A few select parts from the transcript:
Taleb: I think that an oil shock would be very good because we need to be trained to finally give up on these stupid cars. We have so many alternative sources, and people are too lazy. We need to enhance anti-fragility in this area. You can move from wild randomness into mild randomness by creating some. It is like hormesis: You give someone a little bit of poison and they get stronger. Economic life gets stronger not with bailouts, but with bankruptcies.
Evolution works not with bailouts -- there are no bailouts in nature -- but with competition and natural selection. So you need to have some stressors and to use stressors to strengthen the system. We have not been stressed enough about the oil crisis, and it has led to a horrible situation in which the U.S. government is playing a hypocritical role driven by humanitarian forces in Libya, but at the same time supporting the Saudi royal family, essentially one tribe running a place -- even giving its name to it. It is the most unstable place and the most backward of regimes in the world -- all in the name of oil security.
So you realize that you have some schizophrenia as far as how a lot of Western governments are behaving. So we need a little bit of oil shock....
Herring: It requires more than a shock, doesn't it? Because we have had those before.... In fact, the price of oil in real terms was even lower than just after the OPEC increase. So the motives for making substitutions just were not there.
Taleb: I see. But do you think that we will eventually wean ourselves from that nasty dark product from the ground?
Herring: One hopes. But it is hard to see how given the reality of the way we have built our society, with remote suburbs and interstate highways linking everything. We cannot make a very quick substitution out of the petroleum-based economy. But you are absolutely right. It has got to be faced.
Taleb: This is the fragility of having dependence on one source -- one product -- rather than more than one.... It is optimal to use oil visibly. But it is more dangerous. In my new book, I focus on optimization; almost 99 cases out of 100 optimizations make you vulnerable and fragile.
Herring: Yes. That's the darker side of Adam Smith's pin factory. You become more efficient by becoming more specialized, but you also become more vulnerable to some kinds of shocks.