Transcription
The problem is you don't need good people. You and the last thing sometimes is for good people to do good things. What you need is I'd rather have not good people but a good system. So basically it was self harm by by governmental, you know, government trying to do what they think they can do when in fact you just want them to take a vacation.
A lot of people don't realize that virtue is what we call cheap signaling, you know, like, you know, "Hey, let's save the planet." And so, "Let's have your children join an NGO." And let's do this. And, uh, something that infuriates me is when I enter a hotel, I have these people telling me, "Let's save the planet." But in fact, you're saving your own wallet. I mean, it's not, I want to save the planet, okay? But don't use the planet as an excuse.
You have all these people. Let's call virtues empty. There is no cheap virtue. It doesn't come for free. The only virtue you cannot fake is risk-taking. Risk-taking for, and that's the highest virtue. This is an elephant next to a mouse. What's the main difference between them?
Sorry.
Size.
Now, is it qualitative or quantitative?
Sorry.
Quantitative.
No, it's mostly qualitative. Hugely qualitative. Even more for the following reason. How many, uh, LFS we have still around? They can't, if the population-wise, they can't fill a small town in Brazil. How many rats do we have? We have more rats in New York City than humans. Like 8.7 million rats or something. All right? We don't even know because they're good at hiding. All right? So, please don't do the experiment yourself, or if you do it, don't tell anyone. But if you throw a rat out the window, it would laugh at you. If an elephant falls from here, what happens? It's gone. It breaks a leg, it's gone. So the difference is qualitative because as you grow in size, you have this, a lot of things change with the size. You become vastly more fragile.
Elephants also have one advantage. They live longer, but they're the first to go extinct. The mammoth, I know they were mammoths when they had the pyramids in Egypt. When they were before they built, when they were built, had already built the, the, the Great Pyramid, the Khufu pyramid, they had, they had mammoths. So the next animal to go extinct is not going to be the rat, it's the elephant. Large animals. Same thing with corporations. Corporation, if you want a corporation to commit suicide, reach a level when you can enter the S&P 500. Expected duration in the S&P 500 today, 11 years. What was it in the 80s? I went to business school. I'm very, very old. 60. It was. Okay. So the more complex the environment, the more fragility, the less corporation.
Let's now move into political systems with something drastic. You will, and, okay, you guys stop reading. So I go back to the elephant. All right. So the thing is, whenever you say, "I am Republican, Marxist, this, that, libertarian, libertarian, whatever you want," you have to attach a scale to it. You have to say, "I'm libertarian at the mouse level, but a Republican at the elephant level." You see the point? Let's think about it. Is perfectly, I am Marxist with my family. Marxist, share everything, you know. And okay, I'm a little less Marxist with my extended family, more like a socialist, maybe. And then as you go up, okay, I'm libertarian at the federal level. Okay. So the scale matters. So you cannot talk politics without scale. That's volume six of the Inserto. At which maybe only 30 pages on scale because if you start thinking about it, these terms, you, you know, liberty, all right, or two things has to have a scale attached to it. Okay. So you're not free with an assign this, but I want to be free with respect to that. And also, you should do the fractal order, that the relationship between the symmetry between individuals should be replicated with the same symmetry between towns. You don't mess with me, I don't mess with you. Treat others like you'd like, you don't, don't treat them like you don't want to be treated. And goes all the way up to states.
Now, this sentence has been from, from "Skin in the Game," has been spreading like wildfire. "The person saying, 'One can be libertarian at a federal level, Republican at a state level, Democrat at a country level, socialist within a commune, and communist at a family level.'" Okay? And I don't know if you, you can be even worse with your dog or whatever. Something like so, so you, you decide. So the, the whole idea of scaling destroys a lot of things. You cannot say, "Singapore is successful, therefore let's replicate it." 200 million people versus 6 million. It doesn't work. Okay. You cannot say that Canada had a great health plan that's applied to the United States. It doesn't work. 300 million versus 30. It doesn't work. It doesn't scale.
And a lot of things, the city-state model, model has been historically the most successful one because city-states, as an entity, have the right scale, not too small, not too big. Then when we look at the success of Germany, people don't understand Germany. Germany is not a country. Germany is a real federation. Okay. The success of Germany comes from the fact that when you are decentralized, you effectively have a lot of small states. Corporations cannot be very large. You see. And the other virtue of centralization is skin in the game. Let's think about it. Let's take the most decentralized country on this planet ever, which is also the most successful one, and also the most, the one with the most boring people. But don't tell them which country is it?
Switzerland.
All right. Very, very boring people. But, but look at the political system. Very decentralized. And look what it did. They have great skiing. All right. Because they have great snow because of decentralization. Any, maybe there's a connection, but there's high statistical correction. Anyway, so in Switzerland, you, the mayor who makes a decision lives in a community. Let's think about it. Someone in Washington is judged by a spreadsheet. So if you make a mistake, okay, it's a number. But if you make this mistake in Switzerland, guess what? You go to the cafe on Sunday to read the, the, whatever you, and to drink your coffee. You got people coming by to insult you. All right. So you have an emotional skin in the game. You feel, you feel shame. Shame is a great regulator. So decentralization had that effect that decisions are never separated from their consequences. You see, whereas what we have here in this environment is decisions separated from their consequences. Okay. As you go higher, and this is quite central, people don't get it that kept writing an "Antifragile" how the most obvious country to emulate is Switzerland because nobody knows who the president is, and they can name every, probably every president on the planet, but not theirs because they don't know who it is because the real president is a mayor. And another person reported that effectively it works well because there is a scale transformation, what we call scale transformation. People hating one another because every commune hates another commune, resentment, I don't know if you know that, aggregates to something very healthy at the total level. So nothing comes from the top except things that can only be done from the top, like wars or defense or, uh, the train system, for some weird reason, they really think the train system should come from a central state, and nothing else. Okay. So the bulk of your taxes go to the community. So you see your taxes, I'm willing to pay more taxes if I see it tomorrow morning, you know, in the cleaner pavement. Okay.
So, but also the effect it had on Germany is that the French wanted to punish the Germans, and the French had that notion. There was a whole, this whole belief that actually messed up a lot of countries, mostly Latin America, that the central state was a good thing. So the French still had that belief when Germany fell in 1945, and they said, "Okay, we're going to make it a federation to punish them so they don't invade us again." Because, you know, Bismarck unified, invaded, Hitler invades. So they said, and effectively what they did, they gave a huge gift to Germany, particularly that the absence of a central state means no company is going to be very large because you leech. There's a dynamics that you observe between size of corporations. Even Switzerland has a few exceptions, but usually when you have a central state, companies tend to cluster, okay, and being very large, and they leech on a state, and it becomes the same employees going back and forth, stuff like that. Okay. You don't have that in such an environment. So that's one link between decentralization and the other thing.
And so, let me, let me finish and wrap up about what I said. I tried to explain here the virtues of a lot of the ideas that you guys have, but seen from a different prism. Okay. Contact with reality, not being judged by peers, having skin in the game as an engine for stability and, and risk-taking, and valuing those who take risks versus those who don't take risks. Bush, the father, was a prisoner of war, but I don't know if you've heard this guy, what's his name? The guy, the fellow who was head of the CIA and he was a big military person. Everybody respected him. The guy had never seen a battle. What was the name? They called him genius up till, but he was caught because he, he had a mistress and he was doing something funny. He was a CIA male. I forgot his name. Had never seen a battle. So how can you have peace if those who decide on war are never affected by war? They're never killed by war. You cannot have peace under these conditions. They sit in an air-conditioned office. They promote war like Thomas Friedman, who writes for the New York Times. You know, I name names. So he wanted the Iraq war. Iraq war killed all these people. Did it kill him? No. His same office in Washington, you know, and he takes the, he has his commute. He drives, you know, 10 minutes to work, air-conditioned car, air-conditioned office. Very good. And then tens of thousands of people lost their lives, and we lost 7 trillion dollars maybe because of these wars. So this is the problem of separating people from consequences of their actions. And, and decentralization does some of that.
Uh, one more, more thing I wanted to mention about politics is that it's always harder than you think. And, and something about metastatic u [clears throat] bureaucracies and how systems like to sustain themselves, parasitic systems. [sighs] Uh, one British minister called me up after reading, I won't name him, but he called me up after reading "Skin in the Game." And he called me, he said, "Listen, you're wrong on something." I said, "What?" He said, "You think that all these problems come from ministers?" He said, "We have absolutely no control of our ministries. People have been there 30 years, they exert passive resistance. They anonymize their decisions." And people who run Western democracies, even when you think that it's a ministry at the head of someone that came with a government that was elected in some form or another, even then, you think that they would have control. They don't have the time. So the only way we can solve that problem is by reducing these ministries, transferring them, spreading them out, never have a sen because you cannot, even when you elect new people. I mean, Donald Trump has no control of Washington that approved it with the FBI. So you cannot, people on the inside, employees will always run the show. And the corporations that hire these employees, even more. I don't know if you guys know, but Monsanto was writing the documents of the EPA, Environmental Protection Agency. Why? Because the employees of the EPA, their dream is one day to go work for three times their salary for Monsanto. So, you got to be nice to Monsanto because you're underpaid. In their mind, I'm sure they're overpaid, but you think they're underpaid because they can get a job with. Same thing with Boeing. Boeing controls the FAA. [laughter] Okay. Same thing, same story. Okay. So you end up having that cozy relationship between industry and these people. And your head of the agency, you know, appointed by Trump or the next president or anyone else, you have no control. So the solution has to be structural, not, uh, the solution cannot be, uh, you know, done by via politics without something, some deep surgery. You can't just put change of faces and think you're going to solve the problem.
The problem is you don't need good people. You and the last thing sometimes is for good people to do good things. What you need is I'd rather have not good people but a good system. So basically it was self harm by by governmental, you know, government trying to do what they think they can do when in fact you just want them to take a vacation.
So thank you very much. I'm extremely honored to be here. Thank you for inviting me. [applause]