust Anyone In A Tie

Individuals should think about the worst-case scenarios and plan for them. The world will be crazier than you think it will be. Put money away, and then you can live with much more freedom.

You've said you think the world is becoming more extreme than in the past. Why?
Globalization has made the linkages between things more complex. The Internet and technology has increased the number of zeros you can put behind things. Capitalism has forced everyone to overoptimize in order to compete. There's not enough redundancy in the system anymore. If banks had two times the capital and half the leverage, they wouldn't be in the position they are in now.

How would you fix the system?
Take risks away from bankers. Let hedge funds—and the high-net-worth people—take it. At least they aren't threatening society. Also, don't use an economist as Treasury secretary. The world needs fewer economists in general. I believe in psychology, not economics.

© 2008