Antifragile: Things that Gain from Disorder by Nassim Taleb

Antifragile

 

Summary
  1. Taleb describes that anything is antifragile as it gets better with chaos and disorder and improves with time whereas anything antifragile hates volatility. He lays out extremely convincing arguments for doing away with most predictions and trying to forecast into the future as this in reality handicaps us and doesn’t allow us to react to what is truly happening. His arguments are can and should be molded into every facet of your life and your decisions
Key Takeaways
  1. Anything that has more upside than downside during random events has antifragility
  2. Suppressing randomness from antifragile things (ourselves are one of the most antifragile things) actually harms them and makes them weaker. The diet, our economy are antifragile but we have been making them weaker
  3. Fragility and antifragility can be measured but rare events cannot be predicted accurately
  4. Should focus on the fragility of things instead of the probability of something happening. Things lie on a scale of fragility (the triad – antifragile, robust and fragile)
  5. Moving towards simplicity and removing things makes things more antifragile than adding anything 
  6. Absence of challenge degrades the best people and firms. Mental and physical effort forces people into a higher gear
  7. Evolution one of the best examples of antifragility as it loves randomness and volatility and gets stronger from it. Natural things love randomness up to a point – if all life on earth wiped out the fittest will not survive to reproduce
  8. Central illusion in life – randomness is risky. Man made smoothing of randomness makes things more fragile. Daily variability helps strengthen a person or system 
  9. Extremely important to try to differentiate between true and manufactured stability
  10. Much more difficult to examine people who have been successful by procrastinating or non acting as it is not obvious or apparent as that is what caused their success
  11. Believes that in eliminating projections which are almost never right will make us and our economy more robust. What is not measurable and non predictable will remain that way. Let’s not kid ourselves and make us more exposed than we already are
  12. Turkey problem – mistaking what we don’t see for the nonexistent
  13. Exposure more important than knowledge. Do, rather than just learn
  14. Time is the worlds best debunker of fragility 
  15. Small occurrences and events effect us much less than a large event does. For example, a 10 lb thrown at your head would do more than 5x the damage of a 2 lb stone thrown at your head. That which is fragile is hurt much more by extreme events than by a succession of small ones
  16. Barbell – medium risks are still exposed to massive volatility. Better to be at either end (completely anti black swan or for black swan) than stuck in the middle. Don’t do things in the middle – pure action or pure reflection. Barbell method is the domestication not the elimination of risk
  17. You are antifragile when you have more to gain than lose from volatility – more upside than downside. First decrease your exposure to downside
  18. When have optionality, do not need to understand something perfectly and can make good decisions with less information. Can still limit downside and have upside. Having options helps us understand ourselves as we are forced to decide
  19. Tinkering and iterations are much more antifragile than blueprints and hard plans. This allows for more optionality and better decisions since will have better information
  20. When you find antifragile options, there are hidden benefits and therefore need to be right less often compared to linear payoffs to still wind up on top
  21. Avoiding mistakes and being a sucker is quickest way to become antifragile. We know much more of what is wrong than what is right (negative knowledge). Disconfirmation much more rigid than confirmation
  22. Robust decisions rarely require more than one good reason. The man with the most alibis is usually guilty. In addition, a man should be known for one great idea
  23. The longest surviving works are the most robust as time devours everything, the fragile first
  24. Longer term forecast are most prone to error and exponentially so compared to short term. Any reliance on predictions is fragile. Respect and consume the wisdom of our ancestors – philosophy, food, tools, etc.
  25. Perishable v nonperishable – for perishable, younger expected to live longer but for non the older can be expected to lived longer. Established tech more likely to outlive new tech
  26. There is logic in nature much deeper than we can often understand 
  27. Even if there is solid evidence (lose fat if limit carbs), People often don’t act until there are theories they believe. Should be the opposite, if solid evidence, should act regardless of theory as they change all the time
  28. Via negativa – Subtracting things not seasoned by nature reduces the chances of black swans while leaving one open to improvements. For example, eating less extends lives and avoiding new foods and sugars
  29. He argues against buying things with huge marketing budgets as most high quality things do not require it (eggs, meat, art, museums, etc .)
What I got out of it
  1. An thoroughly thought-provoking book which makes you very aware how fragile many systems and institutions truly are. The most powerful part of this book is understanding that this mental model can be integrated into every single part of your life – from diet to work to investing to relationships, etc. An absolute must read

  • Antifragility helps understand fragility better
  • Absence of skin in the game is truly hurting the antifragile systems since people can get the upside without any of the downside and exposing others
  • Black swans are huge and unpredictable events which we can only explain in hindsight which makes us underestimate randomness
  • Neomania – our current state where we are making everything more vulnerable to black swan events
  • Complex systems are often more fragile but regardless simplicity is key
  • Taleb wants to modify our systems (from banking to health care) to make simpler and more antifragile
  • Antifragility is relative and not always worth it as it can be very costly
  • One or a thing cannot be antifragile against everything
  • Domain dependence – can make contradictory claims or thoughts depending on the context
  • Overcompensation and “noise” are necessary for people to grow and learn
  • Redundancy is often a great investment and can often be very efficient (2 kidneys)
  • Always allow for extra wiggle room – worst drop in market was worse than anyone could’ve been predicted based on past models of market drops
  • Often stronger once have made a mistake than if never have made one
  • Don’t know what type of person someone is until they’re given the option to do something immoral
  • Switzerland is the most antifragile place in the world and benefits tremendously when others are hurt or in a panic. It is stable because of the mix of people but mainly because of its lack of a large central government – very few citizens could name its president. Experiences daily fluctuations which make it stronger overall
  • When randomness concentrates is when big shocks and volatility can be expected (financial crisis of 2009 a prime example) (what Taleb calls extremistan)
  • The world has never been closer to catastrophic wars – man has attempted to smooth out and get rid of randomness but this only will build up until some massive event occurs which will be much more difficult if not impossible to recover from
  • In anything and with anyone – light control works but tight control leads to more crashes
  • Injecting randomness strengthens systems
  • Iatrogenics – when the people who are supposed to help (doctors for instance) actually do more harm than good. Any type of intervention has iatrogenics
  • Intervening to limit size and speed can be beneficial. Taleb especially worried about non intervention with anything modern
  • The more often you tune into news the more noise you’ll have to sift through in order to get to the signal (finance or whatever). Only pay attention to very large changes in data
  • Excess wealth if you don’t need it is a burden
  • When possible, try to bet against those who rely on predictions
  • Wisdom in making decisions is vastly more important than knowledge. Seneca is a prime example of this
  • Stoicism is extremely robust. Possessions make us worry about downside and make us fragile. Mentally adjust for the worst before it happens and everything positive from then on will seem like a bonus. Stoicism about the domestication and not the elimination of emotions. Invest in good deeds as things can be taken away
  • Never ask people what they want as people’s preferences can change instantly. Like Jobs, show them what they want
  • Freedom, independence and options is the ultimate trifecta
  • Your work and ideas are more antifragile when have a small but loyal following and a lot of dissenters than if everyone mildly liked it
  • Options are the weapon against fragility. Believes that most of what we think comes from skill in fact comes from optionality – well used optionality
  • Humans lack imagination and don’t even know what tomorrow will look like
  • Randomness plays two roles – innovation and implementation. The implementation of a tool or medicine does not always immediately succeed its invention (the period between is the translational gap)
  • Every trial and every failure provides more information into the right direction to go. Up to you to act rationally and to recognize the options
  • Recognize epiphenomenon – wrong cause and effect. Fooled by randomness – mistaking the purely random for causal
  • Green lumber – very successful people who do, do not need extensive knowledge in a lot of areas. Example – very successful Swiss franc trader in US didn’t even know where Switzerland is on a map
  • Do not get too technical and smart for your own good – keep the elementary in mind
  • Tinkering and trial and error is robust and antifragile to the unknown
  • The experts and anybody else who thinks they know more than they do are fragile
  • Argues against planning or at least over planning as it can make you option blind
  • Look and rank things according to optionality, options with open ended and not closed ended payoffs, do not invest in business plans but in people, make sure you are “barbelled”
  • Argues for more experiential and unstructured learning
  • Aims to read between 30-60 hours a week. Did this while studying at Wharton even. Taleb read nothing but books about probabilities for years!
  • What you choose to read and experience you remember much better and it’s ingrained much deeper
  • A squeeze is when you have to act and have no other choice. As you grow larger, squeezes become more common and more devastating and expensive. Small is antifragile
  • Spread the consumption – whether of fish or pollution, consuming or using too much of one will have much more disastrous effects than spreading it out over different sources
  • Beware of asymmetry the wrong way – volatility has a higher negative effect and grows with more volatility whereas the positive effects are small and decrease with more volatility (Fannie Mae)
  • Planning fallacy – it will always take longer and cost more than you think
  • Bears model error and small probabilities as they are often very antifragile
  • Can classify things into 3 groups – those which like volatility in the long run, are neutral or don’t like them
  • In many areas a disproportionately small number of people or things cause the majority of the problems
  • Future lies in the past – technology replacing itself and getting us back to the way we used to do things. For example, iPad allows us to write longhand on a tablet like we used to. Best running shoes going for barefoot feel
  • People notice change much more than what is static and do not easily take into account the failed endeavors – making success seem easier than it actually is since losing examples are gone and hard to come by
  • Treadmill effect – with goods and tech we get an initial boost when we buy the latest model but quickly revert to our baseline
  • Lindy effect- books that have been around the longest will survive the longest
  • With health conditions, ignore small symptoms and don’t treat as their use is marginal but with severe symptoms, diagnose and treat. Excessive hygiene, antibiotics, surgery, metric lowering medicines all fall into this category
  • We only understand risks after they happen but continually make the mistake of thinking we can risk manage. The risks come from what we cannot see
  • Does not drink anything that hasn’t been around for 1,000 years (water, coffee and wine) and eats only what our ancestors ate and is even cautious to only eat fruits from his ancestors region
  • Should randomize our diet – do not need a balanced meal at every meal. Should randomize and deprive at times to reap biological benefits
  • Every risk taker needs to have some skin in the game – Hammurabi’s code. No opinion without risk. This is becoming rare in today’s world where bankers and politicians can make decisions which affect millions but they themselves don’t pay if they’re wrong
  • A margin of safety should be built into every decision
  • Beware those who explain anything after the fact
  • Those with no skin in the game can cherry pick and convince themselves and others they had predicted it while taking no action
  • Don’t ask people their opinions or theories, ask them what they own in their portfolio
  • Cowards today are prevalent but Romans removed this incentive to run away by killing 10% of the legion of cowardice was suspected. Similar situation – Welch firing bottom 10% of employees
  • Beware those who do not live or act as they preach
  • A truly free man can voice his own opinions