Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb
PROLOGUE: HOW TO LOVE THE WIND
Wind extinguishes a candle and energizes fire.
Deprivation of AntiFragility
This is the tragedy of modernity: as with neurotically overprotective parents, those trying to help are often hurting us the most.
I grew up to find people greedy for credentials nauseating, repulsive, and untrustworthy.
CHAPTER 1: BETWEEN DAMOCLES AND HYDRA
PLEASE BEHEAD ME
In another ancient legend, this time the Greek recycling of an ancient Semitic and Egyptian legend, we find Phoenix, the bird with splendid colors. Whenever it is destroyed, it is reborn from its own ashes. It always returns to its initial state. Phoenix happens to be the ancient symbol of Beirut, the city where I grew up. According to legend, Berytus (Beirut’s historical name) has been destroyed seven times in its close to five-thousand-year history, and has come back seven times.
Hydra, in Greek mythology, is a serpent-like creature that dwells in the lake of Lerna, near Argos, and has numerous heads. Each time one is cut off, two grow back. So harm is what it likes. Hyda represents antifragility.
2: OVERCOMPENSATION AND OVERREACTION EVERYWHERE
HOW TO WIN A HORSE RACE
It is said that the best horses lose when they compete with slower ones, and win against better rivals. Undercompensation from the absence of a stressor, inverse hormesis, absence of challenge, degrades the best of the best. In Baudelaire’s poem, “The albatross’s giant wings prevent him from walking”.
-many do better in Calculus 103 than Calculus 101
This mechanism of overcompensation hides in the most unlikely places. If tired after an intercontinental flight, go to the gym for some exertion instead of resting. Also, it is a well-known trick that if you need something urgently done, give the task to the busiest (or second busiest)
person in the office. Most humans manage to squander their free time, as free time makes them dysfunctional, lazy, and unmotivated-the busier they get, the more active they are at other tasks.
I’ve discovered a trick when giving lectures. I have been told by conference organizers that one needs to be clear, to speak with the fake articulation of TV announcers, maybe even dance on the stage to get the attention of the crowd. Some try sending authors to “speech school”–the first time it was suggested to me I walked out, resolved to change publishers on the spot. I find it better to whisper, not shout. Better to be slightly inaudible, less clear. When I was a pit trader (one of those crazy people who stand in a crowded arena shouting and screaming in a con-
tinuous auction), I learned that the noise produced by the person is inverse to the pecking order: as with mafia dons, the most powerful traders were the least audible. One should have enough self-control to make the audience work hard to listen, which causes them to switch into intellec-
tual overdrive. 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.
Antifragile Responses as Redundancy
The same can be seen in the Fukushima nuclear reactor, which experienced a catastrophic failure in 2011 when a tsunami struck. It had been built to withstand the worst past historical earthquake, with the builders not imagining much worse–and not thinking that the worst past event had to be a surprise, as it had no precedent. Likewise, the former chairman of the Federal Reserve, Fragilista Doctor Alan Greenspan, in his apology to Congress offered the classic “It never happened before.” Well, nature, unlike Fragilista Greenspan, prepares for what has not happened before, assuming worse harm is possible.*
GET ANOTHER JOB
It is easier to change jobs than control your reputation or public perception.
The Cat and the Washing Machine. As we saw, your bones will get stronger when subjected to gravity, say, after your (short) employment with a piano moving company. They will become weaker after you spend the next Christmas vacation in a space station with zero gravity or
(as few people realize) if you spend a lot of time riding a bicycle.
Indeed, the way Heracles managed to control Hydra was by cauterizing the wounds on the stumps of the heads that he had just severed. He thus prevented the regrowth of the heads and the exercise of antifragility. In other words, he disrupted the recovery.
systematic removal of uncertainty from things, trying to make matters highly predictable in their smallest details. All that for the sake of comfort, convenience, and efficiency.
CHAPTER 4 – What Kills Me Makes Others Stronger
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
What does not kill me kills others
There is something like a switch in us that kills the individual in favor of the collective when people engage in communal dances, mass riots, or war. Your mood is now that of the herd. You are part of what Elias Canetti calls the rhythmic and throbbing crowd. You can also feel a different variety of crowd experience during your next street riot, when fear of authorities vanishes completely under group fever.
CHAPTER 5 – The Souk and the Office Building
So, alas, we humans are afraid of the second type of variability and naively fragilize systems–or prevent their antifragility-by protecting them. In other words, a point worth repeating every time it applies, this avoidance of small mistakes makes the large ones more severe.
Note another element of Switzerland: it is perhaps the most successful country in history, yet it has traditionally had a very low level of university education compared to the rest of the rich nations. Its system, even in banking during my days, was based on apprenticeship models, nearly vocational rather than the theoretical ones. In other words, on techne (crafts and know-how), not episteme (book knowledge, know what).
AWAY FROM EXTREMISTAN
“Another way to understand the difference: your caloric intake is from Wediocristan. If you add the calories you consume in a year even without adjusting for your lies, not a single day will represent much of the overall (say, more than 0.5 percent of the total, five thousand calories when you may consume eight hundred thousand in a year). So the exception, the rare event, plays an inconsequential role in the aggregate and the long-term. You cannot double your weight in a single day, not even a month, not possibly in a year–but you can double your net worth or lose half of it in a single moment.
CHAPTER 6 – Tell Them I Love (Some) Randomness
Variations also act as purges. Small forest fires periodically cleanse the system of the most flammable material, so this does not have the opportunity to accumulate. Systematically preventing forest fires from taking place “to be safe” makes the big one much worse. For similar reasons, stability is not good for the economy: firms become very weak during long periods of steady prosperity devoid of setbacks, and hidden vulnerabilities accumulate silently under the surface- so delaying crises is not a very good idea. Likewise, absence of fluctuations in the market causes hidden risks to accumulate with impunity. The longer one goes without
a market trauma, the worse the damage when commotion occurs.
CHAPTER 7 NAIVE INTERVENTION
IN PRAISE OF PROCRASTINATION–THE FABIAN KIND
There is an element of deceit associated with interventionism, accelerating in a professionalized society. It’s much easier to sell “Look what I did for you” than “Look what I avoided for you.” Of course a bonus system based on “performance” exacerbates the problem. I’ve looked in history for heroes who became heroes for what they did not do, but it is hard to observe nonaction; I could not easily find any. The doctor who refrains from operating on a back (a very expensive surgery), instead giving it a chance to heal itself, will not be rewarded and judged as favorably as the doctor who makes the surgery look indispensable, then brings relief to the patient while exposing him to operating risks, while accruing great financial rewards to himself. The latter will be driving the pink Rolls-Royce. The corporate manager who avoids a loss will not often be rewarded. The true hero in the Black Swan world is someone who prevents a calamity and, naturally, because the calamity did not take place, does not get recognition–or a bonus–for it.
I will be taking the concept deeper in Book VI, on ethics, about the unfairness of a bonus system and how such unfairness is magnified by complexity.
CHAPTER 11 – Never Marry the Rock Star
I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas (robust to negative Black Swans) and taking a lot of small risks in others (open to positive Black Swans), hence achieving antifragility. That is extreme risk aversion on one side and extreme risk loving on the other, rather than just the “medium” or the beastly “moderate” risk attitude that in fact is a sucker game (because medium risks can be subjected to huge measurement errors).
Let us use an example from vulgar finance, where it is easiest to explain, but misunderstood the most. 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 effort; here the financial barbell has a maximum known loss.
CHAPTER 15 – History Written by the Losers
When I was in business school I rarely attended lectures in something called strategic planning, a required course, and when I showed my face in class, I did not listen for a nanosecond to what was said there; did not even buy the books. There is something about the common sense of student culture; we knew that it was all babble. I passed the required classes in management by confusing the professors, playing with complicated logics, and I felt it intellectually dishonest to enroll in more classes than the strictly necessary.
Corporations are in love with the idea of the strategic plan. They need to pay to figure out where they are going. 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.
Almost everything theoretical in management, from Taylorism to all productivity stories, upon empirical testing, has been exposed as pseudoscience–and like most economic theories, lives in a world parallel to the evidence. Matthew Stewart, who, trained as a philosopher, found himself in a management consultant job, gives a pretty revolting, if funny, inside story in The Management Myth. It is similar to the self-serving approach of bankers. Abrahamson and Friedman, in their beautiful book A Perfect Mess, also debunk many of these neat, crisp, teleological approaches. It turns out, strategic planning is just superstitious babble.
For an illustration of business drift, rational and opportunistic business drift, take the following. Coca-Cola began as a pharmaceutical product. Tiffany & Co., the fancy jewelry store company, started life as a stationery store. The last two examples are close, perhaps, but consider next: Raytheon, which made the first missile guidance system, was a refrigerator maker (one of the founders was no other than Vannevar Bush, who conceived the teleological linear model of science we saw earlier; go figure). Now, worse: Nokia, who used to be the top mobile phone maker, began as a paper mill (at some stage they were into rubber shoes). DuPont, now famous for Teflon nonstick cooking pans, Corian countertops, and the durable fabric Kevlar, actually started out as an explosives company. Avon, the cosmetics company, started out in door-to-door book sales. And, the strangest of all, Oneida Silversmiths was a community religious cult but for regulatory reasons they needed to use it to cover a joint stock company.
CHAPTER 16: A Lesson in Disorder
What I was given to study in school I have forgotten; what I decided to read on my own, I still remember.
CHAPTER 18 On the Difference Between a Large Stone and a Thousand Pebbles
why is fragility nonlinear
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. Antifragil-
ity, too, is grounded in nonlinearities, nonlinear responses. For the antifragile, shocks bring more benefits (equivalently, less harm) as their intensity increases (up to a point).
Kerviel and Micro-Kerviel
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.
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.
BOOK 6: VIA NEGATIVA
Yet people want more data to “solve problems.” I once testified in Congress against a project to fund a crisis forecasting project. The people involved were blind to the paradox that we have never had more data than we have now, yet have less predictability than ever. More data- such as paying attention to the eye colors of the people around when crossing the street–can make you miss the big truck. When you cross the street, you remove data, anything but the essential threat.
CHAPTER 20 – Time and Fragility
Technology is at its best when it is invisible.
They are now selling us shoes that replicate being barefoot–they want to be so unobtrusive that their only claimed function is to protect our feet from the elements, not to dictate how we walk as the more modernistic mission was. In a way they are selling us the calloused feet of a hunter-gatherer that we can put on, use, and then remove upon returning to civilization. It is quite exhilarating to wear these shoes when walking in nature as one wakes up to a new dimension while feeling the three dimensions of the terrain.
TO AGE IN REVERSE: THE LINDY EFFECT
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 opposite applies to nonperishable items. I am simplifying numbers here for clarity. If a book has been in print for forty years, I can expect it to be in print for another forty years. But, and that is the main difference, if it survives another decade, then it will be expected to be in
print another fifty years.
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. He had, as a child, visited both the Great Pyramid (fifty-seven hundred years old), and the Berlin Wall (twelve years old), and correctly guessed that the former would outlive the latter.
I received an interesting letter from Paul Doolan from Zurich, who was wondering how we could teach children skills for the twenty-first century since we do not know which skills will be needed in the twenty-first century–he figured out an elegant application of the large problem that Karl Popper called the error of historicism. Effectively my answer would be to make them read the classics. The future is in the past. Actually there is an Arabic proverb to that effect: he who does not have a past has no future.*
Neomania and Treadmill Effects
But it looks as though we don’t incur the same treadmilling techno-disatisfaction with classical art, older furniture–whatever we do not put in the category of the technological. You may have an oil painting and a flat-screen television set inhabiting the same room of your house. The oil painting is an imitation of a classic Flemish scene made close to a century ago, with the dark ominous skies of Flanders, majestic trees, and an uninspiring but calmative rural scene. I am quite certain that you are not eager to upgrade the oil painting but that soon your flat-screen TV set will be donated to the local chapter of some kidney foundation.
TURNING SCIENCE INTO JOURNALISM
Now if you want to be convinced of my point of how noisy science can be, take any elementary textbook you read in high school or college with interest then–in any discipline. Open it to a random chapter, and see if the idea is still relevant. Odds are that it may be boring, but still relevant- or nonboring, and still relevant. It could be the famous 1215 Magna Carta (British history), Caesar’s Gallic wars (Roman history), a historical presentation of the school of Stoics (philosophy), an introduction to quantum mechanics (physics), or the genetic trees of cats and
dogs (biology). Now try to get the proceedings of a random conference about the subject matter concerned that took place five years ago. Odds are it will feel no different from a five-year-old newspaper, perhaps even less interesting. So attending breakthrough conferences might be, statistically speaking, as much a waste of time as buying a mediocre lottery ticket, one with a small payoff. The odds of the papers being relevant-and-interesting-in five years is no better than one in ten thousand. The fragility of science!
CHAPTER 22 – To Live Long, but Not Too Long
We know we can cure many cases of diabetes by putting people on a very strict starvation-style diet, shocking their system–in fact the mechanism had to have been known heuristically for a long time since there are institutes and sanatoria for curative starvation in Siberia.