Where is the safe haven really located? | Conversation with Economist Zhu Ning

Source: CITIC Press Corporation
This article is a condensed version from the podcast “Hedging Not Profiting”

Tariff fluctuations, geopolitical conflicts, shadow banking collapses, AI disrupting traditional industries—
A year ago, these events were small-probability “tail risks”; now, they have become the Damocles sword hanging over every ordinary person.

Carrying these pressing questions of the era, host Jeff of the podcast “Hedging Not Profiting” and Professor Zhu Ning, Vice Dean of Shanghai Jiao Tong University Shanghai Advanced Institute of Finance and author of “Rigid Bubbles,” engaged in an in-depth conversation.
They used Nassim Nicholas Taleb’s classic works “The Black Swan” and “Antifragile” as intellectual coordinates, aiming to sketch a cognitive blueprint and survival strategies for turbulent times.

We Are No Longer in the “Average Stain” Era

In Taleb’s context, “Average Stain” refers to data like height and weight—individuals cannot significantly influence the overall.
“Extreme Stain,” on the other hand, emphasizes “winner-takes-all”: putting Elon Musk’s hundreds of billions into a sample of ordinary Shanghai residents, and the per capita wealth instantly jumps by an order of magnitude.
In this domain, seemingly rare “black swans” are the true rulers, even determining the course of history.

Professor Zhu Ning points out that three major waves of the era are making this “extreme stain” omnipresent.

First, the deep resonance of globalization.
In the Age of Discovery (16th-17th centuries), a plague might only affect a city; in 2020, COVID-19 swept the globe in two months.
Today, a blockade of the Strait of Hormuz can trigger chain reactions in global energy and food supply chains within days.
Globalization makes vulnerabilities propagate faster and more fiercely than ever before.

Second, the explosive compound interest of technology.
Average human lifespan has extended from less than 40 years in 1900 to over 70 today, forcing more people to leverage risk for financial support in later life.
The AI revolution, while causing large-scale layoffs of “screwdriver” workers, hires top researchers at sky-high salaries, further intensifying the winner-takes-all landscape.

Third, the high-frequency oscillations of political order.
A leader’s governing style is reshaping the global financial, economic, and trade order in unprecedented ways.

Professor Zhu Ning, in his book “Rigid Bubbles,” has long warned: under implicit government guarantees, people treat risky assets as safe assets.
Once sentiment shifts, exposed risks can be deadly.

You Are Not a Turkey, But You Live Like One

Why do humans, after repeated upheavals, still keep falling into traps when facing risks?

In “The Black Swan,” Taleb tells a brutally cruel metaphor: a caged turkey, fed and cared for gently over 1,000 days, develops immense confidence in the future.
But on the 1,001st day—Thanksgiving—it is slaughtered.

Professor Zhu Ning points out in the podcast that behind this “turkey” is a deep-rooted human “confirmation bias” and “narrative fallacy,” and the deeper reason is:
“Human brain evolution is far too slow to keep up with the complexity of modern society.”

First, herd instinct.
On the ancient African savannah, not following the herd often meant death; the genes of outsiders had long been eliminated by natural selection.
Jeff bluntly explains: “It’s in our genes to herd. Because in ancient times, if you wanted to hunt an elephant, extreme stain didn’t matter to you.”
Humans are naturally more willing to go with the “average stain” and not proactively consider extreme events that could change their fate.

Second, the mismatch of fast and slow thinking systems.
Kahneman’s research shows that human thought involves “fast” and “slow” systems, and most of the time, we rely on “fast” thinking—intuition, experience, and “everyone does it.”
These biases are not born for modern society but are embedded in our genes from billions of years of evolution for species survival.

Third, survivor bias and silent evidence.
During WWII, the British Royal Air Force analyzed the bullet holes on returning aircraft and decided to reinforce the wings and tail.
A statistician then pointed out: “You’re looking at the wrong parts. The planes hit in these areas are still flying back; the ones hit in the cockpit and fuel tanks never return.”

To avoid foolishly passing the first 1,000 days like a turkey, we need to recognize two realities:

First, the world is extremely complex, and our understanding is very limited—if even long-term capital management firms with Nobel laureates and top Wall Street traders blow up, why should ordinary people predict future rises and falls accurately?

Second, always be alert that your “positions” are distorting your judgment—use Taleb’s words: make extreme assumptions without mercy:
If something terrible happens, can I survive?

Expert Predictions Are Less Reliable Than Monkey Darts?

If even our brains systematically deceive us, is relying on “expert predictions” even more unreliable?

“We economists are not good at predicting; we are good at explaining,” Zhu Ning jokes in the podcast,
“and we are best at explaining why our predictions are always wrong.”
Jeff adds a harsher fact: tests on Wall Street analysts show their prediction accuracy is about as good as chimpanzees throwing darts, sometimes even worse.

Taleb’s own attitude is even more radical. He highly admires philosopher Karl Popper—Popper’s core idea is:
“All supposed facts can be overturned or changed overnight.”
This is the philosophical foundation of Taleb’s thinking system.

The most compelling evidence comes from the Long-Term Capital Management (LTCM) case.
This firm, composed of Nobel laureates, former Fed officials, and top Wall Street traders, confidently claimed:
“According to our risk control models, the chance of losing 50% of assets in a month is one in a million.”
Yet, a year later, the firm went bankrupt.

So, if expert predictions are so unreliable, why does this industry still exist?

Zhu Ning offers a thought-provoking answer:
The process of logical thinking still has value; the direction of prediction matters more than precision.
The Club of Rome’s “Limits to Growth” (1970s) predicted disasters that did not materialize as expected, but it spurred global environmental awareness and sustainable development efforts.

“Big research remains important because it points everyone in a general direction,” Zhu Ning says,
“but you must never think your forecast is correct.”

How Can Ordinary People Build an “Antifragile Barbell”?

Since predictions are doomed and black swans are constant companions, what should ordinary people do?

Taleb’s answers in “The Black Swan” and “Antifragile,” distilled by Jeff and Professor Zhu Ning into two words—“redundancy.”

The relationship between these two books is summarized by Jeff as a clear framework:
“Black Swan” is “defense”—the core is survival, avoiding losses, and not getting caught;
“Antifragile” is “offense”—benefiting from adversity and growing through volatility.

In a nutshell:
“The Black Swan” teaches you “how not to be knocked down,”
“Antifragile” teaches you “how to bounce higher after being knocked down.”
A core strategy throughout both books is the “barbell strategy”—discard the comfortable middle ground and allocate all assets at both ends of the barbell.

How to protect the conservative end of the barbell?
Embrace “boredom,” refuse to lose money.

Better to give up high returns than to risk principal loss in any cycle.
He quotes Buffett’s two risk control maxims:
“Never lose money,”
“And always remember the first.”

Taleb also said more vividly:
“I spend the most time thinking about what will kill me, and then I spend the second most time thinking about how to avoid those places.”
Indeed, Taleb himself practices this strategy—he regularly buys out-of-the-money options, “buying insurance” at low cost, and profits from black swans when they arrive, as in the 1987 “Black Monday” and the 2008 financial crisis.

So, how to protect the aggressive end of the barbell?
The answer: be the 1% of extreme stain.

The conservative side ensures “survival,”
while the aggressive side uses small capital to seek huge or even excess returns, profiting from chaos when black swans strike.

It’s crucial to note an extremely important boundary condition—this is the most overlooked critical perspective in this podcast.

Zhu Ning emphasizes:
“I have a slight difference in opinion with Taleb: he is already financially free, so he can allocate assets as he imagines. When he gets low returns or buys insurance contracts, he has the money to do so. Not every novice has this luxury.”

Jeff adds:
“Taleb himself is a former options trader, very familiar with derivatives and tools for preventing extreme events. And in developed markets, such tools are more available. But in the A-share market, there are limited short-selling tools.”

In other words, Taleb’s strategy is more of an ideological guide than a directly replicable “homework.”
For ordinary people, a more pragmatic approach is:
Make a mental shift—not from conservative to reckless suddenly, but gradually open your thresholds and explore new things.

Jeff shares a vivid counterexample to emphasize “liquidity”:
“I have a client who bought 700k yuan of ETFs, only to find he bought into the top ten shareholders of that ETF. The fund only has a total of 100 million yuan, so his 700k yuan made him the ninth-largest shareholder. When he wants to sell, he might find no counterpart.”

Perhaps a relatively universal, low-cost entry method is to buy diversified broad-market ETFs—keeping pace with the market and effectively avoiding individual stock pitfalls.
Choose funds with larger scale and liquidity, full licensing, high ratings, and comprehensive ETF layouts.

These seemingly “boring” details are often the key to surviving storms intact.

Epilogue: Don’t Use Yesterday’s Map to Navigate Tomorrow’s Road

At the end of the conversation, Professor Zhu Ning summarizes the core ideas of “The Black Swan” into three levels:

Cognitive—recognize the world’s complexity and your own limited understanding;
Action—leave yourself redundancy, adopt the barbell strategy;
Macro—policy makers should avoid encouraging leverage or resource over-concentration among the populace.

For ordinary asset holders, the insights from this dialogue can be summarized into four points:

1. Reassess your “certainty.”
   Anything you think “impossible” could become reality tomorrow.
   When you start believing “this time is different,” beware—this is often the most dangerous signal.

2. Abandon “all-in” thinking.
   The essence of the barbell strategy is to ensure survival in any extreme scenario: debt not exceeding repayment capacity, assets not concentrated in a single asset, and not relying on just one skill or industry.

3. Learn to embrace “boredom.”
   In the era of extreme stain, not losing money is a victory in itself.
   Those “boring” safe assets are the true havens in storms.

4. Keep ammunition for offense.
   The other side of black swans is opportunity.
   When others panic, those prepared can profit from chaos.

Finally, Jeff concludes with a succinct statement:
“The world is full of unpredictable, destructive risks. Don’t be overconfident, and never expose yourself to deadly tail risks.”

In a world where black swans have become the new normal, the greatest danger is not risk itself, but that you are still navigating with yesterday’s map for tomorrow.