Antifragile: Things That Gain from Disorder

by Taleb, Nassim Nicholas

  An intelligent life is all about such emotional positioning to eliminate the sting of harm, which as we saw is done by mentally writing off belongings so one does not feel any pain from losses. The volatility of the world no longer affects you negatively.

  The Domestication of Emotions

  Seen this way, Stoicism is about the domestication, not necessarily the elimination, of emotions. It is not about turning humans into vegetables. My idea of the modern Stoic sage is someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking.

  Seneca proposes a complete training program to handle life and use emotions properly—thanks to small but effective tricks. One trick, for instance, that a Roman Stoic would use to separate anger from rightful action and avoid committing harm he would regret later would be to wait at least a day before beating up a servant who committed a violation. We moderns might not see this as particularly righteous, but just compare it to the otherwise thoughtful Emperor Hadrian’s act of stabbing a slave in the eye during an episode of uncontrolled anger. When Hadrian’s anger abated, and he felt the grip of remorse, the damage was irreversible.

  Seneca also provides us a catalogue of social deeds: invest in good actions. Things can be taken away from us—not good deeds and acts of virtue.

  How to Become the Master

  So far, that story is well known, and we have learned to move from the left of the Triad (fragile) to the center (robust). But Seneca went beyond.

  He said that wealth is the slave of the wise man and master of the fool. Thus he broke a bit with the purported Stoic habit: he kept the upside. In my opinion, if previous Stoics claimed to prefer poverty to wealth, we need to be suspicious of their attitude, as it may be just all talk. Since most were poor, they might have fit a narrative to the circumstances (we will see with the story of Thales of Miletus the notion of sour grapes—cognitive games to make yourself believe that the grapes that you can’t reach taste sour). Seneca was all deeds, and we cannot ignore the fact that he kept the wealth. It is central that he showed his preference of wealth without harm from wealth to poverty.

  Seneca even outlined his strategy in De beneficiis, explicitly calling it a cost-benefit analysis by using the word “bookkeeping”: “The bookkeeping of benefits is simple: it is all expenditure; if any one returns it, that is clear gain (my emphasis); if he does not return it, it is not lost, I gave it for the sake of giving.” Moral bookkeeping, but bookkeeping nevertheless.

  So he played a trick on fate: kept the good and ditched the bad; cut the downside and kept the upside. Self-servingly, that is, by eliminating the harm from fate and un-philosophically keeping the upside. This cost-benefit analysis is not quite Stoicism in the way people understand the meaning of Stoicism (people who study Stoicism seem to want Seneca and other Stoics to think like those who study Stoicism). There is an upside-downside asymmetry.

  That’s antifragility in its purest form.2

  The Foundational Asymmetry

  Let us put together Seneca’s asymmetry in a single rule.

  The concept I used earlier is more to lose from adversity. If you have more to lose than to benefit from events of fate, there is an asymmetry, and not a good one. And such asymmetry is universal. Let us see how it brings us to fragility.

  Consider the package in Chapter 1: it does not like to be shaken, and it hates the members of the disorder family—hence it is fragile (very fragile because it has absolutely nothing to gain, hence it is very asymmetric). The antifragile package has more to gain than to lose from being shaken. Simple test: if I have “nothing to lose” then it is all gain and I am antifragile.

  The entire Table 1 with triads across fields and domains can be explained in these terms. Everything.

  To see why asymmetric payoffs like volatility, just consider that if you have less to lose than to gain, more upside than downside, then you like volatility (it will, on balance, bring benefits), and you are also antifragile.

  So the job falling upon this author is to make the link between the four elements as follows with the foundational asymmetry.

  Fragility implies more to lose than to gain, equals more downside than upside, equals (unfavorable) asymmetry

  and

  Antifragility implies more to gain than to lose, equals more upside than downside, equals (favorable) asymmetry

  You are antifragile for a source of volatility if potential gains exceed potential losses (and vice versa).

  Further, if you have more upside than downside, then you may be harmed by lack of volatility and stressors.

  Now, how do we put this idea—reduction of downside, increase in upside—into practice? By the method of the barbell in the next chapter.

  1 For those readers who wonder about the difference between Buddhism and Stoicism, I have a simple answer. A Stoic is a Buddhist with attitude, one who says “f*** you” to fate.

  2 And for those who believe that Zeno, the founder of Stoicism, was completely against material wealth, I have some news: I accidentally found a mention of his activities in maritime financing, where he was an involved investor, not exactly an activity for the anti-wealth utopist.

  CHAPTER 11

  Never Marry the Rock Star

  A precise protocol on how and with whom to cheat on one’s husband—Introduction to barbell strategies—Transforming diplomats into writers, and vice versa

  The barbell (or bimodal) strategy is a way to achieve antifragility and move to the right side of the Triad. Monogamous birds put it into practice by cheating with the local rock star and writers do better by having as a day job a sinecure devoid of writing activities.

  ON THE IRREVERSIBILITY OF BROKEN PACKAGES

  The first step toward antifragility consists in first decreasing downside, rather than increasing upside; that is, by lowering exposure to negative Black Swans and letting natural antifragility work by itself.

  Mitigating fragility is not an option but a requirement. It may sound obvious but the point seems to be missed. For fragility is very punishing, like a terminal disease. A package doesn’t break under adverse conditions, then manage to fix itself when proper conditions are restored. Fragility has a ratchetlike property, the irreversibility of damage. What matters is the route taken, the order of events, not just the destination—what scientists call a path-dependent property. Path dependence can be illustrated as follows: your experience in getting a kidney stone operation first and anesthesia later is different from having the procedures done in the opposite sequence. Or your enjoyment of a meal with coffee and dessert first and tomato soup last would not be the same as the inverse order. The consideration of path dependence makes our approach simple: it is easy to identify the fragile and put it in the left column of the Triad, regardless of upside potential—since the broken will tend to stay permanently broken.

  This fragility that comes from path dependence is often ignored by businessmen who, trained in static thinking, tend to believe that generating profits is their principal mission, with survival and risk control something to perhaps consider—they miss the strong logical precedence of survival over success. To make profits and buy a BMW, it would be a good idea to, first, survive.

  Notions such as speed and growth—anything related to movement—are empty and meaningless when presented without accounting for fragility. Consider that someone driving two hundred and fifty miles per hour in New York City is quite certain to never get anywhere—the effective speed will be exactly zero miles per hour. While it is obvious that one needs to focus on the effective, not the nominal, speed, something in the sociopolitical discourse masks such an elementary point.

  Under path dependence, one can no longer separate growth in the economy from risks of recession, financial returns from risks of terminal losses, and “efficiency” from danger of accident. The notion of efficiency becomes quite meaningless on its own. If a gambler has a risk of terminal blowup (losing back everything), the “potential returns” o
f his strategy are totally inconsequential. A few years ago, a university fellow boasted to me that their endowment fund was earning 20 percent or so, not realizing that these returns were associated with fragilities that would easily turn into catastrophic losses—sure enough, a bad year wiped out all these returns and endangered the university.

  In other words, if something is fragile, its risk of breaking makes anything you do to improve it or make it “efficient” inconsequential unless you first reduce that risk of breaking. As Publilius Syrus wrote, nothing can be done both hastily and safely—almost nothing.

  As to growth in GDP (gross domestic product), it can be obtained very easily by loading future generations with debt—and the future economy may collapse upon the need to repay such debt. GDP growth, like cholesterol, seems to be a Procrustean bed reduction that has been used to game systems. So just as, for a plane that has a high risk of crashing, the notion of “speed” is irrelevant, since we know it may not get to its destination, economic growth with fragilities is not to be called growth, something that has not yet been understood by governments. Indeed, growth was very modest, less than 1 percent per head, throughout the golden years surrounding the Industrial Revolution, the period that propelled Europe into domination. But as low as it was, it was robust growth—unlike the current fools’ race of states shooting for growth like teenage drivers infatuated with speed.

  SENECA’S BARBELL

  This brings us to the solution in the form of a barbell—about all solutions to uncertainty are in the form of barbells.

  What do we mean by barbell? The barbell (a bar with weights on both ends that weight lifters use) is meant to illustrate the idea of a combination of extremes kept separate, with avoidance of the middle. In our context it is not necessarily symmetric: it is just composed of two extremes, with nothing in the center. One can also call it, more technically, a bimodal strategy, as it has two distinct modes rather than a single, central one.

  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). But the barbell also results, because of its construction, in the reduction of downside risk—the elimination of the risk of ruin.

  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 error; here the financial barbell has a maximum known loss.

  For antifragility is the combination aggressiveness plus paranoia—clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself. We saw Seneca’s asymmetry: more upside than downside can come simply from the reduction of extreme downside (emotional harm) rather than improving things in the middle.

  A barbell can be any dual strategy composed of extremes, without the corruption of the middle—somehow they all result in favorable asymmetries.

  Again, to see the difference between barbells and nonbarbells, consider that restaurants present the main course, say, grass-fed minute steak cooked rare and salad (with Malbec wine), then, separately, after you are done with the meat, bring you the goat cheese cake (with Muscat wine). Restaurants do not take your order, then cut the cake and the steak in small pieces and mix the whole thing together with those machines that produce a lot of noise. Activities “in the middle” are like such mashing. Recall Nero in Chapter 9 hanging around with janitors and scholars, rarely with middlebrows.

  In risky matters, instead of having all members of the staff on an airplane be “cautiously optimistic,” or something in the middle, I prefer the flight attendants to be maximally optimistic and the pilot to be maximally pessimistic or, better, paranoid.

  The Accountant and the Rock Star

  Biological systems are replete with barbell strategies. Take the following mating approach, which we call the 90 percent accountant, 10 percent rock star. (I am just reporting, not condoning.) Females in the animal kingdom, in some monogamous species (which include humans), tend to marry the equivalent of the accountant, or, even more colorless, the economist, someone stable who can provide, and once in a while they cheat with the aggressive alpha, the rock star, as part of a dual strategy. They limit their downside while using extrapair copulation to get the genetic upside, or some great fun, or both. Even the timing of the cheating seems nonrandom, as it corresponds to periods with high likelihood of pregnancy. We see evidence of such a strategy with the so-called monogamous birds: they enjoy cheating, with more than a tenth of the broods coming from males other than the putative father. The phenomenon is real, but the theories around it vary. Evolutionary theorists claim that females want both economic-social stability and good genes for their children. Both cannot be always obtained from someone in the middle with all these virtues (though good gene providers, those alpha males aren’t likely to be stable, and vice versa). Why not have the pie and eat it too? Stable life and good genes. But an alternative theory may be that they just want to have pleasure—or stable life and good fun.1

  Also recall from Chapter 2 that overcompensation, to work, requires some harm and stressors as tools of discovery. It means letting children play a little bit, not much more than a little bit, with fire and learn from injuries, for the sake of their own future safety.

  It also means letting people experience some, not too much, stress, to wake them up a bit. But, at the same time, they need to be protected from high danger—ignore small dangers, invest your energy in protecting them from consequential harm. And only consequential harm. This can visibly be translated into social policy, health care, and many more matters.

  One finds similar ideas in ancestral lore: it is explained in a Yiddish proverb that says “Provide for the worst; the best can take care of itself.” This may sound like a platitude, but it is not: just observe how people tend to provide for the best and hope that the worst will take care of itself. We have ample evidence that people are averse to small losses, but not so much toward very large Black Swan risks (which they underestimate), since they tend to insure for small probable losses, but not large infrequent ones. Exactly backwards.

  Away from the Golden Middle

  Now let us continue our exploration of barbells. There are so many fields in which the middle is no “golden middle” and where the bimodal strategy (maximally safe plus maximally speculative) applies.

  Take literature, that most uncompromising, most speculative, most demanding, and riskiest of all careers. There is a tradition with French and other European literary writers to look for a sinecure, say, the anxiety-free profession of civil servant, with few intellectual demands and high job security, the kind of low-risk job that ceases to exist when you leave the office, then spend their spare time writing, free to write whatever they want, under their own standards. There is a shockingly small number of academics among French authors. American writers, on the other hand, tend to become members of the media or academics, which makes them prisoners of a system and corrupts their writing, and, in the case of research academics, makes them live under continuous anxiety, pressures, and indeed, severe bastardization of the soul. Every line you write under someone else’s standards, like prostitution, kills a corresponding segment deep inside. On the other hand, sinecur
e-cum-writing is a quite soothing model, next best to having financial independence, or perhaps even better than financial independence. For instance, the great French poets Paul Claudel and Saint-John Perse and the novelist Stendhal were diplomats; a large segment of English writers were civil servants (Trollope was a post office worker); Kafka was employed by an insurance company. Best of all, Spinoza worked as a lens maker, which left his philosophy completely immune to any form of academic corruption. As a teenager, I thought that the natural way to have a real literary or philosophical career was to enter the lazy, pleasant, and undemanding profession of diplomat, like many members of my family. There was an Ottoman tradition of using Orthodox Christians as emissaries and ambassadors, even ministers of foreign affairs, which was retained by the states of the Levant (my grandfather and great-grandfather had been ministers of foreign affairs). Except that I worried about the wind turning against the Christian minority, and was proved right. But I became a trader and did my writing on my own time, and, as the reader can see, on my own terms. The barbell businessman-scholar situation was ideal; after three or four in the afternoon, when I left the office, my day job ceased to exist until the next day and I was completely free to pursue what I found most valuable and interesting. When I tried to become an academic I felt like a prisoner, forced to follow others’ less rigorous, self-promotional programs.