Book notes for 'Antifragile' by Nassim Taleb
Book notes for 'Antifragile' by Nassim Taleb
Taleb hits the same points from many different angles, the central point of the book is simple, but he reinforces it and makes us believe it by constantly returning to it in this way.
As usual after reading one of his books, I found myself looking at things using this new framework after finishing the book.
He suggests that many of the things he discusses are all but ignored by the rest of the world. It is hard to know if this had changed because of the book, since the book is not new, but many of the ideas were not new to me. I am not sure how much he exagerates how extreme his view actually is.
Two passages in the book stuck out due to being wrong:
"For those readers who wonder about the difference between Buddhism and Stoicism, I have a simple answer. A Stoic is a Buddhist with attitude, one who says “fxxx you” to fate." (Taleb)
This is exactly the opposite of what stoic authors say, the entire philosophy is about accepting fate. This is discussed by all the stoics throughout their work, but I happened to be reading Seneca in parallel to this book. He is pithy as usual, and offers us this quote from Cicero
"For Fate, the willing leads, the unwilling drags along" (Cicero)
Let us speak and live like that, Let fate find us ready and eager. Here is your noble spirit -- the one which has put itself in the hands of fate; on the other side we have the puny degenerate spirit which struggles, (Seneca - Letter CVII)"
The other passage that surprised me (barely important to the rest of text, but how did these things get into the book?)
"One may make others aware of the existence of a product, say a new belly dancing belt, but I wonder why people don’t realize that, by definition, what is being marketed is necessarily inferior, otherwise it would not be advertised" (Taleb)
What? Superious products frequently need to be marketed, exactly so that people know they are superior.
I am nickpicking, but loved the book.
Wind extinguishes a candle and energizes fire. Likewise with randomness, uncertainty, chaos: you want to use them, not hide from them. You want to be the fire and wish for the wind. This summarizes this author’s nonmeek attitude to randomness and uncertainty.
Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture,…
By grasping the mechanisms of antifragility we can build a systematic and broad guide to nonpredictive decision making under uncertainty in business, politics, medicine, and life in general—anywhere the unknown preponderates, any situation in which there is randomness, unpredictability, opacity, or incomplete understanding of things.
It is far easier to figure out if something is fragile than to predict the occurrence of an event that may harm it.
This provides a solution to what I’ve called the Black Swan problem—the impossibility of calculating the risks of consequential rare events and predicting their occurrence. Sensitivity to harm from volatility is tractable, more so than forecasting the event that would cause the harm.
In every domain or area of application, we propose rules for moving from the fragile toward the antifragile, through reduction of fragility or harnessing antifragility. And we can almost always detect antifragility (and fragility) using a simple test of asymmetry: anything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile.
Crucially, if antifragility is the property of all those natural (and complex) systems that have survived, depriving these systems of volatility, randomness, and stressors will harm them. They will weaken, die, or blow up. We have been fragilizing the economy, our health, political life, education, almost everything … by suppressing randomness and volatility. Just as spending a month in bed
> Financial system bailouts, forest fires, etc.
We are witnessing the rise of a new class of inverse heroes, that is, bureaucrats, bankers, Davos-attending members of the I.A.N.D. (International Association of Name Droppers), and academics with too much power and no real downside and/or accountability. They game the system while citizens pay the price. At no point in history have so many non-risk-takers, that is, those with no personal exposure, exerted so much control.
Complex systems are full of interdependencies—hard to detect—and nonlinear responses. “Nonlinear” means that when you double the dose of, say, a medication, or when you double the number of employees in a factory, you don’t get twice the initial effect, but rather a lot more or a lot less. Two weekends in Philadelphia are not twice as pleasant as a single one—I’ve tried. When the response is plotted on a graph, it does not show as a straight line (“linear”), rather as a curve. In such environment, simple causal associations are misplaced; it is hard to see how things work by looking at single parts.
Man-made complex systems tend to develop cascades and runaway chains of reactions that decrease, even eliminate, predictability and cause outsized events. So the modern world may be increasing in technological knowledge, but, paradoxically, it is making things a lot more unpredictable. Now for reasons that have to do with the increase of the artificial, the move away from ancestral and natural models, and the loss in robustness owing to complications in the design of everything, the role of Black Swans in increasing. Further, we are victims to a new disease, called in this book neomania, that makes us build Black Swan–vulnerable systems—“progress.”
An annoying aspect of the Black Swan problem—in fact the central, and largely missed, point—is that the odds of rare events are simply not computable. We know a lot less about hundred-year floods than five-year floods—model error swells when it comes to small probabilities. The rarer the event, the less tractable, and the less we know about how frequent its occurrence—yet the rarer the event, the more confident these “scientists” involved in predicting, modeling, and using PowerPoint in conferences with equations in multicolor background have become.
It is of great help that Mother Nature—thanks to its antifragility—is the best expert at rare events, and the best manager of Black Swans; in its billions of years it succeeded in getting here without much command-and-control instruction from an Ivy League–educated director nominated by a search committee. 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.
you can state with a lot more confidence that an object or a structure is more fragile than another should a certain event happen. You can easily tell that your grandmother is more fragile to abrupt changes in temperature than you, that some military dictatorship is more fragile than Switzerland should political change happen,
The fragilista falls for the Soviet-Harvard delusion, the (unscientific) overestimation of the reach of scientific knowledge. Because of such delusion, he is what is called a naive rationalist, a rationalizer, or sometimes just a rationalist, in the sense that he believes that the reasons behind things are automatically accessible to him. And let us not confuse rationalizing with rational—the two are almost always exact opposites.
In short, 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. There is the medical fragilista who overintervenes in denying the body’s natural ability to heal and gives you medications with potentially very severe side effects; the policy fragilista (the interventionist social planner) who mistakes the economy for a washing machine that continuously needs fixing (by him) and blows it up; the psychiatric fragilista who medicates children to “improve” their intellectual and emotional life;
We didn’t get where we are thanks to the sissy notion of resilience. And, what’s worse, we didn’t get where we are today thanks to policy makers—but thanks to the appetite for risks and errors of a certain class of people we need to encourage, protect, and respect.
> Sort of utilitarian argument for libertarianism
Further, everything that does not like volatility does not like stressors, harm, chaos, events, disorder, “unforeseen” consequences, uncertainty, and, critically, time. And antifragility flows—sort of—from this explicit definition of fragility. It likes volatility et al. It also likes time. And there is a powerful and helpful link to nonlinearity: everything nonlinear in response is either fragile or antifragile to a certain source of randomness.
> vs. Linear response possibly robust
To accord with the practitioner’s ethos, the rule in this book is as follows: I eat my own cooking. I have only written, in every line I have composed in my professional life, about things I have done, and the risks I have recommended that others take or avoid were risks I have been taking or avoiding myself. I will be the first to be hurt if I am wrong. When I warned about the fragility of the banking system in The Black Swan, I was betting on its collapse (particularly when my message went unheeded); otherwise I felt it would not have been ethical to write about it.
in writing, I feel corrupt and unethical if I have to look up a subject in a library as part of the writing itself. This acts as a filter—it is the only filter. If the subject is not interesting enough for me to look it up independently, for my own curiosity or purposes, and I have not done so before, then I should not be writing about it at all, period. It does not mean that libraries (physical and virtual) are not acceptable; it means that they should not be the source of any idea. Students pay to write essays on topics for which they have to derive knowledge from a library as a self-enhancement exercise; a professional who is compensated to write and is taken seriously by others should use a more potent filter. Only distilled ideas, ones that sit in us for a long time, are acceptable—and those that come from reality. It is time to revive the not well-known philosophical notion of doxastic commitment, a class of beliefs that go beyond talk, and to which we are committed enough to take personal risks.
Further, many writers and scholars speak in private, say, after half a bottle of wine, differently from the way they do in print. Their writing is certifiably fake, fake. And many of the problems of society come from the argument “other people are doing it.”
Compromising is condoning. The only modern dictum I follow is one by George Santayana: A man is morally free when … he judges the world, and judges other men, with uncompromising sincerity. This is not just an aim but an obligation.
I write about probability with my entire soul and my entire experiences in the risk-taking business; I write with my scars, hence my thought is inseparable from autobiography. The personal essay form is ideal for the topic of incertitude.
> Inspiring, makes you want to have skin in the game yourself.
Recall that the fragile wants tranquility, the antifragile grows from disorder, and the robust doesn’t care too much. The reader is invited to navigate the Triad to see how the ideas of the book apply across domains. Simply, in a given subject, when you discuss an item or a policy, the task is to find in which category of the Triad one should put it and what to do in order to improve its condition. For example: the centralized nation-state is on the far left of the Triad, squarely in the fragile category, and a decentralized system of city-states on the far right, in the antifragile one.
If you want to become antifragile, put yourself in the situation “loves mistakes”—to the right of “hates mistakes”—by making these numerous and small in harm. We will call this process and approach the “barbell” strategy
Note that fragile and antifragile here are relative terms, not quite absolute properties: one item to the right of the Triad is more antifragile than another to the left. For instance, artisans are more antifragile than small businesses, but a rock star will be more antifragile than any artisan. Debt always puts you on the left, fragilizes economic systems. And things are antifragile up to a certain level of stress. Your body benefits from some amount of mishandling, but up to a point—it would not benefit too much from being thrown down from the top of the Tower of Babel.
The fragile is the package that would be at best unharmed, the robust would be at best and at worst unharmed. And the opposite of fragile is therefore what is at worst unharmed.
This idea that systems may need some stress and agitation has been missed by those who grasp it in one area and not in another. So we can now also see the domain dependence of our minds, a “domain” being an area or category of activity. Some people can understand an idea in one domain, say, medicine, and fail to recognize it in another, say, socioeconomic life. Or they get it in the classroom, but not in the more complicated texture of the street. Humans somehow fail to recognize situations outside the contexts in which they usually learn about them.
This paradox of attention has been a little bit investigated: there is empirical evidence of the effect of “disfluency.” Mental effort moves us into higher gear, activating more vigorous and more analytical brain machinery.* The management guru Peter Drucker and the psychoanalyst Jacques Lacan, two persons who mesmerized the crowds the most in their respective areas, were the antithesis of the polished-swanky speaker or the consonant-trained television announcer. The same or a similar mechanism of overcompensation makes us concentrate better in the presence of a modicum of background random noise, as if the act of countering such noise helps us hone our mental focus. Consider this remarkable ability humans have to filter out noise at happy hour and distinguish the signal among so many other loud conversations.
Indeed, our bodies discover probabilities in a very sophisticated manner and assess risks much better than our intellects do. To take one example, risk management professionals look in the past for information on the so-called worst-case scenario and use it to estimate future risks—this method is called “stress testing.” They take the worst historical recession, the worst war, the worst historical move in interest rates, or the worst point in unemployment as an exact estimate for the worst future outcome. But they never notice the following inconsistency: this so-called worst-case event, when it happened, exceeded the worst case at the time.
If humans fight the last war, nature fights the next one. Your body is more imaginative about the future than you are. Consider how people train in weightlifting: the body overshoots in response to exposures and overprepares (up to the point of biological limit, of course). This is how bodies get stronger.
Those who understand bacterial resistance in the biological domain completely fail to grasp the dictum by Seneca in De clemencia about the inverse effect of punishments. He wrote: “Repeated punishment, while it crushes the hatred of a few, stirs the hatred of all … just as trees that have been trimmed throw out again countless branches.” For revolutions feed on repression, growing heads faster and faster as one literally cuts a few off by killing demonstrators. There is an Irish revolutionary song that encapsulates the effect: The higher you build your barricades, the stronger we become. The crowds, at some point, mutate, blinded by anger and a sense of outrage, fueled by the heroism of a few willing to sacrifice their lives for the cause (although they don’t quite see it as sacrifice) and hungry for the privilege to become martyrs. It is that political movements and rebellions can be highly antifragile, and the sucker game is to try to repress them using brute force rather than manipulate them, give in, or find more astute ruses, as Heracles did with Hydra.
We all learn early on in life that books and ideas are antifragile and get nourishment from attacks—to borrow from the Roman emperor Marcus Aurelius (one of the doer-Stoic authors), “fire feeds on obstacles.” There is the attraction of banned books, their antifragility to interdicts. The first book I read, during my childhood, of Graham Greene’s was The Power and the Glory, selected for no other reason than its having been put on the Index (that is, banned) by the Vatican. Likewise, as a teenager, I gorged on the books of the American expatriate Henry Miller—his major book sold a million copies in one year thanks to having been banned in twenty-three states. The same with Madame Bovary or Lady Chatterley’s Lover.
Some jobs and professions are fragile to reputational harm, something that in the age of the Internet cannot possibly be controlled—these jobs aren’t worth having. You do not want to “control” your reputation; you won’t be able to do it by controlling information flow. Instead, focus on altering your exposure, say, by putting yourself in a position impervious to reputational damage. Or even put yourself in a situation to benefit from the antifragility of information. In that sense, a writer is antifragile, but we will see later most modernistic professions are usually not.
So, suddenly remembering that I was an author, I presented Luca with the following thought experiment: if I beat up the economist publicly, what would happen to me (other than a publicized trial causing great interest in the new notions of fragilita and antifragilita)? You know, this economist had what is called a tête à baffe, a face that invites you to slap it, just like a cannoli invites you to bite into it. Luca thought for a second … well, it’s not like he would like me to do it, but, you know, it wouldn’t hurt book sales. Nothing I can do as an author that makes it to the front page of Corriere della Sera would be detrimental for my book. Almost no scandal would hurt an artist or writer.* Now let’s say I were a midlevel executive employee of some corporation listed on the London Stock Exchange, the sort who never take chances by dressing down, always wearing a suit and tie (even on the beach). What would happen to me if I attack the fragilista? My firing and arrest record would plague me forever. I would be the total victim of informational antifragility. But 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 bold conjecture made here is that everything that has life in it is to some extent antifragile (but not the reverse). It looks like the secret of life is antifragility. Typically, the natural—the biological—is both antifragile and fragile, depending on the source (and the range) of variation. A human body can benefit from stressors (to get stronger), but only to a point.
senescence might not be avoidable, and should not be avoided (it would contradict the logic of life, as we will see in the next chapter); maladjustment is avoidable. Much of aging comes from a misunderstanding of the effect of comfort—a disease of civilization: make life longer and longer, while people are more and more sick. In a natural environment, people die without aging—or after a very short period of aging. For instance, some markers, such as blood pressure, that tend to worsen over time for moderns do not change over the life of hunter-gatherers until the very end. And this artificial aging comes from stifling internal antifragility.
outstanding health and excellent posture. Our antifragilities have conditions. The frequency of stressors matters a bit. Humans tend to do better with acute than with chronic stressors, particularly when the former are followed by ample time for recovery, which allows the stressors to do their jobs as messengers. For instance, having an intense emotional shock from seeing a snake coming out of my keyboard or a vampire entering my room, followed by a period of soothing safety (with chamomile tea and baroque music) long enough for me to regain control of my emotions, would be beneficial for my health, provided of course that I manage to overcome the snake or vampire after an arduous, hopefully heroic fight and have a picture taken next to the dead predator. Such a stressor would be certainly better than the mild but continuous stress of a boss, mortgage, tax problems, guilt over procrastinating with one’s tax return, exam pressures, chores, emails to answer, forms to complete, daily commutes—things that make you feel trapped in life. In other words, the pressures brought about by civilization.
What a tourist is in relation to an adventurer, or a flâneur, touristification is to life; it consists in converting activities, and not just travel, into the equivalent of a script like those followed by actors. We will see how touristification castrates systems and organisms that like uncertainty by sucking randomness out of them to the last drop—while providing them with the illusion of benefit. The guilty parties are the education system, planning the funding of teleological scientific research, the French baccalaureate, gym machines, etc.
There exist the kind of people for whom life is some kind of project. After talking to them, you stop feeling good for a few hours; life starts tasting like food cooked without salt. I, a thrill-seeking human, have a b***t detector that seems to match my boredom detector, as if we were equipped with a naturalistic filter, dullness-aversion. Ancestral life had no homework, no boss, no civil servants, no academic grades, no conversation with the dean, no consultant with an MBA, no table of procedure, no application form, no trip to New Jersey, no grammatical stickler, no conversation with someone boring you: all life was random stimuli and nothing, good or bad, ever felt like work.* Dangerous, yes, but boring, never. Finally, an environment with variability (hence randomness) does not expose us to chronic stress injury, unlike human-designed systems. If you walk on uneven, not man-made terrain, no two steps will ever be identical—compare that to the randomness-free gym machine offering the exact opposite: forcing you into endless repetitions of the very same movement. Much of modern life is preventable chronic stress injury.
> Scrum is this, trying to make every ticket, worker, sprint as identical as possible.
the antifragility of some comes necessarily at the expense of the fragility of others. In a system, the sacrifices of some units—fragile units, that is, or people—are often necessary for the well-being of other units or the whole. The fragility of every startup is necessary for the economy to be antifragile, and that’s what makes, among other things, entrepreneurship work: the fragility of individual entrepreneurs and their necessarily high failure rate.
Restaurants are fragile; they compete with each other, but the collective of local restaurants is antifragile for that very reason. Had restaurants been individually robust, hence immortal, the overall business would be either stagnant or weak, and would deliver nothing better than cafeteria food—and I mean Soviet-style cafeteria food.
In fact, the most interesting aspect of evolution is that it only works because of its antifragility; it is in love with stressors, randomness, uncertainty, and disorder—while individual organisms are relatively fragile, the gene pool takes advantage of shocks to enhance its fitness.
> See Cambrian explosion, etc.
Consider this in terms of economic and institutional life. If nature ran the economy, it would not continuously bail out its living members to make them live forever. Nor would it have permanent administrations and forecasting departments that try to outsmart the future—it would not let the scam artists of the United States Office of Management and Budget make such mistakes of epistemic arrogance.
Say an organism produces ten offspring. If the environment is perfectly stable, all ten will be able to reproduce. But if there is instability, pushing aside five of these descendants (likely to be on average weaker than their surviving siblings), then those that evolution considers (on balance) the better ones will reproduce, making the gene undergo some fitness. Likewise, if there is variability among the offspring, thanks to occasional random spontaneous mutation, a sort of copying mistake in the genetic code, then the best should reproduce, increasing the fitness of the species. So evolution benefits from randomness by two different routes: randomness in the mutations, and randomness in the environment—both act in a similar way to cause changes in the traits of the surviving next generations.
Had the Titanic not had that famous accident, as fatal as it was, we would have kept building larger and larger ocean liners and the next disaster would have been even more tragic. So the people who perished were sacrificed for the greater good; they unarguably saved more lives than were lost. The story of the Titanic illustrates the difference between gains for the system and harm to some of its individual parts.
Every plane crash brings us closer to safety, improves the system, and makes the next flight safer—those who perish contribute to the overall safety of others. Swiss flight 111, TWA flight 800, and Air France flight 447 allowed the improvement of the system. But these systems learn because they are antifragile and set up to exploit small errors; the same cannot be said of economic crashes, since the economic system is not antifragile the way it is presently built. Why? There are hundreds of thousands of plane flights every year, and a crash in one plane does not involve others, so errors remain confined and highly epistemic—whereas globalized economic systems operate as one: errors spread and compound.
my characterization of a loser is someone who, after making a mistake, doesn’t introspect, doesn’t exploit it, feels embarrassed and defensive rather than enriched with a new piece of information, and tries to explain why he made the mistake rather than moving on. These types often consider themselves the “victims” of some large plot, a bad boss, or bad weather.
He who has never sinned is less reliable than he who has only sinned once. And someone who has made plenty of errors—though never the same error more than once—is more reliable than someone who has never made any.
The problem is graver than you think. People go to business school to learn how to do well while ensuring their survival—but what the economy, as a collective, wants them to do is to not survive, rather to take a lot, a lot of imprudent risks themselves and be blinded by the odds. Their respective industries improve from failure to failure. Natural and naturelike systems want some overconfidence on the part of individual economic agents, i.e., the overestimation of their chances of success and underestimation of the risks of failure in their businesses, provided their failure does not impact others. In other words, they want local, but not global, overconfidence.
We saw that the restaurant business is wonderfully efficient precisely because restaurants, being vulnerable, go bankrupt every minute, and entrepreneurs ignore such a possibility, as they think that they will beat the odds. In other words, some class of rash, even suicidal, risk taking is healthy for the economy—under the condition that not all people take the same risks and that these risks remain small and localized.
Sometimes we see people having survived trials and imagine, given that the surviving population is sturdier than the original one, that these trials are good for them. In other words, the trial can just be a ruthless exam that kills those who fail. All we may be witnessing is that transfer of fragility (rather, antifragility) from the individual to the system that I discussed earlier. Let me present it in a different way. The surviving cohort, clearly, is stronger than the initial one—but not quite the individuals, since the weaker ones died. Someone paid a price for the system to improve.
I detest the ruthlessness of selection, the inexorable disloyalty of Mother Nature. I detest the notion of improvement thanks to harm to others. As a humanist, I stand against the antifragility of systems at the expense of individuals, for if you follow the reasoning, this makes us humans individually irrelevant. The great benefit of the Enlightenment has been to bring the individual to the fore, with his rights, his freedom, his independence, his “pursuit of happiness” (whatever that “happiness” means), and, most of all, his privacy. In spite of its denial of antifragility, the Enlightenment and the political systems that emerged from it freed us (somewhat) from the domination of society, the tribe, and the family that had prevailed throughout history.
My dream—the solution—is that we would have a National Entrepreneur Day, with the following message: Most of you will fail, disrespected, impoverished, but we are grateful for the risks you are taking and the sacrifices you are making for the sake of the economic growth of the planet and pulling others out of poverty. You are at the source of our antifragility. Our nation thanks you.
Man-made smoothing of randomness produces the equivalent of John’s income: smooth, steady, but fragile. Such income is more vulnerable to large shocks that can make it go to zero (plus some unemployment benefits if he resides in one of the few welfare states). Natural randomness presents itself more like George’s income: smaller role for very large shocks, but daily variability. Further, such variability helps improve the system (hence the antifragility). A week with declining earnings for a taxi driver or a prostitute provides information concerning the environment and intimates the need to find a new part of town where clients hang around; a month or so without earnings drives them to revise their skills.
Further, for a self-employed person, a small (nonterminal) mistake is information, valuable information, one that directs him in his adaptive approach; for someone employed like John, a mistake is something that goes into his permanent record, filed in the personnel department.
Do these politicians biding their time before (they hope) returning to power notice such absence of government, accept that they are in Switzerland because of such absence of government, and adapt their ideas on nation-states and political systems accordingly? Not at all.
this is a dictatorship from the bottom, not from the top, but a dictatorship nevertheless. But this bottom-up form of dictatorship provides protection against the romanticism of utopias, since no big ideas can be generated in such an unintellectual atmosphere—it suffices to spend some time in cafés in the old section of Geneva, particularly on a Sunday afternoon, to understand that the process is highly unintellectual, devoid of any sense of the grandiose, even downright puny
Someone you see in church Sunday morning would feel uncomfortable for his mistakes—and more responsible for them. On the small, local scale, his body and biological response would direct him to avoid causing harm to others. On a large scale, others are abstract items; given the lack of social contact with the people concerned, the civil servant’s brain leads rather than his emotions—with numbers, spreadsheets, statistics, more spreadsheets, and theories.
Figure 3 illustrates how antifragile systems are hurt when they are deprived of their natural variations (mostly thanks to naive intervention). Beyond municipal noise, the same logic applies to: the child who, after spending time in a sterilized environment, is left out in the open; a system with dictated political stability from the top; the effects of price controls; the advantages of size for a corporation; etc. We switch from a system that produces steady but controllable volatility (Mediocristan), closer to the statistical “bell curve” (from the benign family of the Gaussian or Normal Distribution), into one that is highly unpredictable and moves mostly by jumps, called “fat tails.” Fat tails—a synonym for Extremistan—mean that remote events, those in what is called the “tails,” play a disproportionate role. One (first graph) is volatile; it fluctuates but does not sink. The other (second graph) sinks without significant fluctuations outside of episodes of turmoil. In the long run the second system will be far more volatile—but volatility comes in lumps. When we constrain the first system we tend to get the second outcome.
A turkey is fed for a thousand days by a butcher; every day confirms to its staff of analysts that butchers love turkeys “with increased statistical confidence.” The butcher will keep feeding the turkey until a few days before Thanksgiving. Then comes that day when it is really not a very good idea to be a turkey. So with the butcher surprising it, the turkey will have a revision of belief—right when its confidence in the statement that the butcher loves turkeys is maximal and “it is very quiet” and soothingly predictable in the life of the turkey. This example builds on an adaptation of a metaphor by Bertrand Russell. The key here is that such a surprise will be a Black Swan event; but just for the turkey, not for the butcher. We can also see from the turkey story the mother of all harmful mistakes: mistaking absence of evidence (of harm) for evidence of absence, a mistake that we will see tends to prevail in intellectual circles and one that is grounded in the social sciences.
Nor did the point escape Machiavelli. Jean-Jacques Rousseau wrote, citing him: “It seemed, wrote Machiavelli, that in the midst of murders and civil wars, our republic became stronger [and] its citizens infused with virtues. … A little bit of agitation gives resources to souls and what makes the species prosper isn’t peace, but freedom.”
In reality, the Ottomans did these vassals and suzerains a favor by preventing them from involvement in warfare—this took away militaristic temptations and helped them thrive; regardless of how iniquitous the system seemed to be on the surface, it allowed locals to focus on commerce rather than war. It protected them from themselves. This is the argument brought by David Hume in his History of England in favor of small states, as large states get tempted by warfare.
Some people have fallen for the naive turkey-style belief that the world is getting safer and safer, and of course they naively attribute it to the holy “state” (though bottom-up Switzerland has about the lowest rate of violence of any place on the planet). It is exactly like saying that nuclear bombs are safer because they explode less often. The world is subjected to fewer and fewer acts of violence, while wars have the potential to be more criminal. We were very close to the mother of all catastrophes in the 1960s when the United States was about to pull the nuclear trigger on the Soviet Union. Very close. When we look at risks in Extremistan, we don’t look at evidence (evidence comes too late), we look at potential damage: never has the world been more prone to more damage; never.* It is hard to explain to naive data-driven people that risk is in the future, not in the past.
Consider the method of annealing in metallurgy, a technique used to make metal stronger and more homogeneous. It involves the heating and controlled cooling of a material, to increase the size of the crystals and reduce their defects. Just as with Buridan’s donkey, the heat causes the atoms to become unstuck from their initial positions and wander randomly through states of higher energy; the cooling gives them more chances of finding new, better configurations.
One of the methods, called sortes virgilianae (fate as decided by the epic poet Virgil), involved opening Virgil’s Aeneid at random and interpreting the line that presented itself as direction for the course of action. You should use such method for every sticky business decision. I will repeat until I get hoarse: the ancients evolved hidden and sophisticated ways and tricks to exploit randomness. For instance, I actually practice such randomizing heuristic in restaurants. Given the lengthening and complication of menus, subjecting me to what psychologists call the tyranny of choice, with the stinging feeling after my decision that I should have ordered something else, I blindly and systematically duplicate the selection by the most overweight male at the table; and when no such person is present, I randomly pick from the menu without reading the name of the item, under the peace of mind that Baal made the choice for me.
Time for American policy makers to understand that the more they intervene in other countries for the sake of stability, the more they bring instability (except for emergency-room-style cases). Or perhaps time to reduce the role of policy makers in policy affairs. One of life’s packages: no stability without volatility.
The story of the nation-state is that of the concentration and magnification of human errors. Modernity starts with the state monopoly on violence, and ends with the state’s monopoly on fiscal irresponsibility.
The famously mistreated Austro-Hungarian doctor Ignaz Semmelweis had observed that more women died giving birth in hospitals than giving birth on the street. He called the establishment doctors a bunch of criminals—which they were: the doctors who kept killing patients could not accept his facts or act on them since he “had no theory” for his observations. Semmelweis entered a state of depression, helpless to stop what he saw as murders, disgusted at the attitude of the establishment. He ended up in an asylum, where he died, ironically, from the same hospital fever he had been warning against.
medical error still currently kills between three times (as accepted by doctors) and ten times as many people as car accidents in the United States. It is generally accepted that harm from doctors—not including risks from hospital germs—accounts for more deaths than any single cancer. The methodology used by the medical establishment for decision making is still innocent of proper risk-management principles, but medicine is getting better. We have to worry about the incitation to overtreatment on the part of pharmaceutical companies, lobbies, and special interest groups and the production of harm that is not immediately salient and not accounted for as an “error.”
Iatrogenics is compounded by the “agency problem” or “principal-agent problem,” which emerges when one party (the agent) has personal interests that are divorced from those of the one using his services (the principal). An agency problem, for instance, is present with the stockbroker and medical doctor, whose ultimate interest is their own checking account, not your financial and medical health, respectively, and who give you advice that is geared to benefit themselves. Or with politicians working on their career.
For a theory is a very dangerous thing to have. And of course one can rigorously do science without it. What scientists call phenomenology is the observation of an empirical regularity without a visible theory for it. In the Triad, I put theories in the fragile category, phenomenology in the robust one. Theories are superfragile; they come and go, then come and go, then come and go again; phenomenologies stay, and I can’t believe people don’t realize that phenomenology is “robust” and usable, and theories, while overhyped, are unreliable for decision making—outside physics. Physics is privileged; it is the exception, which makes its imitation by other disciplines similar to attempts to make a whale fly like an eagle. Errors in physics get smaller from theory to theory—so saying “Newton was wrong” is attention grabbing, good for lurid science journalism, but ultimately mendacious; it would be far more honest to say “Newton’s theory is imprecise in some specific cases.” Predictions made by Newtonian mechanics are of astonishing precision except for items traveling close to the speed of light, something you don’t expect to do on your next vacation. We also read nonsense-with-headlines to the effect that Einstein was “wrong” about that speed of light—and the tools used to prove him wrong are of such complication and such precision that they’ve demonstrated how inconsequential such a point will be for you and me in the near and far future.
On the other hand, social science seems to diverge from theory to theory. During the cold war, the University of Chicago was promoting laissez-faire theories, while the University of Moscow taught the exact opposite—but their respective physics departments were in convergence, if not total agreement. This is the reason I put social science theories in the left column of the Triad, as something superfragile for real-world decisions and unusable for risk analyses. The very designation “theory” is even upsetting. In social science we should call these constructs “chimeras” rather than theories.
An ethical problem arises when someone is put in charge. Greenspan’s actions were harmful, but even if he knew that, it would have taken a bit of heroic courage to justify inaction in a democracy where the incentive is to always promise a better outcome than the other guy, regardless of the actual, delayed cost.
As we saw with the overzealous editor, over-intervention comes with under-intervention. Indeed, as in medicine, we tend to over-intervene in areas with minimal benefits (and large risks) while under-intervening in areas in which intervention is necessary, like emergencies. So the message here is in favor of staunch intervention in some areas, such as ecology or to limit the economic distortions and moral hazard caused by large corporations.
What should we control? As a rule, intervening to limit size (of companies, airports, or sources of pollution), concentration, and speed are beneficial in reducing Black Swan risks. These actions may be devoid of iatrogenics—but it is hard to get governments to limit the size of government.
> Small local governments that can only meet once a week? ..Sounds lovely.
Few understand that procrastination is our natural defense, letting things take care of themselves and exercise their antifragility; it results from some ecological or naturalistic wisdom, and is not always bad—at an existential level, it is my body rebelling against its entrapment. It is my soul fighting the Procrustean bed of modernity.
reliance on data causes severe side effects—data is now plentiful thanks to connectivity, and the proportion of spuriousness in the data increases as one gets more immersed in it. A very rarely discussed property of data: it is toxic in large quantities—even in moderate quantities.
> garden of forking paths
Consider the iatrogenics of newspapers. They need to fill their pages every day with a set of news items—particularly those news items also dealt with by other newspapers. But to do things right, they ought to learn to keep silent in the absence of news of significance. Newspapers should be of two-line length on some days, two hundred pages on others—in proportion with the intensity of the signal. But of course they want to make money and need to sell us junk food. And junk food is iatrogenic.
To conclude, the best way to mitigate interventionism is to ration the supply of information, as naturalistically as possible. This is hard to accept in the age of the Internet. It has been very hard for me to explain that the more data you get, the less you know what’s going on, and the more iatrogenics you will cause. People are still under the illusion that “science” means more data.
The final episode of the upheaval in Egypt was unpredictable for all observers, especially those involved. As such, blaming the CIA or some other intelligence agency is as injudicious as funding it to forecast such events. Governments are wasting billions of dollars on attempting to predict events that are produced by interdependent systems and are therefore not statistically understandable at the individual level.
I ran to the podium and told the audience that the next time someone in a suit and tie gave them projections for some dates in the future, they should ask him to show what he had projected in the past—in this case, what he had been forecasting for 2008 and 2009 (the crisis years) two to five years earlier, in 2004, 2005, 2006, and 2007. They would then verify that Highly Venerable Kato-san and his colleagues are, to put it mildly, not very good at this predictionizing business.
To see how redundancy is a nonpredictive, or rather a less predictive, mode of action, let us use the argument of Chapter 2: if you have extra cash in the bank (in addition to stockpiles of tradable goods such as cans of Spam and hummus and gold bars in the basement), you don’t need to know with precision which event will cause potential difficulties.* It could be a war, a revolution, an earthquake, a recession, an epidemic, a terrorist attack, the secession of the state of New Jersey, anything—you do not need to predict much, unlike those who are in the opposite situation, namely, in debt. Those, because of their fragility, need to predict with more, a lot more, accuracy.
Also, as to the naive type of utopianism, that is, blindness to history, we cannot afford to rely on the rationalistic elimination of greed and other human defects that fragilize society. Humanity has been trying to do so for thousands of years and humans remain the same, plus or minus bad teeth, so the last thing we need is even more dangerous moralizers (those who look in a permanent state of gastrointestinal distress). Rather, 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.
> Capitalism vs communism
It is obvious to anyone before drinking time that we can put a man, a family, a village with a mini town hall on the moon, and predict the trajectory of planets or the most minute effect in quantum physics, yet governments with equally sophisticated models cannot forecast revolutions, crises, budget deficits, climate change. Or even the closing prices of the stock market a few hours from now. There are two different domains, one in which we can predict (to some extent), the other—the Black Swan domain—in which we should only let turkeys and turkified people operate. And the demarcation is as visible (to non-turkeys) as the one between the cat and the washing machine. Social, economic, and cultural life lie in the Black Swan domain, physical life much less so.
As for Fat Tony, he had different allergies: the empty suit, which we speculate is someone who has a command of all the superfluous and administrative details of things but misses the essential (and isn’t even aware of it), so his conversation becomes mere chitchat around the point, never getting to the central idea.
Curiosity is antifragile, like an addiction, and is magnified by attempts to satisfy it—books have a secret mission and ability to multiply, as everyone who has wall-to-wall bookshelves knows well.
The curiosity came from having had two brushes with death, the first from a cancer and the second from a helicopter crash that alerted him to both the fragility of technology and the self-healing powers of the human body. So he spent a bit of his time reading textbooks (not papers—textbooks) in medicine, or professional texts.
> See Eliezer's suggestion that one should read textbooks, since that contains the most useful and generally accepted knowledge of a subject. Most results in papers released this year will not be mentioned in the textbooks in ten years.
But to follow ethics to their natural conclusion, Nero should have felt just as proud—and satisfied—had the envelope contained statements of losses. A man is honorable in proportion to the personal risks he takes for his opinion—in other words, the amount of downside he is exposed to. To sum him up, Nero believed in erudition, aesthetics, and risk taking—little else.
My point is that wisdom in decision making is vastly more important—not just practically, but philosophically—than knowledge. Other philosophers, when they did things, came to practice from theory. Aristotle, when he attempted to provide practical advice, and a few decades earlier Plato, with his ideas of the state and advice to rulers, particularly the ruler of Syracuse, were either ineffectual or caused debacles. To become a successful philosopher king, it is much better to start as a king than as a philosopher,
In the end, when he took his own life, he followed excellently and in a dignified way the principles he preached in his writings. So while the Harvard economist is only read by people trying to write papers, who in turn are read by people trying to write papers, and will be (hopefully) swallowed by the inexorable bxxxt detector of history, Lucius Annaeus, known as Seneca the Younger, is still read by real people two millennia after his passing. Let us get into his message.
We introduced Seneca as the wealthiest person in the Roman Empire. His fortune was three hundred million denarii (for a sense of its equivalence, at about the same period in time, Judas got thirty denarii, the equivalent of a month’s salary, to betray Jesus).
Success brings an asymmetry: you now have a lot more to lose than to gain. You are hence fragile.
Seneca’s practical method to counter such fragility was to go through mental exercises to write off possessions, so when losses occurred he would not feel the sting—a way to wrest one’s freedom from circumstances. It is similar to buying an insurance contract against losses. For instance, Seneca often started his journeys with almost the same belongings he would have if he were shipwrecked, which included a blanket to sleep on the ground, as inns were sparse at the time (though I need to qualify, to set things in the context of the day, that he had accompanying him “only one or two slaves”). To show how eminently modern this is, I will next reveal how I’ve applied this brand of Stoicism to wrest back psychological control of the randomness of life. I have always hated employment and the associated dependence on someone else’s arbitrary opinion, particularly when much of what’s done inside large corporations violates my sense of ethics. So I have, accordingly, except for eight years, been self-employed. But, before that, for my last job, I wrote my resignation letter before starting the new position, locked it up in a drawer, and felt free while I was there.
when I was a trader, a profession rife with a high dose of randomness, with continuous psychological harm that drills deep into one’s soul, I would go through the mental exercise of assuming every morning that the worst possible thing had actually happened—the rest of the day would be a bonus. Actually the method of mentally adjusting “to the worst” had advantages way beyond the therapeutic, as it made me take a certain class of risks for which the worst case is clear and unambiguous, with limited and known downside. It is hard to stick to a good discipline of mental write-off when things are going well, yet that’s when one needs the discipline the most.
The concept I used earlier is more to lose from adversity. If you have more to lose than to benefit from events of fate, there is an asymmetry, and not a good one. And such asymmetry is universal. Let us see how it brings us to fragility. Consider the package in Chapter 1: it does not like to be shaken, and it hates the members of the disorder family—hence it is fragile (very fragile because it has absolutely nothing to gain, hence it is very asymmetric). The antifragile package has more to gain than to lose from being shaken. Simple test: if I have “nothing to lose” then it is all gain and I am antifragile.
The first step toward antifragility consists in first decreasing downside, rather than increasing upside; that is, by lowering exposure to negative Black Swans and letting natural antifragility work by itself. Mitigating fragility is not an option but a requirement. It may sound obvious but the point seems to be missed. For fragility is very punishing, like a terminal disease. A package doesn’t break under adverse conditions, then manage to fix itself when proper conditions are restored. Fragility has a ratchetlike property, the irreversibility of damage. What matters is the route taken, the order of events, not just the destination—what scientists call a path-dependent property.
As to growth in GDP (gross domestic product), it can be obtained very easily by loading future generations with debt—and the future economy may collapse upon the need to repay such debt. GDP growth, like cholesterol, seems to be a Procrustean bed reduction that has been used to game systems. So just as, for a plane that has a high risk of crashing, the notion of “speed” is irrelevant, since we know it may not get to its destination, economic growth with fragilities is not to be called growth, something that has not yet been understood by governments.
If you put 90 percent of your funds in boring cash (assuming you are protected from inflation) or something called a “numeraire repository of value,” and 10 percent in very risky, maximally risky, securities, you cannot possibly lose more than 10 percent, while you are exposed to massive upside. Someone with 100 percent in so-called “medium” risk securities has a risk of total ruin from the miscomputation of risks. This barbell technique remedies the problem that risks of rare events are incomputable and fragile to estimation error; here the financial barbell has a maximum known loss. For antifragility is the combination aggressiveness plus paranoia—clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself. We saw Seneca’s asymmetry: more upside than downside can come simply from the reduction of extreme downside (emotional harm) rather than improving things in the middle. A barbell can be any dual strategy composed of extremes, without the corruption of the middle—somehow they all result in favorable asymmetries.
Also recall from Chapter 2 that overcompensation, to work, requires some harm and stressors as tools of discovery. It means letting children play a little bit, not much more than a little bit, with fire and learn from injuries, for the sake of their own future safety. It also means letting people experience some, not too much, stress, to wake them up a bit. But, at the same time, they need to be protected from high danger—ignore small dangers, invest your energy in protecting them from consequential harm. And only consequential harm. This can visibly be translated into social policy, health care, and many more matters.
> Catastrophic safety net only, minimal social security, and actual health insurance, not free health care (ie. only pays out for catastrophic health issues, not for GP visits)
Or, if I have to work, I find it preferable (and less painful) to work intensely for very short hours, then do nothing for the rest of the time (assuming doing nothing is really doing nothing), until I recover completely and look forward to a repetition, rather than being subjected to the tedium of Japanese style low-intensity interminable office hours with sleep deprivation. Main course and dessert are separate.
> Running: easy or hard, avoid the middle
More barbells. Do crazy things (break furniture once in a while), like the Greeks during the later stages of a drinking symposium, and stay “rational” in larger decisions. Trashy gossip magazines and classics or sophisticated works; never middlebrow stuff. Talk to either undergraduate students, cab drivers, and gardeners or the highest caliber scholars; never to middling-but-career-conscious academics. If you dislike someone, leave him alone or eliminate him; don’t attack him verbally.
The legendary investor Ray Dalio has a rule for someone making speculative bets: “Make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil.” Such a rule gets one straight to the barbell.
The error of thinking you know exactly where you are going and assuming that you know today what your preferences will be tomorrow has an associated one. It is the illusion of thinking that others, too, know where they are going, and that they would tell you what they want if you just asked them. Never ask people what they want, or where they want to go, or where they think they should go, or, worse, what they think they will desire tomorrow. The strength of the computer entrepreneur Steve Jobs was precisely in distrusting market research and focus groups—those based on asking people what they want—and following his own imagination. His modus was that people don’t know what they want until you provide them with it.
The key to our message about this upside-downside asymmetry is that he did not need to understand too much the messages from the stars. Simply, he had a contract that is the archetype of what an asymmetry is, perhaps the only explicit asymmetry you can find in its purest form. It is an option, “the right but not the obligation” for the buyer and, of course, “the obligation but not the right” for the other party, called the seller. Thales had the right—but not the obligation—to use the olive presses in case there would be a surge in demand; the other party had the obligation, not the right. Thales paid a small price for that privilege, with a limited loss and large possible outcome. That was the very first option on record. The option is an agent of antifragility.
Centrally, we just don’t need to know what’s going on when we buy cheaply—when we have the asymmetry working for us. But this property goes beyond buying cheaply: we do not need to understand things when we have some edge. And the edge from optionality is in the larger payoff when you are right, which makes it unnecessary to be right too often.
> Taking advantage of betting offers, do not need to understand to benefit from the edge given. Controlled downside vs high upside (acca offers, etc.)
Second example: assume you are the official tenant of a rent-controlled apartment in New York City, with, of course, wall-to-wall bookshelves. You have the option of staying in it as long as you wish, but no obligation to do so. Should you decide to move to Ulan Bator, Mongolia, and start a new life there, you can simply notify the landlord a certain number of days in advance, and thank you goodbye. Otherwise, the landlord is obligated to let you live there somewhat permanently, at a predictable rent. Should rents in town increase enormously, and real estate experience a bubble-like explosion, you are largely protected. On the other hand, should rents collapse, you can easily switch apartments and reduce your monthly payments—or even buy a new apartment and get a mortgage with lower monthly payments. So consider the asymmetry. You benefit from lower rents, but are not hurt by higher ones. How? Because here again, you have an option, not an obligation. In a way, uncertainty increases the worth of such privilege.
One property of the option: it does not care about the average outcome, only the favorable ones (since the downside doesn’t count beyond a certain point). 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. The number of persons who dislike the work don’t count—there is no such thing as the opposite of buying your book, or the equivalent of losing points in a soccer game, and this absence of negative domain for book sales provides the author with a measure of optionality.
Let us call trial and error tinkering when it presents small errors and large gains. Convexity, a more precise description of such positive asymmetry, will be explained in a bit of depth in Chapter 18.† The graph in Figure 7 best illustrates the idea present in California, and voiced by Steve Jobs at a famous speech: “Stay hungry, stay foolish.” He probably meant “Be crazy but retain the rationality of choosing the upper bound when you see it.” Any trial and error can be seen as the expression of an option, so long as one is capable of identifying a favorable result and exploiting it,
> Lean: try things and measure outcomes
> Productivity hormesis, one is more productive when busy, faced with constant change and having to adapt
he did not understand nonlinearities and the fact that the optionality came from some asymmetry! Domain dependence: he missed it in places where the textbook did not point to the asymmetry—he understood optionality mathematically, but not really outside the equation. He did not think of trial and error as options. He did not think of model error as negative options. And, thirty years later, little has changed in the understanding of the asymmetries by many who, ironically, teach the subject of options.
“Life is long gamma.” (To repeat, in the jargon, “long” means “benefits from” and “short” “hurt by,” and “gamma” is a name for the nonlinearity of options, so “long gamma” means “benefits from volatility and variability.” Anthony even had as his mail address “@longgamma.com.”)
Can you imagine that it took close to six thousand years between the invention of the wheel (by, we assume, the Mesopotamians) and this brilliant implementation (by some luggage maker in a drab industrial suburb)? And billions of hours spent by travelers like myself schlepping luggage through corridors full of rude customs officers. Worse, this took place three decades or so after we put a man on the moon. And consider all this sophistication used in sending someone into space, and its totally negligible impact on my life, and compare it to this lactic acid in my arms, pain in my lower back, soreness in the palms of my hands, and sense of helplessness in front of a long corridor. Indeed, though extremely consequential, we are talking about something trivial: a very simple technology. But the technology is only trivial retrospectively—not prospectively. All those brilliant minds, usually disheveled and rumpled, who go to faraway conferences to discuss Gödel, Shmodel, Riemann’s Conjecture, quarks, shmarks, had to carry their suitcases through airport terminals, without thinking about applying their brain to such an insignificant transportation problem.
Trial and error has one overriding value people fail to understand: it is not really random, rather, thanks to optionality, it requires some rationality. One needs to be intelligent in recognizing the favorable outcome and knowing what to discard. And one needs to be rational in not making trial and error completely random. If you are looking for your misplaced wallet in your living room, in a trial and error mode, you exercise rationality by not looking in the same place twice. In many pursuits, every trial, every failure provides additional information, each more valuable than the previous one—if you know what does not work, or where the wallet is not located.
Stemm’s method is as follows. He does an extensive analysis of the general area where the ship could be. That data is synthesized into a map drawn with squares of probability. A search area is then designed, taking into account that they must have certainty that the shipwreck is not in a specific area before moving on to a lower probability area. It looks random but it is not. It is the equivalent of looking for a treasure in your house: every search has incrementally a higher probability of yielding a result, but only if you can be certain that the area you have searched does not hold the treasure.
Nobody discusses the possibility of the birds’ not needing lectures—and nobody has any incentive to look at the number of birds that fly without such help from the great scientific establishment. The problem is that what I wrote above looks ridiculous, but a change of domain makes it look reasonable. Clearly, we never think that it is thanks to ornithologists that birds learn to fly—and if some people do hold such a belief, it would be hard for them to convince the birds. But why is it that when we anthropomorphize and replace “birds” with “men,” the idea that people learn to do things thanks to lectures becomes plausible? When it comes to human agency, matters suddenly become confusing to us. So the illusion grows and grows, with government funding, tax dollars, swelling (and self-feeding) bureaucracies in Washington all devoted to helping birds fly better. Problems occur when people start cutting such funding—with a spate of accusations of killing birds by not helping them fly.
> Case against education?
The lecturing-birds-how-to-fly effect is an example of epiphenomenal belief: we see a high degree of academic research in countries that are wealthy and developed, leading us to think uncritically that research is the generator of wealth. In an epiphenomenon, you don’t usually observe A without observing B with it, so you are likely to think that A causes B, or that B causes A, depending on the cultural framework or what seems plausible to the local journalist.
Trollope’s novel The Way We Live Now, published close to a century and a half ago, shows the exact same complaint of a resurgence of greed and con operators that I heard in 1988 with cries over of the “greed decade,” or in 2008 with denunciations of the “greed of capitalism.” With astonishing regularity, greed is seen as something (a) new and (b) curable. A Procrustean bed approach; we cannot change humans as easily as we can build greed-proof systems, and nobody thinks of simple solutions.
Now let’s look at evidence of the direction of the causal arrow, that is, whether it is true that lecture-driven knowledge leads to prosperity. Serious empirical investigation (largely thanks to one Lant Pritchet, then a World Bank economist) shows no evidence that raising the general level of education raises income at the level of a country. But we know the opposite is true, that wealth leads to the rise of education—not an optical illusion.
Take the following potent and less-is-more-style argument by the rogue economist Ha-Joon Chang. In 1960 Taiwan had a much lower literacy rate than the Philippines and half the income per person; today Taiwan has ten times the income. At the same time, Korea had a much lower literacy rate than Argentina (which had one of the highest in the world) and about one-fifth the income per person; today it has three times as much. Further, over the same period, sub-Saharan Africa saw markedly increasing literacy rates, accompanied with a decrease in their standard of living. We can multiply the examples (Pritchet’s study is quite thorough), but I wonder why people don’t realize the simple truism, that is, the fooled by randomness effect: mistaking the merely associative for the causal, that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking. Epiphenomenon here again. (The error in reasoning is a bit from wishful thinking, because education is considered “good”; I wonder why people don’t make the epiphenomenal association between the wealth of a country and something “bad,” say, decadence, and infer that decadence, or some other disease of wealth like a high suicide rate, also generates wealth.)
I am not saying that for an individual, education is useless: it builds helpful credentials for one’s own career—but such effect washes out at the country level. Education stabilizes the income of families across generations. A merchant makes money, then his children go to the Sorbonne, they become doctors and magistrates. The family retains wealth because the diplomas allow members to remain in the middle class long after the ancestral wealth is depleted. But these effects don’t count for countries.
> Positional goods
Accordingly, I am not saying that knowledge is not important; the skepticism in this discussion applies to the brand of commoditized, prepackaged, and pink-coated knowledge, stuff one can buy in the open market and use for self-promotion. Further, let me remind the reader that scholarship and organized education are not the same.
Clearly, it is unrigorous to equate skills at doing with skills at talking. My experience of good practitioners is that they can be totally incomprehensible—they do not have to put much energy into turning their insights and internal coherence into elegant style and narratives. Entrepreneurs are selected to be just doers, not thinkers, and doers do, they don’t talk, and it would be unfair, wrong, and downright insulting to measure them in the talk department.
Bureaucrats, on the other hand, because of the lack of an objective metric of success and the absence of market forces, are selected on the “halo effects” of shallow looks and elegance. The side effect is to make them better at conversation.
My first conversation with an expert was with a fellow called B. Something-that-ends-with-a-vowel dressed in a handmade Brioni suit. I was told that he was the biggest Swiss franc trader in the world, a legend in his day—he had predicted the big dollar collapse in the 1980s and controlled huge positions. But a short conversation with him revealed that he could not place Switzerland on the map—foolish as I was, I thought he was Swiss Italian, yet he did not know there were Italian-speaking people in Switzerland. He had never been there. When I saw that he was not the exception, I started freaking out watching all these years of education evaporating in front of my eyes.
Sometimes, even when an economic theory makes sense, its application cannot be imposed from a model, in a top-down manner, so one needs the organic self-driven trial and error to get us to it. For instance, the concept of specialization that has obsessed economists since Ricardo (and before) blows up countries when imposed by policy makers, as it makes the economies error-prone; but it works well when reached progressively by evolutionary means, with the right buffers and layers of redundancies. Another case where economists may inspire us but should never tell us what to do—more
Something hit me then. Nobody worries that a child ignorant of the various theorems of aerodynamics and incapable of solving an equation of motion would be unable to ride a bicycle. So why didn’t he transfer the point from one domain to another? Didn’t he realize that these Chicago pit traders respond to supply and demand, little more, in competing to make a buck, with no need for the Girsanov theorem, any more than a trader of pistachios in the Souk of Damascus needs to solve general equilibrium equations to set the price of his product?
To our great excitement, we had proof after proof that traders had vastly, vastly more sophistication than the formula. And their sophistication preceded the formula by at least a century. It was of course picked up through natural selection, survivorship, apprenticeship to experienced practitioners, and one’s own experience.
according to the medieval science historian Guy Beaujouan, before the thirteenth century no more than five persons in the whole of Europe knew how to perform a division.
Further, we are quite certain that the Romans, admirable engineers, built aqueducts without mathematics (Roman numerals did not make quantitative analysis very easy). Otherwise, I believe, these would not be here, as a patent side effect of mathematics is making people over-optimize and cut corners, causing fragility. Just look how the new is increasingly more perishable than the old.
Cooking seems to be the perfect business that depends on optionality. You add an ingredient and have the option of keeping the result if it is in agreement with Fat Tony’s taste buds, or fuhgetaboudit if it’s not. We also have wiki-style collaborative experimentation leading to a certain body of recipes. These recipes are derived entirely without conjectures about the chemistry of taste buds, with no role for any “epistemic base” to generate theories out of theories. Nobody is fooled so far by the process. As Dan Ariely once observed, we cannot reverse engineer the taste of food from looking at the nutritional label. And we can observe ancestral heuristics at work: generations of collective tinkering resulting in the evolution of recipes. These food recipes are embedded in cultures. Cooking schools are entirely apprenticeship based. On the other side, we have pure physics, with theories used to generate theories with some empirical validation. There the “epistemic base” can play a role. The discovery of the Higgs Boson is a modern case of a particle entirely expected from theoretical derivations. So was Einstein’s relativity.
An extraordinary proportion of work came out of the rector, the English parish priest with no worries, erudition, a large or at least comfortable house, domestic help, a reliable supply of tea and scones with clotted cream, and an abundance of free time. And, of course, optionality. The enlightened amateur, that is. The Reverends Thomas Bayes (as in Bayesian probability) and Thomas Malthus (Malthusian over-population) are the most famous. But there are many more surprises, cataloged in Bill Bryson’s Home, in which the author found ten times more vicars and clergymen leaving recorded traces for posterity than scientists, physicists, economists, and even inventors.
consider textile technologies. Again, the main technologies that led to the jump into the modern world owe, according to Kealey, nothing to science. “In 1733,” he writes, “John Kay invented the flying shuttle, which mechanized weaving, and in 1770 James Hargreaves invented the spinning jenny, which as its name implies, mechanized spinning. These major developments in textile technology, as well as those of Wyatt and Paul (spinning frame, 1758), Arkwright (water frame, 1769), presaged the Industrial Revolution, yet they owed nothing to science; they were empirical developments based on the trial, error, and experimentation of skilled craftsmen who were trying to improve the productivity, and so the profits, of their factories.”
Payoffs from research are from Extremistan; they follow a power-law type of statistical distribution, with big, near-unlimited upside but, because of optionality, limited downside. Consequently, payoff from research should necessarily be linear to number of trials, not total funds involved in the trials. Since, as in Figure 7, the winner will have an explosive payoff, uncapped, the right approach requires a certain style of blind funding. It means the right policy would be what is called “one divided by n” or “1/N” style, spreading attempts in as large a number of trials as possible: if you face n options, invest in all of them in equal amounts.* Small amounts per trial, lots of trials, broader than you want. Why? Because in Extremistan, it is more important to be in something in a small amount than to miss it. As one venture capitalist told me: “The payoff can be so large that you can’t afford not to be in everything.”
> See: SV venture capital
Yet there is no evidence that strategic planning works—we even seem to have evidence against it. A management scholar, William Starbuck, has published a few papers debunking the effectiveness of planning—it makes the corporation option-blind, as it gets locked into a non-opportunistic course of action.
To repeat (it is necessary to repeat because intellectuals tends to forget it), evidence of absence is not absence of evidence, a simple point that has the following implications: for the antifragile, good news tends to be absent from past data, and for the fragile it is the bad news that doesn’t show easily.
In the antifragile case (of positive asymmetries, positive Black Swan businesses), such as trial and error, the sample track record will tend to underestimate the long-term average; it will hide the qualities, not the defects.
We will return to these two distinct payoffs, with “bounded left” (limited losses, like Thales’ bet) and “bounded right” (limited gains, like insurance or banking). The distinction is crucial, as most payoffs in life fall in either one or the other category.
> Thales is the guy who optioned oil presses
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.
It is not well advertised that there is no evidence that abilities in chess lead to better reasoning off the chessboard—even those who play blind chess games with an entire cohort can’t remember things outside the board better than a regular person. We accept the domain-specificity of games, the fact that they do not really train you for life, that there are severe losses in translation. But we find it hard to apply this lesson to technical skills acquired in schools, that is, to accept the crucial fact that what is picked up in the classroom stays largely in the classroom.
But the problem is more general; soccer moms try to eliminate the trial and error, the antifragility, from children’s lives, move them away from the ecological and transform them into nerds working on preexisting (soccer-mom-compatible) maps of reality. Good students, but nerds—that is, they are like computers except slower.
If you want to understand how vapid are the current modernistic arguments (and understand your existential priorities), consider the difference between lions in the wild and those in captivity. Lions in captivity live longer; they are technically richer, and they are guaranteed job security for life, if these are the criteria you are focusing on …
This made me focus on what an intelligent antistudent needed to be: an autodidact—or a person of knowledge compared to the students called “swallowers” in Lebanese dialect, those who “swallow school material” and whose knowledge is only derived from the curriculum. The edge, I realized, isn’t in the package of what was on the official program of the baccalaureate, which everyone knew with small variations multiplying into large discrepancies in grades, but exactly what lay outside it.
Again, I wasn’t exactly an autodidact, since I did get degrees; I was rather a barbell autodidact as I studied the exact minimum necessary to pass any exam, overshooting accidentally once in a while, and only getting in trouble a few times by undershooting. But I read voraciously, wholesale, initially in the humanities, later in mathematics and science, and now in history—outside a curriculum, away from the gym machine so to speak.
The enterprise needed to be totally effortless in order to be worthwhile. The minute I was bored with a book or a subject I moved to another one, instead of giving up on reading altogether—when you are limited to the school material and you get bored, you have a tendency to give up and do nothing or play hooky out of discouragement. The trick is to be bored with a specific book, rather than with the act of reading. So the number of pages absorbed could grow faster than otherwise. And you find gold, so to speak, effortlessly, just as in rational but undirected trial-and-error-based research. It is exactly like options, trial and error, not getting stuck, bifurcating when necessary but keeping a sense of broad freedom and opportunism. Trial and error is freedom.
> Yes! Give up on books if they are not useful. Books are great options, tiny price and frequently a huge payoff
I realized that school was a plot designed to deprive people of erudition by squeezing their knowledge into a narrow set of authors. I started, around the age of thirteen, to keep a log of my reading hours, shooting for between thirty and sixty a week, a practice I’ve kept up for a long time.
I saw the limits of probability in front of me, clear as crystal, but could not find the words to express the point. So I went to the bookstore and ordered (there was no Web at the time) almost every book with “probability” or “stochastic” in its title. I read nothing else for a couple of years, no course material, no newspaper, no literature, nothing. I read them in bed, jumping from one book to the next when stuck with something I did not get immediately or felt ever so slightly bored. And I kept ordering those books. I was hungry to go deeper into the problem of small probabilities. It was effortless. That was my best investment—risk turned out to be the topic I know the best. Five years later I was set for life and now I am making a research career out of various aspects of small probability events. Had I studied the subject by prepackaged means, I would be now brainwashed into thinking that uncertainty was something to be found in a casino, that kind of thing.
> Go deep
There is such a thing as nonnerdy applied mathematics: find a problem first, and figure out the math that works for it (just as one acquires language), rather than study in a vacuum through theorems and artificial examples, then change reality to make it look like these examples.
“much of what other people know isn’t worth knowing.” To this day I still have the instinct that the treasure, what one needs to know for a profession, is necessarily what lies outside the corpus, as far away from the center as possible. But there is something central in following one’s own direction in the selection of readings: what I was given to study in school I have forgotten; what I decided to read on my own, I still remember.
Socrates, we are told, had looks beyond unprepossessing. Socrates was repeatedly described as having a protruding belly, thin limbs, bulging eyes, a snub nose. He looked haggard. He might even have had body odor, as he was said to bathe much less than his peers. You can imagine Fat Tony sneering while pointing his finger at the fellow: “Look, Neeero, you want me to talk to … dis?” Or perhaps not: Socrates was said to have a presence, a certain personal confidence and a serenity of mind that made some young men find him “beautiful.”
FAT TONY: “Then, my good Socrates, why do you think that we need to fix the meaning of things?” SOCRATES: “My dear Mega-Tony, we need to know what we are talking about when we talk about things. The entire idea of philosophy is to be able to reflect and understand what we are doing, examine our lives. An unexamined life is not worth living. FAT TONY: “The problem, my poor old Greek, is that you are killing the things we can know but not express. And if I asked someone riding a bicycle just fine to give me the theory behind his bicycle riding, he would fall from it. By bullying and questioning people you confuse them and hurt them.” Then, looking at him patronizingly, with a smirk, very calmly: FAT TONY: “My dear Socrates … you know why they are putting you to death? It is because you make people feel stupid for blindly following habits, instincts, and traditions. You may be occasionally right. But you may confuse them about things they’ve been doing just fine without getting in trouble. You are destroying people’s illusions about themselves. You are taking the joy of ignorance out of the things we don’t understand. And you have no answer; you have no answer to offer them.”
Note:Taleb hots the ssme point from mny doofferent angles to reinfoorcd it. Cor point iss simple. BArbell. Optionality.
> Taleb covers the same points from many different angles in his books, reinforcing them, beating them into you. The core point is simple. Barbell, optionality. (this is not a bad thing!)
If you sat with a pencil and jotted down all the decisions you’ve taken in the past week, or, if you could, over your lifetime, you would realize that almost all of them have had asymmetric payoff, with one side carrying a larger consequence than the other. You decide principally based on fragility, not probability. Or to rephrase, You decide principally based on fragility, not so much on True/False.
In a way it is no different from racketeering: one needs a decent university “name” to get ahead in life; but we know that collectively society doesn’t appear to advance with organized education.
Now the very simple point, in fact, that allows for a detection of fragility: For the fragile, shocks bring higher harm as their intensity increases (up to a certain level).
The example is shown in Figure 9. Let us generalize. Your car is fragile. If you drive it into the wall at 50 miles per hour, it would cause more damage than if you drove it into the same wall ten times at 5 mph. The harm at 50 mph is more than ten times the harm at 5 mph.
Note that this is a simple expansion of the foundational asymmetry we saw two chapters ago, as we used Seneca’s thinking as a pretext to talk about nonlinearity. Asymmetry is necessarily nonlinearity. More harm than benefits: simply, an increase in intensity brings more harm than a corresponding decrease offers benefits.
Let me explain the central argument—why fragility is generally in the nonlinear and not in the linear. That was the intuition from the porcelain cup. The answer has to do with the structure of survival probabilities: conditional on something being unharmed (or having survived), then it is more harmed by a single rock than a thousand pebbles, that is, by a single large infrequent event than by the cumulative effect of smaller shocks. If for a human, jumping one millimeter (an impact of small force) caused an exact linear fraction of the damage of, say, jumping to the ground from thirty feet, then the person would already be dead from cumulative harm.
Let me reexpress my previous rule: For the fragile, the cumulative effect of small shocks is smaller than the single effect of an equivalent single large shock. This leaves me with the principle that the fragile is what is hurt a lot more by extreme events than by a succession of intermediate ones. Finito—and there is no other way to be fragile. Now let us flip the argument and consider the antifragile. Antifragility, too, is grounded in nonlinearties, nonlinear responses. For the antifragile, shocks bring more benefits (equivalently, less harm) as their intensity increases (up to a point).
Why does asymmetry map to convexity or concavity? Simply, if for a given variation you have more upside than downside and you draw the curve, it will be convex; the opposite for the concave. Figure 12 shows the asymmetry reexpressed in terms of nonlinearities. It also shows the magical effect of mathematics that allowed us to treat steak tartare, entrepreneurship, and financial risk in the same breath: the convex graph turns into concave when one simply puts a minus sign in front of it. For instance, Fat Tony had the exact opposite payoff than, say, a bank or financial institution in a certain transaction: he made a buck whenever they lost one, and vice versa. The profits and losses are mirror images of each other at the end of the day, except that one is the minus sign times the other.
> The graph shows your 'profit' as a function of x
I never realized it could show so clearly when put in graphical form. Figure 13 illustrates the effect of harm and the unexpected. The more concave an exposure, the more harm from the unexpected, and disproportionately so. So very large deviations have a disproportionately larger and larger effect. FIGURE 13. Two exposures, one linear, one nonlinear, with negative convexity—that is, concavity—in the first graph, positive convexity in the second. An unexpected event affects the nonlinear disproportionately more. The larger the event, the larger the difference.
We can see applications of the point across economic domains: central banks can print money; they print and print with no effect (and claim the “safety” of such a measure), then, “unexpectedly,” the printing causes a jump in inflation. Many economic results are completely canceled by convexity effects—and the happy news is that we know why. Alas, the tools (and culture) of policy makers are based on the overly linear, ignoring these hidden effects. They call it “approximation.” When you hear of a “second-order” effect, it means convexity is causing the failure of approximation to represent the real story.
In spite of what is studied in business schools concerning “economies of scale,” size hurts you at times of stress; it is not a good idea to be large during difficult times. Some economists have been wondering why mergers of corporations do not appear to play out. The combined unit is now much larger, hence more powerful, and according to the theories of economies of scale, it should be more “efficient.” But the numbers show, at best, no gain from such increase in size—that was already true in 1978, when Richard Roll voiced the “hubris hypothesis,” finding it irrational for companies to engage in mergers given their poor historical record.
Now, to see the effect of fragility from size, look at Figure 15 showing losses as a function of quantity sold. A fire sale of $70 billion worth of stocks leads to a loss of $6 billion. But a fire sale a tenth of the size, $7 billion would result in no loss at all, as markets would absorb the quantities without panic, maybe without even noticing. So this tells us that if, instead of having one very large bank, with Monsieur Kerviel as a rogue trader, we had ten smaller banks, each with a proportional Monsieur Micro-Kerviel, and each conducted his rogue trading independently and at random times, the total losses for the ten banks would be close to nothing.
In project management, Bent Flyvbjerg has shown firm evidence that an increase in the size of projects maps to poor outcomes and higher and higher costs of delays as a proportion of the total budget. But there is a nuance: it is the size per segment of the project that matters, not the entire project—some projects can be divided into pieces, not others. Bridge and tunnel projects involve monolithic planning, as these cannot be broken up into small portions; their percentage costs overruns increase markedly with size. Same with dams. For roads, built by small segments, there is no serious size effect, as the project managers incur only small errors and can adapt to them. Small segments go one small error at the time, with no serious role for squeezes.
> !!! Agile! Build in MVPs
I’ve used the following argument against large super-store chains in spite of the advertised benefits. A large super-megastore wanted to acquire an entire neighborhood near where I live, causing uproar owing to the change it would bring to the character of the neighborhood. The argument in favor was the revitalization of the area, that type of story. I fought the proposal on the following grounds: should the company go bust (and the statistical elephant in the room is that it eventually will), we would end up with a massive war zone. This is the type of argument the British advisors Rohan Silva and Steve Hilton have used in favor of small merchants, along the poetic “small is beautiful.” It is completely wrong to use the calculus of benefits without including the probability of failure.
Let us now apply this concept to projects. Just as when you add uncertainty to a flight, the planes tend to land later, not earlier (and these laws of physics are so universal that they even work in Russia), when you add uncertainty to projects, they tend to cost more and take longer to complete. This applies to many, in fact almost all, projects.
No psychologist who has discussed the “planning fallacy” has realized that, at the core, it is not essentially a psychological problem, not an issue with human errors; it is inherent to the nonlinear structure of the projects. Just as time cannot be negative, a three-month project cannot be completed in zero or negative time. So, on a timeline going left to right, errors add to the right end, not the left end of it. If uncertainty were linear we would observe some projects completed extremely early (just as we would arrive sometimes very early, sometimes very late). But this is not the case.
So here is something to use. The technique, a simple heuristic called the fragility (and antifragility) detection heuristic, works as follows. Let’s say you want to check whether a town is overoptimized. Say you measure that when traffic increases by ten thousand cars, travel time grows by ten minutes. But if traffic increases by ten thousand more cars, travel time now extends by an extra thirty minutes. Such acceleration of traffic time shows that traffic is fragile and you have too many cars and need to reduce traffic until the acceleration becomes mild (acceleration, I repeat, is acute concavity, or negative convexity effect).
This method is very general. I even used it with Fukushima-style computations and realized how fragile their computation of small probabilities was—in fact all small probabilities tend to be very fragile to errors, as a small change in the assumptions can make the probability rise dramatically, from one per million to one per hundred. Indeed, a ten-thousand-fold underestimation.
> Yes! See 'disolving the fermi paradox'
What I can say for now is that much of what is taught in economics that has an equation, as well as econometrics, should be immediately ditched—which explains why economics is largely a charlatanic profession. Fragilistas, semper fragilisti
FIGURE 16. Megafragility. Health as a function of temperature curves inward. A combination of 0 and 140 degrees (F) is worse for your grandmother’s health than just 70 degrees. In fact almost any combination averaging 70 degrees is worse than just 70 degrees.* The graph shows concavity or negative convexity effects—curves inward.
(c) If the function is convex (antifragile), then the average of the function of something is going to be higher than the function of the average of something. And the reverse when the function is concave (fragile). As an example for (c), which is a more complicated version of the bias, assume that the function under question is the squaring function (multiply a number by itself). This is a convex function. Take a conventional die (six sides) and consider a payoff equal to the number it lands on, that is, you get paid a number equivalent to what the die shows—1 if it lands on 1, 2 if it lands on 2, up to 6 if it lands on 6. The square of the expected (average) payoff is then (1+2+3+4+5+6 divided by 6)2, equals 3.52, here 12.25. So the function of the average equals 12.25. But the average of the function is as follows. Take the square of every payoff, 12+22+32+42+52+62 divided by 6, that is, the average square pay-off, and you can see that the average of the function equals 15.17. So, since squaring is a convex function, the average of the square payoff is higher than the square of the average payoff. The difference here between 15.17 and 12.25 is what I call the hidden benefit of antifragility—here, a 24 percent “edge.” There are two biases: one elementary convexity effect, leading to mistaking the properties of the average of something (here 3.5) and those of a (convex) function of something (here 15.17), and the second, more involved, in mistaking an average of a function for the function of an average, here 15.17 for 12.25. The latter represents optionality. Someone with a linear payoff needs to be right more than 50 percent of the time. Someone with a convex payoff, much less. The hidden benefit of antifragility is that you can guess worse than random and still end up outperforming. Here lies the power of optionality—your function of something is very convex, so you can be wrong and still do fine—the more uncertainty, the better.
Recall that the interventionista focuses on positive action—doing. Just like positive definitions, we saw that acts of commission are respected and glorified by our primitive minds and lead to, say, naive government interventions that end in disaster, followed by generalized complaints about naive government interventions, as these, it is now accepted, end in disaster, followed by more naive government interventions. Acts of omission, not doing something, are not considered acts and do not appear to be part of one’s mission. Table 3 showed how generalized this effect can be across domains, from medicine to business.
> See, you can refuse treatment and die, but you cannot get many drugs without a doctor note.
So the central tenet of the epistemology I advocate is as follows: we know a lot more what is wrong than what is right, or, phrased according to the fragile/robust classification, negative knowledge (what is wrong, what does not work) is more robust to error than positive knowledge (what is right, what works). So knowledge grows by subtraction much more than by addition—given
since one small observation can disprove a statement, while millions can hardly confirm it, disconfirmation is more rigorous than confirmation.
For the Arab scholar and religious leader Ali Bin Abi-Taleb (no relation), keeping one’s distance from an ignorant person is equivalent to keeping company with a wise man. Finally, consider this modernized version in a saying from Steve Jobs: “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.”
Few realize that we are moving into the far more uneven distribution of 99/1 across many things that used to be 80/20: 99 percent of Internet traffic is attributable to less than 1 percent of sites, 99 percent of book sales come from less than 1 percent of authors … and I need to stop because numbers are emotionally stirring. Almost everything contemporary has winner-take-all effects, which includes sources of harm and benefits. Accordingly, as I will show, 1 percent modification of systems can lower fragility (or increase antifragility) by about 99 percent—and all it takes is a few steps, very few steps, often at low cost, to make things better and safer. For instance, a small number of homeless people cost the states a disproportionate share of the bills, which makes it obvious where to look for the savings. A small number of employees in a corporation cause the most problems, corrupt the general attitude—and vice versa—so getting rid of these is a great solution. A small number of customers generate a large share of the revenues. I get 95 percent of my smear postings from the same three obsessive persons, all representing the same prototypes of failure (one of whom has written, I estimate, close to one hundred thousand words in posts—he needs to write more and more and find more and more stuff to critique in my work and personality to get the same effect). When it comes to health care, Ezekiel Emanuel showed that half the population accounts for less than 3 percent of the costs, with the sickest 10 percent consuming 64 percent of the total pie.
> Average is over
I have often followed what I call Bergson’s razor: “A philosopher should be known for one single idea, not more” (I can’t source it to Bergson, but the rule is good enough). The French essayist and poet Paul Valéry once asked Einstein if he carried a notebook to write down ideas. “I never have ideas” was the reply (in fact he just did not have chickensxxxt ideas). So, a heuristic: if someone has a long bio, I skip him—at a conference a friend invited me to have lunch with an over-achieving hotshot whose résumé “can cover more than two or three lives”; I skipped to sit at a table with the trainees and stage engineers.
Antifragility implies—contrary to initial instinct—that the old is superior to the new, and much more than you think. No matter how something looks to your intellectual machinery, or how well or poorly it narrates, time will know more about its fragilities and break it when necessary.
As shown from the track record of the prophets: before you are proven right, you will be reviled; after you are proven right, you will be hated for a while, or, what’s worse, your ideas will appear to be “trivial” thanks to retrospective distortion. This makes it far more convincing to follow the Fat Tony method of focusing on shekels more than recognition.
Odds are that your imagination will be adding things to the present world. I am sorry, but I will show in this chapter that this approach is exactly backward: the way to do it rigorously, according to the notions of fragility and antifragility, is to take away from the future, reduce from it, simply, things that do not belong to the coming times. Via negativa. What is fragile will eventually break; and, luckily, we can easily tell what is fragile. Positive Black Swans are more unpredictable than negative ones.
> (On predicting the future)
An interesting apparent paradox is that, according to these principles, longer-term predictions are more reliable than short-term ones, given that one can be quite certain that what is Black Swan–prone will be eventually swallowed by history since time augments the probability of such an event.
Technothinkers tend to have an “engineering mind”—to put it less politely, they have autistic tendencies. While they don’t usually wear ties, these types tend, of course, to exhibit all the textbook characteristics of nerdiness—mostly lack of charm, interest in objects instead of persons, causing them to neglect their looks. They love precision at the expense of applicability. And they typically share an absence of literary culture. This absence of literary culture is actually a marker of future blindness because it is usually accompanied by a denigration of history, a byproduct of unconditional neomania.
> Worryingly close..
Now conditional on something belonging to either category, I propose the following (building on the so-called Lindy effect in the version later developed by the great Benoît Mandelbrot):* For the perishable, every additional day in its life translates into a shorter additional life expectancy. For the nonperishable, every additional day may imply a longer life expectancy. So the longer a technology lives, the longer it can be expected to live.
The physicist Richard Gott applied what seems to be completely different reasoning to state that whatever we observe in a randomly selected way is likely to be neither in the beginning nor in the end of its life, most likely in its middle. His argument was criticized for being rather incomplete. But by testing his argument he tested the one I just outlined above, that the expected life of an item is proportional to its past life. Gott made a list of Broadway shows on a given day, May 17, 1993, and predicted that the longest-running ones would last longest, and vice versa. He was proven right with 95 percent accuracy.
The best filtering heuristic, therefore, consists in taking into account the age of books and scientific papers. Books that are one year old are usually not worth reading (a very low probability of having the qualities for “surviving”), no matter the hype and how “earth-shattering” they may seem to be. So I follow the Lindy effect as a guide in selecting what to read: books that have been around for ten years will be around for ten more; books that have been around for two millennia should be around for quite a bit of time, and so forth. Many understand this point but do not apply it to academic work, which is, in much of its modern practice, hardly different from journalism (except for the occasional original production). Academic work, because of its attention-seeking orientation, can be easily subjected to Lindy effects: think of the hundreds of thousands of papers that are just noise, in spite of how hyped they were at the time of publication.
My best conversations in philosophy have been with French lycée teachers who love the topic but are not interested in pursuing a career writing papers in it (in France they teach philosophy in the last year of high school). Amateurs in any discipline are the best, if you can connect with them. Unlike dilettantes, career professionals are to knowledge what prostitutes are to love.
One of my students (who was majoring in, of all subjects, economics) asked me for a rule on what to read. “As little as feasible from the last twenty years, except history books that are not about the last fifty years,” I blurted out, with irritation as I hate such questions as “what’s the best book you’ve ever read,” or “what are the ten best books,”—my “ten best books ever” change at the end of every summer. Also, I have been hyping Daniel Kahneman’s recent book, because it is largely an exposition of his research of thirty-five and forty years ago, with filtering and modernization. My recommendation seemed impractical, but, after a while, the student developed a culture in original texts such as Adam Smith, Karl Marx, and Hayek, texts he believes he will cite at the age of eighty. He told me that after his detoxification, he realized that all his peers do is read timely material that becomes instantly obsolete.
Note:Yes. Generlly do not regret reading classix texts
In 2010, The Economist magazine asked me to partake in an exercise imagining the world in 2036. As they were aware of my reticence concerning forecasters, their intention was to bring a critical “balance” and use me as a counter to the numerous imaginative forecasts, hoping for my usual angry, dismissive, and irascible philippic. Quite surprised they were when, after a two-hour (slow) walk, I wrote a series of forecasts at one go and sent them the text.
Note:Walk deep work
Every time I hear someone trying to make a comparison between a book and an e-reader, or something ancient and a new technology, “opinions” pop up, as if reality cared about opinions and narratives. There are secrets to our world that only practice can reveal, and no opinion or analysis will ever capture in full. This secret property is, of course, revealed through time, and, thankfully, only through time.
If something that makes no sense to you (say, religion—if you are an atheist—or some age-old habit or practice called irrational); if that something has been around for a very, very long time, then, irrational or not, you can expect it to stick around much longer, and outlive those who call for its demise.
> Similar Chesterton's fence
I was able to confirm that there is no compelling empirical evidence in favor of the reduction of swelling. At least, not outside of the very rare cases in which the swelling would threaten the patient, which was clearly not the case. It was pure sucker-rationalism in the mind of doctors, following what made sense to boundedly intelligent humans, coupled with interventionism, this need to do something, this defect of thinking that we knew better, and denigration of the unobserved.
> Similar suggestions from many runners
Why do we need to focus treatment on more serious cases, not marginal ones? Take this example showing nonlinearity (convexity). When hypertension is mild, say marginally higher than the zone accepted as “normotensive,” the chance of benefiting from a certain drug is close to 5.6 percent (only one person in eighteen benefit from the treatment). But when blood pressure is considered to be in the “high” or “severe” range, the chances of benefiting are now 26 and 72 percent, respectively (that is, one person in four and two persons out of three will benefit from the treatment). So the treatment benefits are convex to condition (the benefits rise disproportionally, in an accelerated manner). But consider that the iatrogenics should be constant for all categories! In the very ill condition, the benefits are large relative to iatrogenics; in the borderline one, they are small.
Of the hundred and twenty thousand drugs available today, I can hardly find a via positiva one that makes a healthy person unconditionally “better” (and if someone shows me one, I will be skeptical of yet-unseen side effects). Once in a while we come up with drugs that enhance performance, such as, say, steroids, only to discover what people in finance have known for a while: in a “mature” market there is no free lunch anymore, and what appears as a free lunch has a hidden risk. When you think you have found a free lunch, say, steroids or trans fat, something that helps the healthy without visible downside, it is most likely that there is a concealed trap
> Yes! Commonly talked about in nootropic circles, if there was a free lunch for the taking, our brains would be taking it already. Can only tweak at the margins
People with a variety of lung diseases, including acute respiratory distress syndrome, used to be put on mechanical ventilators. The belief was that constant pressure and volume were desirable—steadiness seemed a good idea. But the reaction of the patient is nonlinear to the pressure (convex over an initial range, then concave above it), and he suffers from such regularity. Further, people with very sick lungs cannot take high pressure for a long time—while they need a lot of volume. J. F. Brewster and his associates figured out that dispensing higher pressure on occasion, and low pressure at other times, allowed them to provide a lot more volume to the lungs for a given mean pressure and thus decrease patient mortality.
back surgery done in modern times to correct sciatica is often useless, minus the possible harm from the operation. Evidence shows that six years later, such an operation is, on average, equivalent to doing nothing, so we have a certain potential deficit from the back operation as every operation brings risks such as brain damage from anesthesia, medical error (the doctor harming the spinal cord), or exposure to hospital germs. Yet spinal cord surgery such as lumbar disc fusion is still practiced liberally, particularly as it is very lucrative for the doctor.
Let me repeat the argument here in one block to make it clearer. Evolution proceeds by undirected, convex bricolage or tinkering, inherently robust, i.e., with the achievement of potential stochastic gains thanks to continuous, repetitive, small, localized mistakes. What men have done with top-down, command-and-control science has been exactly the reverse: interventions with negative convexity effects, i.e., the achievement of small certain gains through exposure to massive potential mistakes. Our record of understanding risks in complex systems (biology, economics, climate) has been pitiful, marred with retrospective distortions (we only understand the risks after the damage takes place, yet we keep making the mistake), and there is nothing to convince me that we have gotten better at risk management. In this particular case, because of the scalability of the errors, you are exposed to the wildest possible form of randomness. Simply, humans should not be given explosive toys (like atomic bombs, financial derivatives, or tools to create life).
We are built to be dupes for theories. But theories come and go; experience stays. Explanations change all the time, and have changed all the time in history (because of causal opacity, the invisibility of causes) with people involved in the incremental development of ideas thinking they always had a definitive theory; experience remains constant. As we saw in Chapter 7, what physicists call the phenomenology of the process is the empirical manifestation, without looking at how it glues to existing general theories. Take for instance the following statement, entirely evidence-based: if you build muscle, you can eat more without getting more fat deposits in your belly and can gorge on lamb chops without having to buy a new belt. Now in the past the theory to rationalize it was “Your metabolism is higher because muscles burn calories.” Currently I tend to hear “You become more insulin-sensitive and store less fat.”
I would add that, in my own experience, a considerable jump in my personal health has been achieved by removing offensive irritants: the morning newspapers (the mere mention of the names of the fragilista journalists Thomas Friedman or Paul Krugman can lead to explosive bouts of unrequited anger on my part), the boss, the daily commute, air-conditioning (though not heating), television, emails from documentary filmmakers, economic forecasts, news about the stock market, gym “strength training” machines, and many more.
If true wealth consists in worriless sleeping, clear conscience, reciprocal gratitude, absence of envy, good appetite, muscle strength, physical energy, frequent laughs, no meals alone, no gym class, some physical labor (or hobby), good bowel movements, no meeting rooms, and periodic surprises, then it is largely subtractive (elimination of iatrogenics).
> Step 1: remove office work
Recall from the lung ventilator discussion this practical consequence of Jensen’s inequality: irregularity has its benefits in some areas; regularity has its detriments. Where Jensen’s inequality applies, irregularity might be medicine. Perhaps what we mostly need to remove is a few meals at random, or at least avoid steadiness in food consumption. The error of missing nonlinearities is found in two places, in the mixture and in the frequency of food intake.
Someone looked at the longevity of Cretans, cataloged what they ate, then inferred—naively—that they lived longer because of the types of food they consumed. It could be true, but the second-order effect (the variations in intake) could be dominant, something that went unnoticed by mechanistic researchers. Indeed, it took a while to notice the following: the Greek Orthodox church has, depending on the severity of the local culture, almost two hundred days of fasting per year; and these are harrowing fasts.
Note that if I had to find the anti-me, the person with diametrically opposite ideas and lifestyle on the planet, it would be that Ray Kurzweil fellow. It is not just neomania. While I propose removing offensive elements from people’s diets (and lives), he works by adding, popping close to two hundred pills daily. Beyond that, these attempts at immortality leave me with deep moral revulsion.
> ! Taleb looks at group survival over individual. Group requires death of individuals to stay antifragile, possibly? I still think that death is bad though. If we extended healthy life span 3-4x, there would still be survival pressure on the species, allowing us to stay antifragile?
A half-man (or, rather, half-person) is not someone who does not have an opinion, just someone who does not take risks for it.
Fat Tony has two heuristics. First, never get on a plane if the pilot is not on board. Second, make sure there is also a copilot. The first heuristic addresses the asymmetry in rewards and punishment, or transfer of fragility between individuals. Ralph Nader has a simple rule: people voting for war need to have at least one descendant (child or grandchild) exposed to combat. For the Romans, engineers needed to spend some time under the bridge they built—something that should be required of financial engineers today. The English went further and had the families of the engineers spend time with them under the bridge after it was built.
Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio.
> Betting is a tax on bullshit
The psychologist Gerd Gigerenzer has a simple heuristic. Never ask the doctor what you should do. Ask him what he would do if he were in your place. You would be surprised at the difference.
Playing on one’s inner agency problem can go beyond symmetry: give soldiers no options and see how antifragile they can get. On April 29, 711, the armies of the Arab commander Tarek crossed the Strait of Gibraltar from Morocco into Spain with a small army (the name Gibraltar is derived from the Arabic Jabal Tarek, meaning “mount of Tarek”). Upon landing, Tarek had his ships put to the fire. He then made a famous speech every schoolchild memorized during my school days that I translate loosely: “Behind you is the sea, before you, the enemy. You are vastly outnumbered. All you have is sword and courage.” And Tarek and his small army took control of Spain.
In Book IV of The Wealth of Nations, Smith was extremely chary of the idea of giving someone upside without downside and had doubts about the limited liability of joint-stock companies (the ancestor of the modern limited liability corporation). He did not get the idea of transfer of antifragility, but he came close enough. And he detected—sort of—the problem that comes with managing other people’s business, the lack of a pilot on the plane: The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.
Now consider companies like Coke or Pepsi, which I assume are, as the reader is poring over these lines, still in existence—which is unfortunate.
> Would be a good prediction for metaculus, will Coke still be around (to define) in 30 years. If we agree that older companies are likely to stick around for longer, than probably, yes?
my experience of company executives, as evidenced by their appetite for spending thousands of hours in dull meetings or reading bad memos, is that they cannot possibly be remarkably bright. They are no entrepreneurs—just actors, slick actors (business schools are more like acting schools). Someone intelligent—or free—would likely implode under such a regimen.
One may make others aware of the existence of a product, say a new belly dancing belt, but I wonder why people don’t realize that, by definition, what is being marketed is necessarily inferior, otherwise it would not be advertised.
> This is clearly not necessarily true. Products are marketed even if they are superior.
We have known since Adam Smith that the collective does not require the benevolence of individuals, as self-interest can be the driver of growth. But all this does not make people less unreliable in their personal opinions about the collective. For they are involving the skin of others, so to speak. What Montaigne and Seneca missed, in addition to the notion of skin in the game, was that one can draw the line with public affairs. They missed the agency problem—although the problem was known heuristically (Hammurabi, golden rules), it was not part of their consciousness. The point isn’t that making a living in a profession is inherently bad; rather, it’s that such a person becomes automatically suspect when dealing with public affairs, matters that involve others.
> Against democracy..
For Fat Tony, humanity started at the level of “self-ownership.” Now self-ownership for our horizontal friend was vastly more democratic than for his thinking predecessors. It simply meant being the owner of your opinion. And it has nothing to do with wealth, birth, intelligence, looks, shoe size, rather with personal courage. In other words, for Fat Tony, it was a very, very specific definition of a free person: someone who cannot be squeezed into doing something he would otherwise never do. Consider this leap in sophistication from Athens to Brooklyn: if for the Greeks, only he who is free with his time is free with his opinion, for our horizontal friend and advisor, only he who has courage is free with his opinion. Sissies are born, not made. They stay sissies no matter how much independence you give them, no matter how rich they get.
He actually believes that all real ideas can be distilled down to a central issue that the great majority of people in a given field, by dint of specialization and empty-suitedness, completely miss. Everything in religious law comes down to the refinements, applications, and interpretations of the Golden Rule, “Don’t do unto others what you don’t want them to do to you.” This we saw was the logic behind Hammurabi’s rule. And the Golden Rule was a true distillation, not a Procrustean bed. A central argument is never a summary—it is more like a generator.
The glass is dead; living things are long volatility. The best way to verify that you are alive is by checking if you like variations. Remember that food would not have a taste if it weren’t for hunger; results are meaningless without effort, joy without sadness, convictions without uncertainty, and an ethical life isn’t so when stripped of personal risks.
It is quite distressing to hear debates about political systems that make comparisons between countries when the size of the entities is not the same—say, comparing Singapore to Malaysia. The size of the unit may matter more than the system.
Thankfully, the European Union is legally protected from overcentralization thanks to the principle of subsidiarity: things should be handled by the smallest possible unit that can manage them with efficacy. The idea was inherited from the Catholic Church: philosophically, a unit doesn’t need to be very large (the state) nor very small (the individual), but somewhere in between. This is a powerful philosophical statement, particularly in light of both the transfers of fragility we saw in Chapter 4 and the notion that size fragilizes, much on which later.
For those readers who wonder about the difference between Buddhism and Stoicism, I have a simple answer. A Stoic is a Buddhist with attitude, one who says “fxxx you” to fate.
> A stoic would not say fuck you to fate, fate is not something that is in our control, so they would strive to feel unattached to its outcomes.