Antifragile

Aug 2, 2013

Antifragile cover

Rating: 55

I should have started with this book. It fleshes out Taleb’s ideas from Fooled by Randomness and The Black Swan into more applicable strategies. He frequently discusses how he applies the idea of antifragility to his own life, which makes for an interesting read. Start with this book, and then read Fooled by Randomness and The Black Swan if you are interested in the theory behind Taleb’s ideas.

Notes:

  • Many events have a non-linear payoff, where they benefit or are harmed more by volatility. For example, falling 1 ft. 1000 times vs. falling 1000 ft. 1 time. Those that benefit are anti-fragile, while those that are harmed are fragile. If an event is unaffected by volatility, it is robust.

  • The fragile wants tranquility, the antifragile gains from disorder, and the robust does not care.

  • Taleb advocates a barbell strategy to handle volatility. It gives you optionality. Expose yourself to antifragile risk (known bounded downside, unbounded upside).

  • A lot of society’s problems are from fragility of a person or company transferred to the public, e.g. bailouts. This can be solved by “skin in the game,” when a person personally benefits or is harmed by their decisions and opinions.

  • Nature/time is very efficient at removing the fragile, which Taleb uses as a filter. E.g. he only drinks water, coffee, wine; reads older books; since they have survived for many years and are therefore likely to survive for many more.

  • One can become more antifragile by moving from hating mistakes to loving them by making them numerous and small in harm.

  • Some parts on the inside of a system may be fragile in order to make the system as a whole antifragile. E.g. restaurants are fragile; they compete with each other, but the collective of local restaurants is antifragile for that very reason. If restaurants were robust, the overall business would be stagnant or weak.

  • Nature is antifragile up to a point, but the point is quite high.

  • We are fagilizing social and economic systems by denying them stressors and randomness. The avoidance of small mistakes makes the large ones more severe.

  • Iatrogenics: causing harm while trying to help. Usually result from situations where the benefits are small and visible, and the costs are large, delayed, and hidden.

  • What should we control? Limiting size, concentration, and speed are generally beneficial in reducing Black Swan risks.

  • Not seeing a tsunami of economic event coming is excusable; building something fragile to them is not.

  • Stoicism makes you desire the challenge of a calamity. Stoicism, by the attainment of a state of immunity from one’s external circumstances, is pure robustness. Seneca’s version of that is antifragility from fate, no downside, plenty of upside. (Seneca acquired much wealth, but would have also been happy if he were poor). Stoicism is the domestication, not the elimination, of emotions.

  • Success brings an asymmetry: you have a lot more to lose than to gain, which makes you fragile.

  • Modern stoic: someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking.

  • Invest in good actions; things can be taken away from us, not good deeds and acts of virtue.

  • America’s asset is risk taking, the ability to engage in rational forms of trial and error, with no shame in failing and starting again.

  • Options, any options, by allowing more upside than downside, are vectors of antifragility. Going to parties has optionality.

  • Life is long gamma (benefits from volatility).

  • Epiphenomenon: you don’t usually observe A without observing B, so you are likely to think that A causes B or that B causes A. Example: raising the general level of education does not necessarily raise the income at the level of a country.

  • Green lumber fallacy: mistaking a source of necessary knowledge for another, less visible from the outside, less tractable, less narratable.

  • Ideas survive because the person who holds it has survived. So wisdom you learn from your grandmother should be superior to what you get from a class in business school.

  • Look for optionality, rank things according to optionality; preferably with open-ended, not close ended, payoffs; invest in people not business plans; make sure you are barbelled.

  • Taleb uses optionality to continue to be a voracious reader. When he’s bored with a book, he immediately moves onto another one instead of giving up reading.

  • Barbell in education: play it safe in school, and read on your own, having zero expectation from school.

  • Convex: for a set deviation in a variable, in equivalent amounts in both directions, gains more than it loses (concave is the reverse).

  • Advocates injecting redundancy in people’s lives: always carrying a notebook, books.

  • For the nonperishable, every additional day may imply a longer life expectancy (ideas, books, etc). For what to read: “as little as feasible from the last twenty years, except history books that are not about the last fifty years.”

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