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Nassim Taleb: Ban Tesco bonuses | The Spectator

Great stuff! And a hilarious illustration.
HatTip to Dave Lull.

8) Tesco should be banned from paying bonuses. Here’s his argument: that that bailouts introduce the idea of unspoken government insurance — a very valuable policy, a safety net being provided for free to firms deemed ‘too big to fail’. He argues in Black Swan that bonuses encourage managers to hide risk. So he’d draw up ‘a list of companies that may be bailed out if they fail and you tell them you can no longer give bonuses so managers can hide risk.’ Being added to this list would encourage companies to slim down, so their failure would not lead to a bailout. ‘If Tesco tomorrow was to fail, the government is going to have to do some bail out. So: no bonuses.’ That would force Tesco to cut down in size, he says. I asked if this were an odd policy for a free society. ‘No, it is no longer free. A free society is one in which you are not harming others, but you are harming taxpayers. If I have to bail you out, that is no longer capitalism.’

via Nassim Taleb: Ban Tesco bonuses | The Spectator.

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