Antifragile - by Nassim Taleb

Date finished 15 Apr 2020

Taleb’s style is rough around the edges. That’s what’s so refreshing about him and his work. We need outsiders; challenging the status quo, providing different perspectives and calling out bullshit. Antifragile takes us across disciplines to look at what’s causing fragility in our systems and economies, why and how we can resolve them using the concept of antifragility.

My notes

• Split into 4 “Books”

• Book 1: Introduction to the concept

  • Antifragile. Something which gains from and in fact needs disorder (to an extent). Human body needs stressors.
  • Fragile-Robust-Antifragile.
  • Antifragility of the whole depends on the fragility of the parts. Small failures prevent large failures.

• Book 2: Denial of antifragility and it’s manifestation in naive interventionism

  • The Procrustean Bed used an example. We chop and stretch things to fit our world.
  • “Subsidiarity is a principle of social organisation that holds that social and political issues should be dealt with at the most immediate (or local) level that is consistent with their resolution.” (https://en.wikipedia.org/wiki/Subsidiarity) General principle of European Union law - this is linked to Decentralisation
  • Switzerland - collection of small municipalities that have enmity. Is antifragile. Small volatile mini states but stable on an aggregate level.
  • Principle-Agent problem. When the one providing the services’ interests are divorced from those using his services.
  • Naive Interventionism makes things fragile. Doctors overprescribing patients. Prevention of small forest fires which causes buildup of material that creates massive ones. Greenspan or Gordon Brown smoothing the booms and busts in economies that just made the eventual collapse of 2008 bigger. Bush in the Iraq war post 9/11. Other times more intervention is needed, such as with the environment. We need a systemic protocol to determine when to intervene and when to leave systems alone.
    • Drachten effect - in the Dutch town they took away street signs, made it safer since people had to concentrate more.
    • Nowadays there is more and more noise drowning out the signal - ie more data means more noise. Best way to mitigate naive interventionism is to ration the supply of information as naturalistically as possible. Science does not mean more data.
    • Other examples of intervention causing harm. The Chinese famine between ‘59 and ‘61 that killed 30 million people.
  • Iatrogenics: where treatment causes more harm than benefit. Like blood letting of George Washington to ‘cure’ him.

• Book 3: Asymmetry. The barbell strategy - 80/20 rule.

  • Talks Seneca - creating more upside than downside. Don’t go for the ‘middle’ where there is risk of ruin. Go for maximally safe and maximally speculative (80/20). Pure action and pure reflection.

• Book 4: Optionality, technology and the intelligence of antifragility.

  • Observes we are in a complex, non linear world, we don’t know what works and people don’t know what they want. Apple built the iPhone, they didn’t ask people if they wanted one.
  • Basically says to have options with limited downside but that have high potential upside. Like Thales and his rental of the olive presses.
  • I find this identical to the way things are done in new product development. You need to have the option, you need to have the intelligence to spot when to cash in / when it’s not working etc.
  • Talks about Epiphenomenon: secondary phenomenon that occurs alongside or in parallel to a primary phenomenon - can be mistaken for the cause. Uses the example of the assumption that education-> increase in GDP, when actually prosperity leads to increase in education.
  • Heuristic are valuable. Not only survived due to their own effectiveness, they survived because people that used them survived.
    • Architects relied on them, Romans didn’t use maths to build aqua-ducts. Empirical methods and tools used. Cathedrals built with small tricks and rules. Innovation through practice - theory comes later.
  • Examples of innovation coming from practice less well known as history is written by theorists “teaching birds to fly”. Jet engine. “The role of formal knowledge over appreciated as it it highly visible.”
    • the computer
    • the internet
    • -their use today was not predicted. All examples are anti-teleology, that is contrary to the idea of an “explanation of phenomena in terms of the purpose they serve rather than of the cause by which they arise.”
  • Heuristic:”..the kind of knowledge that comes out of a master guiding his apprentices”.
    • Cooking provides a great example of applying heuristics over theory.
  • Venture capitalists say “you bet on the jockey, not the horse”. Innovations drift, it is the individuals that can sport the new opportunities and pivot, take advantage, that do well - not the initial idea.
  • “The right approach requires a certain style of blind funding”. “The payoff can be so large that you can’t afford not to be in everything”.
  • “Collaboration has explosive upside.” 1+1 is more than 2, exponentially. Superadditive function.
  • “No evidence that strategic planning works…we seem to have evidence against it”p234. “It makes corporations option-blind, as it get’s locked in to a opportunistic course of action. See William Starbuck’s work.
  • Examples of pivoting, changing industries, not following a plan.
    • Coca cola started as a medicine
    • Tiffany & Co was a stationary store
    • Raytheon who created the first guided missile system was a refrigerator maker
    • Nokia was a paper mill
    • Dupont, now making teflon, countertops and kevlar started as an explosives company
    • Avon started in door to door book sales
    • Oneida Silversmiths was a community religious cult who started a company for regulatory reasons
  • Evidence of absence is not absence of evidence.
  • 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
  • Two distinct payoffs - you want bounded left with unlimited right. Not the reverse.
    • “bounded left” - limited losses, like Thales’ bet
    • “bounded right” - limited gains, like insurance or banking
    • The payoff, what happens to you (the benefits or harm from it), is always the most important thing, not the event itself.
      • Checking people at airports, incase there are terrorists. We check because we are fragile to terrorism. Asymmetry.
      • Spend millions on safety of nuclear reactors.
      • Do you think this random medicine will harm you. No. But do you ingest pills? No, no, no.
      • “The probability (hence True/false) does not work in the real world,; it is the payoff that matters”.
        • Modify your exposure, rather than learn to predict better.
  • Two domains
    • Ludic - set up like a game, rules applied in advance in a specific way - the casino. Domain-specific.
    • Ecological - we don’t know the rules and cannot isolate variables, as in real life #complexity
    • We must embrace the randomness to be antifragile
  • Education
    • Follow what interests you. Following a curriculum makes you a robot and you loose creativity and important links that other’s don’t see.
    • When you get board, jump to something else.
    • Read 30-60hours a week.
    • This will set you for life rather than the classroom.
  • Knowledge
    • Narrated, intelligible knowledge. School curriculums.
    • Opaque, probed by tinkering - heuristics. Error of thinking that things always have a reason that is intelligible to us.
    • We mistake the unintelligible for the unintelligent. “What is not intelligible to me is not necessarily unintelligent”.
    • Similar to the turkey problem, mistaking what we don’t see for the nonexistent. Sibling to mistaking absence of evidence for evidence of absence.
  • Quotes/talks about Nietzsche quite a bit.

• Book 5: Nonlinearity - the difference between a large stone and 1000 pebbles #efficiency

  • Maximum efficiency = fragile. Think roads, airports.
  • Size hurts you in times of stress. Kind of like negative economies of scale.
    • Gains from size of corporations are highly visible, but risks are hidden.
    • Why so many mergers fail.
    • Bent Flyvbjerg has shown that increase in size of projects maps to poor outcomes and higher costs of delays as a proportion of total budget. There is nuance - it is size per segment. Meaning breaking down projects helps prevent this. Which is why roads fare well.
      • Projects of 100 million dollars are more unpredictable than projects of 5 million. Higher unpredictability and fragility. More unknowns, more interrelationships.
    • Smooth functioning at regular times is different from rough functioning at times of stress.
    • Todays world -complexity, interdependence, globalisation increases Black Swan effects, efficiency makes people sail too close to the wind.
    • Projects tend to be as weak as the weakest link in the chain.
    • If uncertainty were linear we would see some projects completed extremely early. This is not the case.
    • Complexity plus asymmetry can lead to explosive errors.
      • The Great War, WWII, US war in Iraq. Indirect costs multiply.
    • The fragility in any domain resides in the nonlinear.

• Book 6: Via negativa

  • Subtraction, Via negativa, can be more powerful than addition.
  • “More data - such as paying attention to the eye colours of people around when crossing the street - can make you miss the big truck.”
  • Antifragility implies that the old is superior to the new.
    • “Time has sharp teeth that destroy everything”. - Simonides of Ceos #time
    • The Lindy Effect - a technology, or anything non-perishable, increases in life expectancy with every day of its life - unlike perishable items (such as humans, cats, dogs and tomatoes). So a book that has been a hundred years in print is likely to stay in print another hundred years.
  • Information hides failures - we hear about success stories. Investors are led to overestimate chances of success.
• “Read as little as feasible from the last twenty years, except history books that are not about the last fifty years”. Read the classics - Lindy effect! - New books outdate fast.
• “The good is mostly in the absence of bad” Ennius
• “Sometimes scantiness of nourishment restores the system” - Plotinus
• Caloric restriction as the one key way to lengthen lives.
• People who construct or oversee a system must be fully responsible for it
  • Hammurabi’s code - 229 If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death.
• “He who does not stop a crime is an accomplice.” - Publilius Syrus
• Globalisation brings fragilities and requires a great deal of redundancies to operate properly.
• “Don’t be fooled by money. These are just numbers. Being self-owned is a state of mind.” - Fat Tony