Over the years, Nassim Nicholas Taleb has donned many hats — trader, hedge fund manager, academic, best-selling author. But at heart, the 54-year-old remains a statistician to whom numbers are magic. With his sharp logic and rationale, Taleb has destroyed many popular economic myths in best-selling books such as Black Swan, Fooled By Randomness and Antifragile. A student of risk and uncertainty, Taleb is a distinguished professor of risk engineering at New York University and University of Oxford. In India for The Economic Times Global Business Summit, Taleb spoke toabout Black Swans, celebrating failure and of course Prime Minister Narendra Modi. Edited excerpts:I am very impressed. From a risk perspective, I would urge him to be a little more careful about agricultural technologies that are on test; they have some risks that we do not know about yet. I would urge him to be careful about GMOs (genetically modified organisms). We are not sure effectively, when you look at the numbers, that there are any savings. Let me tell you this, if I was an Indian, I would have voted for him.I know that Saudi Arabia is a very, very fragile country, probably the one that’s most fragile for a lot of reasons. They are more robust to oil revenue to Iran and other countries but not other things. They say oil is x percent of GDP, around 50% but the rest is also linked to oil. It is untenable. You see here in India you do not have governance problems, it is a democracy and that makes you a lot more robust than other countries, definitely more robust than China.Maybe it doesn’t allow you to do as many things as the Chinese can do but Saudi Arabia is a country started by a family based on a mission of some kind of puritan version of Islam, Wahhabi Islam. And two things have happened — the first thing is that they have continued promoting the version of Islam which is completely intolerant compared to other versions of Islam.They have promoted their own version and jihad has been nothing but a spillover of that. There is no difference between ISIS and Wahhabis. This is how they started, the Wahhabis. And beheadings have been a regular affair in Saudi Arabia and they are one order of magnitude ahead of ISIS.The second one is the internal contradiction. Here you have a family that owns a country and I do not know in history of any family that has kept owning a country forever. Can you see how fragile that is?So here you have what between five and 18,000 royals from that family. The king claims to be Wahhabi and then you have his pictures everywhere. So how are things going to blow up? Economically... from inside of the country, probably. People say that they engineered the oil price drop, I don’t believe so. With oil price dropping, they won’t have the revenues to buy their peace.Then the other thing is, go to the toilet in the Emirates — impeccable. Go to a bathroom in Saudi Arabia at the airport, it’s terrible. It’s like they are squeezing every penny out of other countries — the royal family. The religious guys and the royal family are splitting the money. They started building the infrastructure after the uprisings in Arab countries.Then who are they fooling. The country is composed of three parts: one part Shiites, the oil belongs to the Shiites and they treat them as underdogs, the centre of the country is Najd where the royal family is from, and then you have Jeddah (Hejaz), which is a completely different area that was invaded by them. The country is unstable. They have built a wall against Isis, are they trying to make ISIS from leaving. They are in the country. How many of the hijackers from September 11 were Saudis? Nobody is fooled by the Saudis but the Saudis are lobbying their way to stay in the good graces of the West.If America is no longer interested in their oil they would drop them like Shah of Iran. It is not a love relationship, it is a pure business relationship. It is bad policy on part of America to be too close to that kingdom. When I go to Saudi Arabia and then I see India, I tell myself you guys do not have oil, do not have stuff, look how much ahead you are.What do the Arab leaders talk about? Always geopolitics. I attended Prime Minister Modi’s talk. Not one word of geopolitics. So you are not wasting your time on ego building stuff, you are trying to get business done.Yes. When you tell them GMOs are dangerous, they tell you, well, you do not have evidence. I do not have to show you evidence of harm, you just showed me absence of evidence of harm. The difference is very big but people do not get it logically. For risk management, the way we lay out things is that you have the biologists — they do their work, excellent work. On top of the biologist is the statistician. They cannot write a scientific paper without having a statistician say yes, his methodology allows him to make that kind of statements concerning effectiveness or lack of effectiveness.But the statistician does not deal with tail risk. He deals with whether the statement made technically okay. Statistics actually never allow you to make a statement about evidence. They allow you only to make statement to fail to reject at some confidence level. So, this is what people fail to understand. I am a statistician, in statistics what you do not see you don’t make claims. So, I do not tell you well there is nobody in the room why I do not see someone coming out of it, you do not make that same statements with statistics.If I have not seen a Black Swan, I cannot claim that there is no Black Swan. You see the idea. If I have seen a Black Swan, I can say well there is evidence of a Black Swan. So when it comes to harm and risk for new things that do not have a track record, you have a big burden. We do that with medication and when you introduce a medication in United States, you do not tell the FDA you have no evidence of harm. You run it through tests.So it is much more complicated than people think and you need to stay rigorous with risk. And what happened is that a lot of biologists cannot be trusted with statistical matter but at the same time, all the papers are vetted by statisticians.That is why they do not understand that they have to abide by our methodology and I am placing myself in one class of statistics that deal in the tail events.Very simple. If you look at countries around the world, you see that countries that are rich have higher degree of education. What came first? Well, the cause and effect is that you can see that higher education comes afterwards. Now I am not saying that it is a bad thing, I am saying it is more important to focus on tangible real skills than higher education. Higher education invariably leads to a slowdown in risk taking, because you think about your own strategy. If you have a level of education, it is easier to play safe, get a good-level job, or go work for bureaucracy, or work for a large cooperation.Higher education leads to a slowdown in risk taking. Think of what would have happened to the computer industry had Steve Jobs, Bill Gates, and Larry Ellison stayed in school — they are all college dropouts. These people were made to be entrepreneurs. Had someone like Bill Gates stayed at school would have ended up as a manager, or a consultant. So that is my comment on university education.On the other hand, school is not just helpful, it is a condition, it is necessary.Yes, but that is not the point. The point is you cannot forecast anything or everything or you should be relying on forecasting. The point is to build a system that takes into account the fact that we are incapable of forecasting oil prices. That is what you need to take into account. Large deviation in the price of material — whether oil or Swiss Franc or anything — are possible regardless of central banks that can stop something or a country that can produce more of something. We need to know that no forecast from the office of budget management has worked better than random... So the logic in such a situation is to be immune to forecast errors. That is the idea.Forecasting has killed more businesses than anything else. Because when you forecast, it gives you confidence. In fact, it lowers your anxiety for the future and it leads to accumulation of debt and stuff like that. I mean forecasting on part of the IMF, forecasting on the part of everyone, is total incompetence. Now when you are in a situation like that what do you do? You say okay we are going to have to have a structure. If you have low debt, there is little forecasting error. If you have high debt, you cannot. So you have to manoeuvre to have a better sensitivity to forecast error. In that sense, maybe you just forecast to see how your forecast error affects you.Yes, it is imperative to be light on debt. Debt has traditionally never fuelled innovation.Okay but then what happens when you have to pay it back. Let us look in history — I mean that’s another big myth. There are two or three myths in economics that do not seem to hold on practice. The first myth is economies of scale and the second one likewise is debt. Debt makes you more fragile as a corporation, sort of like the GE story. Look at the companies in Silicon Valley we are really proud of — do they have debt? No. They have the opposite of debt, they have equity and they issue equity. Now equity is a good idea because it gives them leeway to negotiate the future.I think large corporation already is a bad thing. So add debt on top of that you end up with a structure that looks displaced. Why do corporations become large, the larger you are, the closer you can be to the state, effectively they are the state. This is what people do not understand in US, whether Democrats or Republican.Democrats want a large powerful state whereas Republicans want large powerful corporations but these corporations become the state. They have lobbyists, who can hijack the government system, someone like Monsanto for example, hijacks the government in the US. You hire regulators alright and then have lobbyists to control politicians and you own the government so that they can do your bidding. This is why large corporations are not good for society. You want a lot of small medium corporations. Small may not be feasible but it is necessary because small becomes large.Small either dies or becomes larger. But the companies that have survived for centuries and some have, all these companies stayed below the medium-size level.Yes, 100%. Simply because a process that doesn’t have a high rate of failure will have a tough time negotiating the uncertain future. Uncertainty is impenetrable in any other way. So you tinker, you have small losses here and there. So you have overall tinkering in a part of economy where a lot of people are trying different things and then some succeed and keep going. Like in California, they have 50,000 companies, may be five-six that surely will end up surviving.Publishers understand that very well. To get a best seller, you do not know what books will turn into best sellers so probably try lot of stuff and you make your money from that big winner. If you present that properly, it would be okay. But at the individual level, people do not like to fail so unless you glorify the failures, which is very easy to do and explain to people what I explained in Antifragile.We never say hey, he is a failure as a soldier — he died, he became a hero. Why don’t we give recognition to entrepreneurs who are really ensuring our future.Central banks have been feeding the market with easy money... like feeding a turkey before Thanksgiving, as you put it. Do you see a Thanksgiving Day for the market?Let me tell you why it is probably necessary to do some kind of easing. It is just like it’s very necessary if you have, I mean God forbid, disease. It is very important to give painkillers, but you never give a patient painkillers without doing something else.Now what do we have in America... we seemed to have recovery. But the median income is unaffected. If you want to see how much this has been subsidising effectively, the asset-holding class, the Fed’s mission is to make rich people richer. So the 1%... look at real estate prices in the upper end compared to a median. The median real estate in New York is down.It is more than enough to remember what happened at previous reversals of policy. I remember exactly 21 years ago, 1994, with harsh winter in America and when (US Federal Reserve ex-chairman Alan) Greenspan has raised rates, what happened? All the assets that had gained over the three and a half years of his loosening previous to that, all the assets had gained.But a lot more people lost money because people leveraged as usual. So it gives you little warning of what may happen when we raise rates. You see it is only over when it is over and any monetary policy can only be judged in its effectiveness when you stop it, not in the middle of it. Banks are getting bigger. We have something endangering us that the formation of small companies is slowing down big time, compared to what it was 10 years ago. So what we need is exactly the opposite of what they have. A little bit favour the small company, favour individuals, favour entrepreneurs and not just treat the large corporations. Large corporations are very dangerous.Exactly. Consultants typically do not know a lot. You have to realise that consultants are not entrepreneurs. I am not consulting, I am a scientist. Consulting is usually narratives put together to sell stuff to clients.Sometimes there maybe something, typically it was packaging things for clients which is exactly the opposite of science. If scale mattered, then mergers will work. Although on paper they have economies of scale. The second thing is if scale mattered, we will be dominated by large companies. Look at the S&P 500, what it was at the end of 2004, and look what it was at the end of 94, 84 and 74.You will be shocked. You will be shocked that large corporations do not tend to stay there a long time. So it tells you that large corporations do not seem to carry on the advantage they have from being large, so there is such a thing as too large. Now GE. I do not consider GE a corporation. It is a hedge fund. Let us not fool ourselves and I am not that sure about their performance.