Tim Hortons franchisees should not let 50 years of prosperity blind them to new normal.

February 9, 2015

Black Swan event(s) can happen simultaneously, be compounded, and quickly result in a negative (less than $0 value) to your personal net worth.

Taleb thanksgiving turkey

Franchising is unique in that the rational small business person will continue to throw good money after bad (sunk costs).

The Risk profile has changed.

3G Capital takeover x threatened/actual CCAA x gross margin erosion x organized labour x Fightfor15.org x equity appropriation x personal guaranteed = degradation to a negative gross margin business?

Nassim Taleb‘s Thanksgiving Day Turkey analogy:

Consider a turkey that is fed every day,” Taleb writes. “Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say.

“On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”

Business Insider

Taleb blowup franchisee

Consider that the turkey’s experience may have, rather than no value, a negative value. It learned from observation, as we are all advised to do (hey, after all, this is what is believed to be the scientific method). Its confidence increased as the number of friendly feedings grew, and it felt increasingly safe even though the slaughter was more and more imminent. Consider that the feeling of safety reached its maximum when the risk was at the highest!

Nationalize U.S. banks: Bob Rubin — give our $110 million back

February 3, 2009

rubinInteresting post from James Saft’s Reuters blog.

Saft interviewed Nissam Nicholas Taleb, author of the Black Swan at the World Economic Forum in Davos, Switzerland.

Taleb wants banks nationalized and forced to become a zero risk utility. He argues that they should never be allowed again to take the risks they took that resulted in the current economic crisis:

They rigged the game. We pay them for their profits, there is no clawback so their incentive is to hide the risk they are taking.”

“Which is why eventually as someone who loves free markets,  a total nationalisation of the part of the business that requires insurance and does clearing and payments needs to happen.”

“I am angry with U.S. policy. What we had is exactly the opposite of socialism, they got TARP to pay their bonuses and to take more risk.”

And he goes further. He wants banking executives [see Robert Rubin above] to give the bonuses back that they stripped out just as their banks tanked.

…he wants Bob Rubin, who trousered millions while chairman of Citigroup, to cough up.

“I want Bob Rubin to return his $110 million dollars to the American taxpayer.”

Taleb insists (Facebook: Make Bankers Accountable- A “J’accuse”) that capitalism must produce pain but the powerful should not be exempt from the outcomes of their behaviours.

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