Antifragile: Things That Gain from Disorder

by Taleb, Nassim Nicholas

  Plus or Minus Bad Teeth

  You can control fragility a lot more than you think. So let us refine in three points:

  (i) Since detecting (anti)fragility—or, actually, smelling it, as Fat Tony will show us in the next few chapters—is easier, much easier, than prediction and understanding the dynamics of events, the entire mission reduces to the central principle of what to do to minimize harm (and maximize gain) from forecasting errors, that is, to have things that don’t fall apart, or even benefit, when we make a mistake.

  (ii) We do not want to change the world for now (leave that to the Soviet-Harvard utopists and other fragilistas); we should first make things more robust to defects and forecast errors, or even exploit these errors, making lemonade out of the lemons.

  (iii) As for the lemonade, it looks as if history is in the business of making it out of lemons; antifragility is necessarily how things move forward under the mother of all stressors, called time.

  Further, after the occurrence of an event, we need to switch the blame from the inability to see an event coming (say a tsunami, an Arabo-Semitic spring or similar riots, an earthquake, a war, or a financial crisis) to the failure to understand (anti)fragility, namely, “why did we build something so fragile to these types of events?” Not seeing a tsunami or an economic event coming is excusable; building something fragile to them is not.

  Also, as to the naive type of utopianism, that is, blindness to history, we cannot afford to rely on the rationalistic elimination of greed and other human defects that fragilize society. Humanity has been trying to do so for thousands of years and humans remain the same, plus or minus bad teeth, so the last thing we need is even more dangerous moralizers (those who look in a permanent state of gastrointestinal distress). Rather, the more intelligent (and practical) action is to make the world greed-proof, or even hopefully make society benefit from the greed and other perceived defects of the human race.

  In spite of their bad press, some people in the nuclear industry seem to be among the rare ones to have gotten the point and taken it to its logical consequence. In the wake of the Fukushima disaster, instead of predicting failure and the probabilities of disaster, these intelligent nuclear firms are now aware that they should instead focus on exposure to failure—making the prediction or nonprediction of failure quite irrelevant. This approach leads to building small enough reactors and embedding them deep enough in the ground with enough layers of protection around them that a failure would not affect us much should it happen—costly, but still better than nothing.

  Another illustration, this time in economics, is the Swedish government’s focus on total fiscal responsibility after their budget troubles in 1991—it makes them much less dependent on economic forecasts. This allowed them to shrug off later crises.2

  The Idea of Becoming a Non-Turkey

  It is obvious to anyone before drinking time that we can put a man, a family, a village with a mini town hall on the moon, and predict the trajectory of planets or the most minute effect in quantum physics, yet governments with equally sophisticated models cannot forecast revolutions, crises, budget deficits, climate change. Or even the closing prices of the stock market a few hours from now.

  There are two different domains, one in which we can predict (to some extent), the other—the Black Swan domain—in which we should only let turkeys and turkified people operate. And the demarcation is as visible (to non-turkeys) as the one between the cat and the washing machine.

  Social, economic, and cultural life lie in the Black Swan domain, physical life much less so. Further, the idea is to separate domains into those in which these Black Swans are both unpredictable and consequential, and those in which rare events are of no serious concern, either because they are predictable or because they are inconsequential.

  I mentioned in the Prologue that randomness in the Black Swan domain is intractable. I will repeat it till I get hoarse. The limit is mathematical, period, and there is no way around it on this planet. What is nonmeasurable and nonpredictable will remain nonmeasurable and nonpredictable, no matter how many PhDs with Russian and Indian names you put on the job—and no matter how much hate mail I get. There is, in the Black Swan zone, a limit to knowledge that can never be reached, no matter how sophisticated statistical and risk management science ever gets.

  The involvement of this author has not been so much in asserting this impossibility to ever know anything about these matters—the general skeptical problem has been raised throughout history by a long tradition of philosophers, including Sextus Empiricus, Algazel, Hume, and many more skeptics and skeptical empiricists—as in formalizing and modernizing as a background and footnote to my anti-turkey argument. So my work is about where one should be skeptical, and where one should not be so. In other words, focus on getting out of the f*** Fourth Quadrant—the Fourth Quadrant is the scientific name I gave to the Black Swan domain, the one in which we have a high exposure to rare, “tail” events and these events are incomputable.3

  Now, what is worse, because of modernity, the share of Extremistan is increasing. Winner-take-all effects are worsening: success for an author, a company, an idea, a musician, an athlete is planetary, or nothing. These worsen predictability since almost everything in socioeconomic life now is dominated by Black Swans. Our sophistication continuously puts us ahead of ourselves, creating things we are less and less capable of understanding.

  No More Black Swans

  Meanwhile, over the past few years, the world has also gone the other way, upon the discovery of the Black Swan idea. Opportunists are now into predicting, predictioning, and predictionizing Black Swans with even more complicated models coming from chaos-complexity-catastrophe-fractal theory. Yet, again, the answer is simple: less is more; move the discourse to (anti)fragility.

  1 From my experiences of the Lebanese war and a couple of storms with power outages in Westchester County, New York, I suggest stocking up on novels, as we tend to underestimate the boredom of these long hours waiting for the trouble to dissipate. And books, being robust, are immune to power outages.

  2 A related idea is expressed in a (perhaps apocryphal) statement by the financier Warren Buffett that he tries to invest in businesses that are “so wonderful that an idiot can run them. Because sooner or later, one will.”

  3 A technical footnote (to skip): What are the Quadrants? Combining exposures and types of randomness we get four combinations: Mediocristan randomness, low exposure to extreme events (First Quadrant); Mediocristan randomness, high exposure to extreme events (Second Quadrant); Extremistan randomness, low exposure to extreme events (Third Quadrant); Extremistan randomness, high exposure to extreme events (Fourth Quadrant). The first three quadrants are ones in which knowledge or lack of it bring inconsequential errors. “Robustification” is the modification of exposures to make a switch from the fourth to the third quadrant.

  BOOK III

  A Nonpredictive View of the World

  Welcome, reader, to the nonpredictive view of the world.

  Chapter 10 presents Seneca’s stoicism as a starting point for understanding antifragility, with applications from philosophy and religion to engineering. Chapter 11 introduces the barbell strategy and explains why the dual strategy of mixing high risks and highly conservative actions is preferable to just a simple medium-risk approach to things.

  But first, we open Book III with the story of our two friends who derive some great entertainment from, and make a living by, detecting fragility and playing with the ills of fragilistas.

  CHAPTER 9

  Fat Tony and the Fragilistas

  Olfactory methods with the perception of fragility—The difficulties of lunch—Quickly open the envelope—A certain redivision of the world, as seen from New Jersey—The sea gets deeper and deeper

  INDOLENT FELLOW TRAVELERS

  Before the economic crisis of 2008, the association between Nero Tulip and Tony DiBenedetto, also known as “Fat Tony” or the more politically acceptable �
�Tony Horizontal,” would have been hard to explain to an outsider.

  Nero’s principal activity in life is reading books, with a few auxiliary activities in between. As to Fat Tony, he reads so little that, one day when he mentioned he wanted to write his memoirs, Nero joked that “Fat Tony would have written exactly one more book than he had read”—to which Fat Tony, always a few steps ahead of him, quoted Nero back: “You once said that if you felt like reading a novel, you would write one.” (Nero had one day cited the British prime minister and novelist Benjamin Disraeli, who wrote novels but didn’t like reading them.)

  Tony grew up in Brooklyn and moved to New Jersey, and he has exactly the accent you would expect him to have. So, unburdened with time-consuming (and, to him, “useless”) reading activities, and highly allergic to structured office work, Fat Tony spent a lot of his time doing nothing, with occasional commercial transactions in between. And, of course, a lot of eating.

  The Importance of Lunch

  While most people around them were running around fighting the different varieties of unsuccess, Nero and Fat Tony had this in common: they were terrified of boredom, particularly the prospect of waking up early with an empty day ahead. So the proximate reason for their getting together before that crisis was, as Fat Tony would say, “doing lunch.” If you live in an active city, say, New York, and have a friendly personality, you will have no trouble finding good dinner partners, people who can hold a conversation of some interest in an almost relaxed way. Lunch, however, is a severe difficulty, particularly during phases of high employment. It is easy to find lunch partners among resident office inmates but trust me, you don’t want to get near them. They will have liquefied stress hormones dripping from their pores, they will exhibit anxiety if they discuss anything that may divert them from what they think is in the course of their “work,” and when in the process of picking their brain you hit on a less uninteresting mine, they will cut you short with a “I have to run” or “I have a two-fifteen.”

  Moreover, Fat Tony got respect in exactly the right places. Unlike Nero, whose ruminating philosophical episodes erased his social presence, making him invisible to waiters, Tony elicited warm and enthusiastic responses when he showed up in an Italian restaurant. His arrival triggered a small parade among the waiters and staff; he was theatrically hugged by the restaurant owner, and his departure after the meal was a long procedure with the owner and, sometimes, his mother seeing him outside, with some gift, like perhaps homemade grappa (or some strange liquid in an unmarked bottle), more hugs, and promises to come for the Wednesday special meal.

  Accordingly, Nero, when he was in the New York area, could reduce his anxiety about lunchtime, as he could always count on Tony. He would meet Tony at the health club; there our horizontal hero did his triathlon (sauna, Jacuzzi, and steam bath), and from there they would go get some worship from restaurant owners. So Tony once explained to Nero that he had no use for him in the evenings—he could get better, more humorous, more Italian–New Jersey friends, who, unlike Nero, could give him ideas for “something useful.”

  The Antifragility of Libraries

  Nero lived a life of mixed (and transient) asceticism, going to bed as close to nine o’clock as he could, sometimes even earlier in the winter. He tried to leave parties when the effect of alcohol made people start talking to strangers about their personal lives or, worse, turn metaphysical. Nero preferred to conduct his activities by daylight, trying to wake up in the morning with the sun’s rays gently penetrating his bedroom, leaving stripes on the walls.

  He spent his time ordering books from booksellers on the Web, and very often read them. Having terminated his turbulent, extremely turbulent, adventures, like Sindbad the sailor and Marco Polo the Venetian traveler, he ended up settling for a quiet and sedate life of post-adventure.

  Nero was the victim of an aesthetic ailment that brings revulsion, even phobia, toward: people wearing flip-flops, television, bankers, politicians (right-wing, left-wing, centrists), New Jersey, rich persons from New Jersey (like Fat Tony), rich persons who take cruises (and stop in Venice wearing flip-flops), university administrators, grammatical sticklers, name droppers, elevator music, and well-dressed salespersons and businessmen. As for Fat Tony, he had different allergies: the empty suit, which we speculate is someone who has a command of all the superfluous and administrative details of things but misses the essential (and isn’t even aware of it), so his conversation becomes mere chitchat around the point, never getting to the central idea.

  And Fat Tony was a smeller of fragility. Literally. He claimed that he could figure out a person from seeing him just walk into a restaurant, which was almost true. But Nero had noticed that Fat Tony, when talking to people for the first time, got very close to them and sniffed them, just like a dog, a habit of which Fat Tony wasn’t even aware.

  Nero belonged to a society of sixty volunteer translators collaborating on previously unpublished ancient texts in Greek, Latin, or Aramaic (Syriac) for the French publishing house Les Belles Lettres. The group is organized along libertarian lines, and one of their rules is that university titles and prestige give no seniority in disputes. Another rule is mandatory attendance at two “dignified” commemorations in Paris, every November 7, the death of Plato, and every April 7, the birth of Apollo. His other membership is in a local club of weight lifters that meets on Saturdays in a converted garage. The club is mostly composed of New York doormen, janitors, and mobster-looking fellows who walk around in the summer wearing sleeveless “wife-beater” shirts.

  Alas, men of leisure become slaves to inner feelings of dissatisfaction and interests over which they have little control. The freer Nero’s time, the more compelled he felt to compensate for lost time in filling gaps in his natural interests, things that he wanted to know a bit deeper. And, as he discovered, the worst thing one can do to feel one knows things a bit deeper is to try to go into them a bit deeper. The sea gets deeper as you go further into it, according to a Venetian proverb.

  Curiosity is antifragile, like an addiction, and is magnified by attempts to satisfy it—books have a secret mission and ability to multiply, as everyone who has wall-to-wall bookshelves knows well. Nero lived, at the time of writing, among fifteen thousand books, with the stress of how to discard the empty boxes and wrapping material after the arrival of his daily shipment from the bookstore. One subject Nero read for pleasure, rather than the strange duty-to-read-to-become-more-learned, was medical texts, for which he had a natural curiosity. The curiosity came from having had two brushes with death, the first from a cancer and the second from a helicopter crash that alerted him to both the fragility of technology and the self-healing powers of the human body. So he spent a bit of his time reading textbooks (not papers—textbooks) in medicine, or professional texts.

  Nero’s formal training was in statistics and probability, which he approached as a special branch of philosophy. He had been spending all his adult life writing a philosophical-technical book called Probability and Metaprobability. His tendency was to abandon the project every two years and take it up again two years later. He felt that the concept of probability as used was too narrow and incomplete to express the true nature of decisions in the ecology of the real world.

  Nero enjoyed taking long walks in old cities, without a map. He used the following method to detouristify his traveling: he tried to inject some randomness into his schedule by never deciding on the next destination until he had spent some time in the first one, driving his travel agent crazy—when he was in Zagreb, his next destination would be determined by his state of mind while in Zagreb. Largely, it was the smell of places that drew him to them; smell cannot be conveyed in a catalogue.

  Mostly, when in New York, Nero sat in his study with his writing desk set against the window, occasionally looking dreamily at the New Jersey shore across the Hudson River and reminding himself how happy he was to not live there. So he conveyed to Fat Tony that the “I have no use for you” was re
ciprocal (in equally nondiplomatic terms), which, as we will see, was not true.

  ON SUCKERS AND NONSUCKERS

  After the crisis of 2008, it became clear what the two fellows had in common: they were predicting a sucker’s fragility crisis. What had gotten them together was that they had both been convinced that a crisis of such magnitude, with a snowballing destruction of the modern economic system in a way and on a scale never seen before, was bound to happen, simply because there were suckers. But our two characters came from two entirely different schools of thought.

  Fat Tony believed that nerds, administrators, and, mostly, bankers were the ultimate suckers (that was when everyone still thought they were geniuses). And, what’s more, he believed that collectively they were even bigger suckers than they were individually. And he had a natural ability to detect these suckers before they fell apart. Fat Tony derived his income from that activity while leading, as we saw, a life of leisure.

  Nero’s interests were similar to Tony’s, except dressed up in intellectual traditions. To Nero, a system built on illusions of understanding probability is bound to collapse.

  By betting against fragility, they were antifragile.

  So Tony made a bundle from the crisis, in the high eight to low nine figures—everything other than a bundle for Tony is “tawk.” Nero made a bit, though much less than Tony, but he was satisfied that he had won—as we said, he had already been financially independent and he saw money as a waste of time. To put it bluntly, Nero’s family’s wealth had peaked in 1804, so he did not have the social insecurity of other adventurers, and money to him could not possibly be a social statement—only erudition for now, and perhaps wisdom in old age. Excess wealth, if you don’t need it, is a heavy burden. Nothing was more hideous in his eyes than excessive refinement—in clothes, food, lifestyle, manners—and wealth was nonlinear. Beyond some level it forces people into endless complications of their lives, creating worries about whether the housekeeper in one of the country houses is scamming them while doing a poor job and similar headaches that multiply with money.