In a few words
A treatise on dealing with uncertainty.
Things that gain from disorder.
The kind of book that changes your worldview.
A treatise on dealing with uncertainty.
Things that gain from disorder.
The kind of book that changes your worldview.
"Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk and uncertainty...Let us call [them] antifragile."
Beyond being resilient, Taleb suggests being antifragile - positioned to gain from disorder.
"I'd rather be dumb and antifragile than extremely smart and fragile, anytime." - The first of Taleb's many gripes with theorists.
"Fragility can be measured; risk is not measurable."
"This is the tragedy of modernity: as with neurotically overprotective parents, those trying to help are often hurting us the most."
"At no point in history have so many non-risk-takers, that is, those with no personal exposure, exerted so much control."
"You get pseudo-order when you seek order; you only get a measure of order and control when you embrace randomness."
"Antifragility is not just the antidote to the Black Swan; understanding it makes us less intellectually fearful in accepting the role of these events as necessary for history, technology, knowledge, everything."
"Technology is the result of antifragility, exploited by risk-takers in the form of tinkering and trial and error, with nerd-driven design confined to the backstage."
"Teaching birds how to fly" - Taleb's aphorism for the illusion that the world functions thanks to programmed design, research, bureaucratic funding etc.
"the fragilista (medical, economic, social planning) is one who makes you engage in policies and actions, all artificial, in which the benefits are small and visible, and the side effects potentially severe and invisible."
"Complications lead to multiplicative chains of unanticipated effects...Less is more and usually more effective."
"Steve Jobs figured out that 'you have to work hard to get your thinking clean to make it simple.' "
"The Arabs have an expression for trenchant prose: no skill to understand it, mastery to write it."
"Heuristics are simplified rules of thumb that make things simple and easy to implement. But their main advantage is that the user knows that they are not perfect, just expedient, and is therefore less fooled by their powers. They become dangerous when we forget that."
"Let us call Mithridatization the result of an exposure to a small dose of a substance that, over time, makes one immune to additional, larger quantities of it. It is the sort of approach used in vaccination and allergy medicine. It is not quite antifragility, still at the more modest level of robustness, but we are on our way. And we already have a hint that perhaps being deprived of poison makes us fragile and that the road to robustification starts with a modicum of harm."
"Humans somehow fail to recognize situations outside the contexts in which they usually learn about them."
"moderns try today to create inventions from situations of comfort, safety, and predictability."
"A system that overcompensates is necessarily in overshooting mode, building extra capacity and strength in anticipation of a worse outcome and in response to information about the possibility of a hazard."
"someone earning close to minimum wage, say, a construction worker or a taxi driver, does not overly depend on his reputation and is free to have his own opinions. He would be merely robust compared to the artist, who is antifragile. A midlevel bank employee with a mortgage would be fragile to the extreme. In fact he would be completely a prisoner of the value system that invites him to be corrupt to the core—because of his dependence on the annual vacation in Barbados."
The human body benefits from stressors up to a certain point.
News is suspect because in a complex world, it's hard to determine the cause of things. News has a constant supply of causes of things.
Acute over chronic stressors.
Another example of a side effect of trying to reduce volatility and variation - Taleb is frustrated by the number of children on antidepressants today.
Learning a language is best achieved through situational difficulty, the stress of stumbling from error to error trying to express what you want to say. Not merely through textbooks and exercises in verb conjugation.
"Every plane crash makes the next one less likely. The same can't be said for economic crashes."
Local, but not global, overconfidence.
Taleb contrasts artisans and corporate employees.
"This is the central illusion in life: that randomness is risky, that it is a bad thing—and that eliminating randomness is done by eliminating randomness...avoidance of small mistakes makes the large ones more severe"
Bottom-up variations - political volatility that takes place within a municipality.
"A cluster of municipalities with charming provincial enmities, their own internal fights, and people out to get one another aggregates to a quite benign and stable state."
Having to encounter someone on a daily basis forces you to consider how you treat them. People become abstracted on a larger scale.
Small states in the aggregate are more antifragile than a larger nation state.
The principal of subsidiarity: "things should be handled by the smallest possible unit that can manage them with efficacy."
Volatility vs. Time:
Mediocristan
Learn to think in second steps, chains of consequences and side effects.
It's hard to sell "look what I avoided for you" over "look what I did for you".
After the occurrence of an event the chief question should be - "Why did we build something so fragile to these types of events?"
Popper's criterion for democratic systems: "we cannot afford to rely on the rationalistic elimination of greed and other human defects that fragilize society...the more intelligent (and practical) action is to make the world greed-proof, or even hopefully make society benefit from the greed and other perceived defects of the human race."
Warren Buffet's apocryphal statement that he tries to invest in businesses that are "so wonderful an idiot could run them. Because sooner or later one will".
nihil perditi - "I lost nothing"
The asymmetry of success - you now have more to lose than to gain and loses hurt more than commensurate gains feel good. This is fragility.
Seneca went through mental exercises to write off possessions, an insurance contract against losses.
Taleb's Barbell Strategy:
"I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas (robust to negative Black Swans) and taking a lot of small risks in others (open to positive Black Swans), hence achieving antifragility. That is extreme risk aversion on one side and extreme risk loving on the other, rather than just the “medium” or the beastly “moderate” risk attitude that in fact is a sucker game (because medium risks can be subjected to huge measurement errors). But the barbell also results, because of its construction, in the reduction of downside risk—the elimination of the risk of ruin."
90% cash (protected from inflation) + 10% maximally risk securities > 100% in medium risk securities. Consider the possibility of total ruin from miscomputation of risks.
Antifragility = Paranoia + Aggressiveness
Antifragility = Maximally Safe + Maximally Speculative
Nero Tulip hanging around with janitors and scholars, never middlebrows.
Taleb avoids the risk of ruin and terminal injury. Outside of these he takes all manner of professional and personal risks.
Taleb's exercise regimen involves going for the maximum weight he can lift, then nothing. Supplemented with long walks.
"In social policy, it consists in protecting the very weak and letting the strong do their job, rather than helping the middle class to consolidate its privileges, thus blocking evolution and bringing all manner of economic problems that tend to hurt the poor the most."
"Like Britain in the Industrial Revolution, America’s asset is, simply, risk taking and the use of optionality, this remarkable ability to engage in rational forms of trial and error, with no comparative shame in failing, starting again, and repeating failure. In modern Japan, by contrast, shame comes with failure, which causes people to hide risks under the rug, financial or nuclear, making small benefits while sitting on dynamite, an attitude that strangely contrasts with their traditional respect for fallen heroes and the so-called nobility of failure."
Taleb is invite to a party on a Saturday evening where he had no other fixed plans. He has the option, not the obligation to attend it. The cost to go is negligible but there may be a big upside if he meets someone interesting. (Grant Dever - "the costs of showing up are known and fixed. The potential upside is unlimited:")
Living in a rent controlled apartment is an option. Prices increase? You're protected. Prices decrease? You can move to an apartment with a better deal or buy an apartment with lower monthly mortgage payments. That's an asymmetry.
“f*** you money”—a sum large enough to get most, if not all, of the advantages of wealth (the most important one being independence and the ability to only occupy your mind with matters that interest you)"
Taleb gives a nod to Kevin Kelly's 10,000 True Fans: "Authors, artists, and even philosophers are much better off having a very small number of fanatics behind them than a large number of people who appreciate their work."
Optionality is a substitute for intelligence
If you have optionality, you don't have to be right often. All you need it to:
'tinkering' - Taleb's term for trial and error which presents small errors and large gains. This positive asymmetry is technically called convexity.
"in business, people pay for the option when it is identified and mapped in a contract, so explicit options tend to be expensive to purchase, much like insurance contracts. They are often overhyped. But because of the domain dependence of our minds, we don’t recognize it in other places, where these options tend to remain underpriced or not priced at all."
Life is Long Gamma
Long = Benefits from / Short = Hurt by
Gamma = nonlinearity of options
Thus, long gamma = benefits from volatility and variability
Taleb's gripe with economists is what he calls the "ludic fallacy" - mistaking the randomness of life for the well tractable one of casinos.
Taleb recounts the story of a treasure hunter who's investors don't understand that a "bad" quarter without any finds is not distressing. Its information: "By some mental domain dependence, people can spend money on, say, office furniture and not call it a “loss,” rather an investment, but would treat cost of search as “loss.”
"Let me stop to issue rules based on the chapter so far. (i) Look for optionality; in fact, rank things according to optionality, (ii) preferably with open-ended, not closed-ended, payoffs; (iii) Do not invest in business plans but in people, so look for someone capable of changing six or seven times over his career, or more (an idea that is part of the modus operandi of the venture capitalist Marc Andreessen); one gets immunity from the backfit narratives of the business plan by investing in people. It is simply more robust to do so; (iv) Make sure you are barbelled, whatever that means in your business."
An antifragile (barbell) education: "It was a barbell—play it safe at school and read on your own, have zero expectation from school".