Antifragile: Things That Gain from Disorder
by Nassim Nicholas Taleb
I had never read any books by Nassim Taleb of “black swan” fame until some hilarious retweets from his Twitter account caused me to start following him.
Taleb is a witty and opinionated fellow. He’s lately been hating on what he labels the “Intellectual Yet Idiot” class. Here’s a recent Facebook post of his on the topic that went viral.
What’s a IYI?
Intellectual Yet Idiot: semi-erudite bureaucrat who thinks he is an erudite; pathologizes others for doing things he doesn’t understand not realizing it is his understanding that may be limited; imparts normative ideas to others: thinks people should act according to their best interests *and* he knows their interests, particularly if they are uneducated “red necks” or English non-crisp-vowel class.
More socially: subscribes to the New Yorker; never curses on twitter; speaks of “equality of races” and “economic equality” but never went out drinking with a minority cab driver; has considered voting for Tony Blair; has attended more than 1 TEDx talks and watched more than 2 TED talks; will vote for Hillary Monsanto-Malmaison because she seems electable; has The Black Swan on his shelves but mistakes absence of evidence for evidence of absence; is member of a club to get traveling privileges; if social scientist uses statistics without knowing how they are derived; when in the UK goes to literary festivals; drinks red wine with steak (never white); used to believe that fat was harmful and has now completely reversed; takes statins because his doctor told him so; fails to understand ergodicity and when explained forgets about it soon later; doesn’t use Yiddish words; studies grammar before speaking a language; has a cousin who worked with someone who knows the Queen; has never read Frederic Dard, Michael Oakeshot, John Gray, or Joseph De Maistre; has never gotten drunk with Russians and went breaking glasses; doesn’t know the difference between Hecate and Hecuba; doesn’t know that there is no difference between “pseudointellectual” and “intellectual”; has mentioned quantum mechanics at least twice in the past 5 years; knows at any point in time what his words or actions are doing to his reputation.
But a much easier marker: doesn’t deadlift.
I think it’s fair to say Taleb would put most think tankers in the IYI class, particularly given that we lack his all important criteria of “skin in the game.” This would include Yours Truly, who can’t remember the last time I had white wine with steak.
Things that are fragile easily break if they are disturbed. Things that are robust or resilient are retain their integrity when disrupted. But Taleb says that there’s a third category: items that actually become stronger when disrupted or suffering volatility. As there’s no word for this in English, he coined the term “antifragile”).
Things that are antifragile have limited downside and unlimited upside, at least across some range of values. Taleb comes from the finance world and so uses the example of options. An option gives you the right, but not the obligation, to buy a stock at a particular price. So your downside is capped at what you paid for the option, but your upside is theoretically unlimited. In that environment, as price becomes more volatile and movements more extreme, that’s good for the value of your option.
Another example would be something like strength training. When you apply stress to your body in the form of lifting a weight, your body responds by getting stronger. On the other side of the distribution, you will actually get weaker and less healthy if you don’t lift. So this is an antifragile distribution for reasonable ranges of stress, hence Taleb’s endorsement of deadlifting.
This book seems to extend his black swan idea. I haven’t read that book, but in his recapitulation in this one the concept seems to be that there are many things with “fat tail” distributions in which events that are extremely remote probabilistically can, if they occur, radically change the long run outcome. These are “black swan” events, and can’t be predicted, thus this is a risk that, unlike the odds in a casino, you can’t really calculate. All you can calculate and control is your exposure. So if you’re exposed to black swan events, not only can you get taken out, over time you almost certainly will get taken out. (This seems to have been the underlying logic of his prediction that FannieMae would go bankrupt).
Antifragile items have protection against negative black swan events while being exposed to positive ones.
This produces a number of heuristics. For example, things that are old are much more likely to be antifragile (or at least robust) than new things. So reliance on the tried and true is the best strategy. The tried and true has already demonstrated that it is not vulnerable to black swans, at least over a significant period of time.
Obviously this is a conservative, or even reactionary stance.
Taleb seems to live it out. As he writes, “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. ” He uses a sort of “just eat real food”/paleo diet strategy in which he only eats things that were around a long time ago in the Levant (where is from and seems to live at least part of the time). He only drinks beverages that have been around for at least a thousand years. He came from a Greek Orthodox family, and though he gives off no sign of actual faith, he diligently follows the rituals of the Orthodox calendar, including over 200 days of fasting per year. His view is that these have stood the test of time and that alone commands respect.
The fasting schedule is directly antifragile. His view is that the body is designed to function best with variability/volatility in its nutrient intake, not consistent, even intake of food. He practices intermittent fasting (as do I), in which he eats only lunch and dinner, with 17 hours between meals. Plus all the Orthodox fasts. Wouldn’t you know it, studies show that intermittent fasting promotes autophagy (“self-eating”, or the body’s recycling of old cell components) and increases glucose sensitivity.
Taleb has other heuristics, including a preference for the small over the large; for trial and error vs. traditional notions of academia, planning, etc.; and an opposition to debt. In his view, large entities like corporations (or nation states) are able to achieve small immediate gains (via mechanisms such as economies of scale), but at the price of being exposed to black swan events.
In addition to default fragility of larger entities, they are even worse because they are able to create antifragility for themselves at the expense of others. For example, the finance industry, from its own perspective, is antifragile because it limited its downside exposure via government bailouts (e.g., you and me). Taleb quips, “If every plane crash makes the next one less likely, every bank crash makes the next one more likely.”
The CEOs of large companies also are able to pocket huge upside from their action in the form of bonus checks and stock, while limiting their downside to getting fired (with none of the earnings they pulled in through their highly risky actions clawed back). The same seems to apply to politicians. This is the “agency problem” is and is what he means by a lack of skin in the game.
These heuristics are clearly applicable to urban planning and cities.
As it happens, while I was reading Antifragile the web site Strong Towns commissioned a series of writers to pen responses to the book. I haven’t yet read all of these, but you can check out the entire series for their take.
To me Taleb’s heuristics would suggest a preference for things like:
- City-states and Swiss-style confederations (vs. nation-states) – “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.”
- Longstanding pedestrian oriented urban design
- Bottoms-up small scale urban initiatives vs. top-down planning and large-scale redevelopment schemes
- Limited to no debt (or other liabilities) – “The world as a whole has never been richer, and it has never been more heavily in debt, living off borrowed money. The record shows that, for society, the richer we become, the harder it gets to live within our means. Abundance is harder for us to handle than scarcity.”
- No genetically engineered crops (Taleb is in fact militantly opposed to GMOs)
Taleb loves entrepreneurs who are all in at risk in the venture:
In order to progress, modern society should be treating ruined entrepreneurs in the same way we honor dead soldiers, perhaps not with as much honor, but using exactly the same logic (the entrepreneur is still alive, though perhaps morally broken and socially stigmatized, particularly if he lives in Japan). For there is no such thing as a failed soldier, dead or alive (unless he acted in a cowardly manner)—likewise, there is no such thing as a failed entrepreneur or failed scientific researcher, any more than there is a successful babbler, philosophaster, commentator, consultant, lobbyist, or business school professor who does not take personal risks. (Sorry.)
He’s also especially enamored of the paradigm of the flâneur:
The rational flâneur is someone who, unlike a tourist, makes a decision at every step to revise his schedule, so he can imbibe things based on new information, what Nero [a Taleb character, not the Roman emperor] was trying to practice in his travels, often guided by his sense of smell. The flâneur is not a prisoner of a plan. Tourism, actual or figurative, is imbued with the teleological illusion; it assumes completeness of vision and gets one locked into a hard-to-revise program, while the flâneur continuously—and, what is crucial, rationally—modifies his targets as he acquires information.
In terms of the personal, I always like to think about how I might apply concepts like this to my own life. I already roughly mirror Taleb’s diet and exercise plan, which is the most straightforward to implement.
Taleb suggests applying a “barbell” strategy to things like career. On the one end, you want to derisk your main gig as much as possible. On the other, you want to take many small, risky bets. He says one should especially avoid exposure to reputational risks:
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.
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 same with a civil servant in Washington. Take this easy-to-use heuristic (which is, to repeat the definition, a simple compressed rule of thumb) to detect the independence and robustness of someone’s reputation. With few exceptions, those who dress outrageously are robust or even antifragile in reputation; those clean-shaven types who dress in suits and ties are fragile to information about them.
His paradigm is the writer who has limited his downside. Taleb has this by virtue of the millions he made in finance. Because his downside is capped at merely having to enjoy his cash pile, he’s free to run his mouth all day long and profit from the “no such thing as bad publicity” effect. He also suggests doing things like getting a government sinecure (unfireable) to limit the downside for writers. Other professions that benefit from antifragile effects are things like taxi/Uber driver and prostitute. But what if you aren’t rich and don’t want to be a bureaucrat or a hooker?
Even if you don’t have an immediate to-do for yourself coming out of this, Antifragile is a provocative and ofttimes witty (if overly long) book. It’s definitely a good one if you’re looking for something to challenge your assumptions and make you think. I didn’t even give half of a precis of the material it contains.
from Aaron M. Renn