 Good day fellow investors. One of my favorites investing authors is Nicholas Nassim Taleb that wrote The Black Swan and Antifragil and Fools by Randomness and other papers. However, he's not an author, he's a trader. So Nicholas Nassim Taleb is a trader that made so much money, enough money, he says fuck you money, in order to allow himself to live a life of leisure, read books and think about the world. The result is that he discusses randomness, which he thinks he sees this world as much more random than we see it from normal statistical Gaussian perspective. He sees as the world as very very fragile and he looks to invest in things that are antifragile, that gain from disorder. So Black Swan investing really is the synthesizing of what he does and he tries to find exposures to potential white swans, positive white swans for you, negative for other people perhaps. You will give you the possibility to invest very little, but have huge exponential returns. So today we're going to discuss his investing strategy. His books are a lot of philosophy, very entertaining philosophy. I recommend the books, I have put the links in the description below. So really read those books, if you haven't, those books will blow your mind. However, in all that philosophy there is little, but there is, technical aspects of investing and today I will share with you how to technically invest for Black Swans. Let me first define what is a Black Swan. A Black Swan is a metaphor for an event that comes as a surprise, but has a huge effect and is later rationalized. For example, the 2008 housing crisis was such an event. Now it is clear why and how it happened, but only a few saw it coming in 2007. A positive Black Swan would be an event that is surprise, but has a huge positive effect. If you would have estimated cryptocurrencies in 2007, they weren't even invented. However, look at their impact now. So that is a positive Black Swan. So Taleb's view about the economy, about the world is that it is much more random than we see the bitcoins, I don't know, marijuana stocks, whatever. Everything moves very, very randomly and with huge extremes, much larger extremes than what we see when we look from our short-term perspective. If you look at the long-term perspective, look at the SAP 500 going up 200%, down 50%, 60%, other stocks, countries exploding, growing, then going down into corruption and so on. So in order, if you want to invest like Taleb, you seize the opportunities gained from Black Swans. The problem is that you cannot know what will happen. So the only way to be exposed to Black Swans is to be prepared, because as said, a Black Swan cannot be predicted, something that you can estimate with certainty but don't know when it will happen. It is a grey swan, also a very good investment strategy. We'll discuss that too. All right, so how to invest for positive or negative Black Swans? The first thing is that Taleb recommends don't trust large-scale harmful projections. So the government, they have to make, give a rosy picture about whatever and they say, okay, in 25 years it will look like this, in 60 years it will look like this. Those projections are usually never right. They can be much, much better than what is projected or much, much worse. So the first thing that Taleb says, don't trust that, but be prepared for everything. Be exposed to the much, much better. But in case, let's say the government cannot pay your pension in 2040, that's not a risk that you have to think, okay, what's the probability of that happening? You have to be prepared for that. If that happens, if you are prepared, everything is okay, because the pain is so big, if that happens, if the government doesn't pay your pension, that you are not allowed not to be prepared. So by preparing yourself to a lot of Black Swans, you are exposed to positive Black Swans. For example, a gray swan, let's say that the SAP 500 goes to 900 points in 2025. I have made a video where I discussed how baby boomers selling academic research has shown how it can go to 900 points. So a price earnings ratio of seven, eight, nine from current earnings. So that's a possibility. However, very unlikely that's a gray swan. So, but you can also invest in order to protect yourselves from that. Nevertheless, that would also be a surprise to the environment and many would call it a Black Swan. So the only way to be exposed to various potential Black Swans is trial and error investing. So let's say there are 15 potential Black Swans, 15 things that can really shake, that can be disrupted and you invest a little bit of your portfolio in all those 15 things that are uncorrelated, crazy, whatever. By doing that, you are doing trial and error investing. If what you can lose is what you have invested, let's say 1% of your portfolio, but what you can gain is 50 times what you have invested. If of the 15 crazy investments you make per year, one makes 50 times what you invested and the others lose everything. So you lose 14% of your portfolio, 1% that you invested becomes 50% of your portfolio as it is 50 times higher. Let's don't leave the mathematics out. 50 times more what you have invested. So the returns you practically have a free beggar of that part of your portfolio in one year. If that happens in 15 years, sometimes you'll get five Black Swans and you get the point of how Nassim Taleb would invest now. Just an example, in the last financial crisis the stock of General Motors went from above 40 towards the end of 2007 to below 1 in 2009. So in 2007 nobody expected GM to go bankrupt, but it happened and it happened fast. Now if I look at the current option chain for January 2020, which means after two years, so if you expect the GM or another blue chip company goes bankrupt in the next two years, you can for example buy put options with a strike price of 23 for let's say 75 cents here. This means that if GM's stock price goes to 1, you make 30 times your money. So 40 times your money, when has that happened? 2007, 2009, 2000, 2002, 1987, 1982 and in every few years we have huge bankruptcies that really shake the world, especially in a recession. So you make 30 times your money. So if you invest 1% of your portfolio each year in something like that and then when a recession comes, you make 30 times that you are perfectly hedge and you cover for all those, let's say you lose 10 years in a row, you cover for all those 10 years of losses. As Talib says, the world is much more random, so the losses are limited, the payout is huge because such events will happen much more often that we might imagine with the normal way of looking at the markets. Talib continues discussing how to invest and he uses a marble strategy. He likes to lift weights, so that's the analogy there. So however, he's saying, okay, invest 85, 90% of your portfolio in something completely safe that will give you the opportunity to invest the 10%, 15% of what's left in extremely aggressive, crazy aggressive investments. So this is the bulk of your portfolio. It can be a real estate, it can be bonds, it can be something that cannot go away and that will allow you to do whatever you want in your life. However, those 10%, 15%, like the Winklevoss brothers invested in Bitcoin, those are the potential explosions that can lead you to great returns. So by having 15 Black Swan bets with 15% of your portfolio, various Black Swan bets wherever can happen and 85% of portfolio in such a marble, the risks are pretty well weighted. However, the returns here are certain, you know what you will get? The returns here are extreme, unlimited, uncertain, but can really make a huge difference in your life. As the world is more random and given what central banks are doing will become even more random, because the more they try to keep stability, the more random, the more risky it becomes. So it's really interesting to see how we can take advantage of future Black Swans, even if we don't see them now. The key according to Taleb is to get extremely aggressive, as speculative and as unreasonable as possible when the downside is little and the upside is limited. Therefore, when you find an opportunity, make sure to seize it. So what is Taleb saying? Look for asymmetry, look for investments where the risk is low and the reward is potentially unlimited. So you have limited risk, unlimited reward. This is a positive asymmetric risk reward investment situation. Looking forward to your comments, try to think out the box and really think about crazy things that can happen in the world, so that we find those 15 Black Swan investments for those that are interested in such an investment crazy speculative aggressive strategy. I'm really looking to your four comments, really please be crazy, crazy, crazy as you have never been in your life. I'll see you in the next video.