image1 image2 image3

PRODUCT.|PHILOSOPHY.|LIFE.

Absorbing barriers

Absorbing barriers, are points that once you reach them, there is no future activity (or past activity). For instance, the big bang is an absorbing barrier, as there is no way to know what was before the big bang based on everything that we know about what came after. For whatever version of the Universe existed before that, it reached an absorbing barrier.

Here is Nassim Taleb describing absorbing barriers:
"An absorbing barrier is a point that you reach beyond which you can’t continue. You stop. So, as Warren Buffett keeps saying, in order to make money, you must first survive. It’s not like an option. It’s a condition. So, once you hit that point, you are done. You are finished. And that applies in the financial world to what we call financial ruin."
In the current scenario, some businesses (and many people) are likely to hit an absorbing barrier. They will reach a point (bankruptcy / lack of cash) beyond which they simply cannot continue.

What's most important in times of a crisis is having cash on hand to tide us over, so that we do not hit an absorbing barrier. So that we are beaten and bruised, but are not dead. So that we live to fight another day.

Despite many people comparing the cash handouts being given by several governments to affected people to the concept of a universal basic income, they are vastly different.

While one is done in peace time to cover essentials and raise the standard of living of those at the bottom and provide them dignity, another is done to help prevent people from hitting an absorbing barrier.

And the latter, I'm fully in support of, even if it means future government debt and all the consequences that come with it.

Share this:

CONVERSATION