ET GBS 2015: PM Narendra Modi is trying to get business done, says Nassim Nicholas Taleb

NEW DELHI: Nassim Nicholas Taleb questions the prevailing wisdom on everything — from monetary policy to big data. But he put his stamp of approval on Prime Minister Narendra Modi’s vision from schools to administration to economics, although he wasn’t so keen about introducing genetically modified crops to tackle hunger in India.

Modi means business, but he should not get carried away by the promise of plenty by the advocates of agricultural technologies since scientists are yet to prove such crops are harmless, Taleb said.

But apart from that caveat, the Black Swanauthor, who was in the audience when Modi gave his stirring address at the Economic Times Global Business Summit on Friday, was all praise for the prime minister. “If I were an Indian, I would have voted for him,” Taleb, one of the featured speakers at the summit, told ET in an interview “I would urge him to be careful about GMOs (genetically modified organisms) because you may not want to be sorry. We are not sure that, effectively, when you look at the numbers, that there are any big savings, because it may be cosmetic savings.”

Modi, who came to power in May, is shaking up the administration after corruption charges rendered the previous United Progressive Alliance (UPA) government indecisive.

It also put into cold storage decisions on field trials of genetically modified crops. Modi was quick to grant permission selectively for such trials since he believes technology can help resolve hunger.

Some wings of the ruling Bharatiya Janata Party such as the Swadeshi Jagran Manch are opposed to field trials of genetically modified crops.

The prime minister is focused on what needs to be done, Taleb said. “I am very impressed. I attended Prime Minister Modi’s talk. Not one word of geopolitics, so you are not wasting your time on ego-building stuff,” he said. “You are trying to get business done. Listen to any leader, (they) all talk geopolitics.”

Taleb shot to fame as the global credit crisis unfolded with his 2007 book, ‘The Black Swan: The Impact of the Highly Improbable’, on how unforeseen events can have a huge global impact. He warned that the collapse of crude oil prices has the potential to be another event that could snowball into chaos, especially in the biggest oil producer in the Gulf, Saudi Arabia.

That and the continuous printing of money by the central banks in developed nations could lead to hyperinflation. “I know that Saudi Arabia is a very, very fragile country, probably the one that’s the most fragile for a lot of reasons,” said Taleb, who’s of Lebanese origin — members of his family have occupied ministerial positions in that country. “If you look at (Saudi Arabia), it has nothing but oil. And they say oil around 50% (of GDP)... so you know the ripple effect from oil. It has severe internal problems.” Saudi Arabia has so far apparently escaped the kind of social unrest and violence that has been sweeping the Middle East.

The oil-rich country run by the House of Saud has been able to buy peace by spending hundreds of billions of dollars on social welfare. But that spending may be under threat with crude halving in the past few months. “Here you have a family that owns a country,” said Taleb. “And I do not know in history a family that has kept owning a country forever.” Taleb, who is critical of easy monetary policy, believes that there are still plenty of risks in the system and the policy of some central banks to print more money is just a repeat of what was done before the credit crisis. “It is very important to give painkillers,” said Taleb.

“But you never give a patient painkillers without doing something else.” Such “painkillers” may distort economies as they favour only a few.

Zero interest rate regimes have led to asset price increases in a disorderly fashion, leading to just the rich getting richer while the rest haven’t seen much improvement in their welfare.

“We seemed to have recovery, but the median income is unaffected,” said Taleb. “If you want to see that how much this has been subsidising, effectively, the asset-holding class… the Fed’s mission is to make rich people richer.” The financial world is still afflicted with the problems that caused the global credit crisis, he said.

“We have not still cured the problem,” said Taleb. The monetary policy caused the problem in the first place and the same strategy is being used. “That is not quite the way to do things. I mean I have nothing against monetary policy but you have to realise that it has side effects.”

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