Principle #7 from "The Ten Principles for a Black Swan Robust Society" by Nassim N. Taleb found in his 2nd ed of "The Black Swan."
"7. Only Ponzi schemes should depend on confidence. Governments should never need to 'restore confidence.'
In a Ponzi scheme (the most famous being the one perpetrated by Bernard Madoff), a person borrows or takes funds from a new investor to repay an existing investor trying to exit the investment.
Cascading rumors are a product of complex systems. Governments cannot stop the rumors. Simply, we need to be in a position to shrug off rumors, be robust to them."
So confidence in the markets is a function of lies and schemes like a Ponzi. But we as investors should be defending ourselves against "rumors" by having redundancy or back-ups in our lives, that is, "be robust to them," rather than running around in a dither.
Moderation comes to minds here. Don't risk money that is needed, that is, cannot afford to lose. Only risk money that can be lost forever without upsetting the household or family. Keep most investments in the conservative zone, that is, the principal is not at risk and the profit is likely small yet steady. Take only 5% or so that can be put into a position for a positive Black Swan. Obviously, the "rich get richer" because their 5% has more zeroes than the rest of us. But if any of us get greedy then we're likely headed for negative Black Swan vulnerability. That's not being robust but rather "going bust."
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