Antifragile - by Nassim Nicholas Taleb #

Date Read: 2018-09-19 #

Notes #

The sword of Damocles represents the side effects of power and success: you cannot rise and rule without facing this continuous danger - someone out there will be actively working to topple you. And like the sword, the danger will be silent, inexorable, and discontinuous. It will fall abruptly after long periods of quiet, perhaps at the very moment one has gotten used to it and forgotten about its existence. Black Swans will be out there to get you as you now have much more to lose, a cost of success (and growth), perhaps an unavoidable penalty of excessive success. At the end, what matters is the strength of the string - not the wealth and power of the dining party. But, luckily, this is an identifiable, measurable, and tractable vulnerability, for those who want to listen. The entire point of the Triad is that in many situations we can measure the strength of the string.

How do you innovate? First, you try to get in trouble. I mean serious, but not terminal, trouble. I hold - it is beyond speculation, rather a conviction - that innovation and sophistication spark from initial situations of necessity (from the unintended side effects of, say, an initial invention or attempt at invention). Naturally, there are classical thoughts on the subject, with a Latin saying that sophistication is born out of hunger. The idea pervades classical literature: in Ovid, difficulty is what wakes up the genius, which translate in Brooklyn English into “When life gives you a lemon …” The excess energy released from overreaction to setbacks is what innovates!

There is another dimension to the need to focus on actions and avoid words: the health-eroding dependence on external recognition. People are cruel and unfair in the way they confer recognition, so it is best to stay out of that game. Stay robust to how others treat you. Nero at some stage befriended a scientist of legendary status, a giant for whom he had immense respect. Although the fellow was about as prominent as one could get in his field (in the eyes of others), he spent his time focused on the status he had that week in the scientific community. He would become enraged at authors who did not cite him or at some committee granting a medal he had never received to someone he judged inferior, that imposter! Nero learned that no matter how satisfied they could be with their work, these hotshots-who-depended-on-words were deprived of Tony’s serenity; they remained fragile to the emotional toll from the compliments they did not get, the ones others got, and from what someone of lower intellect stole from them. So Nero promised himself to escape all of this with his small ritual - just in case he should fall prone to the hos-shot’s temptation. Nero’s spoils from what he called the “Fat Tony bet”, after deducting the cost of a new car (a Mini) and a new $60 Swatch watch, amounted to a dizzyingly large amount sitting in a portfolio, the summary of which was mailed to him monthly from (of all places) a New Jersey address, with three other statements from overseas countries. Again, it is not the amount but the tangibility of his action that counted - quantities could have been a tenth, even a hundredth as much and the effect would remain the same. So he would cure himself of the game of recognition by opening the envelope containing the statement and then going on with his day, oblivious to the presence of those cruel and unfair users of words.

… an absence of fragility to decisions made by fate, is robustness.

… if something is fragile, its risk of breaking makes anything you do to improve it or make it “efficient” inconsequential unless you first reduce that risk of breaking.

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.

Option = asymmetry + rationality #

Be prepared to take advantage, keep the good and ditch the bad. “exercise the option”, recognise that what you have now is better than before.

Business school methods of computing risks do not take into account the possibility of rare events.

Randomness of life is not the well-tractable one of casinos (there are rare events, there are unlimited upsides.)

Optionality - with minimal downside, you do not need knowledge and asymmetry will help you.

  • e.g. Rent controlled apartment - if rents go up, you are protected. If you want to leave you can. If rents go down, you can get a cheaper place or get a cheap mortgage.
  • e.g. Author, artists - better to have a small number of fanatics than a large number of people appreciate. The number of persons who dislike don’t count - there is no opposite of buying your book.
  • e.g. In work, it is better to have a large number of people disliking you and your message and have a low extremely loyal supporters.
  • e.g. Luxury goods - average stays the same with larger dispersion. Doesn’t care about the average
  • e.g. Real Estate - investors have the option at the expense of banks
  • e.g. technology - through trial and error
  • e.g. Negative option - banks have lost everything they made through blowups