Book: ‘Antifragile’ by Nassim Nicholas Taleb – Key Statements

Wind extinguishes a candle and energizes fire.

Likewise with randomness, uncertainty, chaos: you want to use them, not hide from them.  Some things are fragile—they don’t like chaos, while others are robust—they don’t care if things are crazy.

Antifragility is beyond resilience or robustness.  Antifragile things get better and stronger when the world is falling apart.  Everything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile. 

If antifragility is the property of all those natural (and complex) systems that have survived till now, depriving these systems of volatility, randomness, and stressors will harm them.  They will weaken, die or blow up.

Most of history comes from Black Swan events, which are highly improbable and unpredictable.  Mother Nature is the best expert at rare events and the best manager of Black Swans; in its billions of years, it had succeeded in getting here without much command-and-control instruction from an Ivy-League-educated director nominated by a search committee.

At no point in history have so many non-risk-takers, that is, those with no personal exposure exerted so much control.  They form the new class of inverse heroes; bureaucrats, bankers, Davos-attending members of the I.A.N.D. (International Association of Name Droppers), and academics with too much power and no real downside and/or accountability.  They game the system while citizens pay the price.

Example: The Financial Fragilista who makes people use “risk” models that destroy the banking system (and then uses them again).

The tension between education, which loves order, and innovation, which loves disorder; the process of discovery (or innovation, or technological progress) itself depends on antifragile tinkering and aggressive risk taking rather than on formal education.

If you need something urgently done, give the task to the busiest (or second busiest) person in the office.

One should have enough self-control to make the audience work hard to listen—which causes them to switch into intellectual overdrive.  It’s better to whisper and not to shout.

Nature likes to over-insure itself.  It’s all about redundancy.  Layers of redundancy are the central risk management property of natural systems.  We have, for example, two kidneys.  But humans also have a historical track record of engaging in debt, which is the opposite of redundancy.

Organisms need to die for nature to be antifragile—nature is opportunistic, ruthless, and selfish.  If nature ran the economy, it would not continuously bail out its living members to make them live forever.

Risk Management Professionals look in the past for information on the so-called worst-case scenario and use it to estimate future risks (= stress testing).  But they never notice the following inconsistency: this so-called worst-case event, when it happened, exceeded the worst case at that time!

Learning from the mistakes of others: see Titanic or plane crashes who were/are making the next one less likely.  These systems learn because they are antifragile and set up to exploit small errors.  The same cannot be said of economic crashes, since the economic system is not antifragile the way it is presently built.  Globalized economic systems operate as one: errors spread and compound.  Every bank crash makes the next one more likely => we need to eliminate the second type of error—the one that produces contagion—in our construction of an ideal socioeconomic system.

Some risk-taking is healthy for the economy—under the condition that not all people take the same risks and that these risks remain small and localized (randomness is distributed rather than concentrated).  Now, by disrupting that model with bailouts is the opposite of healthy risk-taking; it is transferring fragility from the collective to the unfit.  We have to build a system where nobody’s fall can drag others down.  Paradoxically many goverment interventions and social policies end up hurting the weak and consolidating the established.

Depriving political (and other) systems of volatility harms them, causing eventually greater volatility of the cascading type.  Avoidance of small mistakes makes the large ones more severe.

A loser is someone who, after making a mistake, doesn’t introspect, doesn’t exploit it, feels embarrassed and defensive rather than enriched with a new piece of information, tries to explain why he made the mistake rather than moving on.  Someone who has made plenty of errors—though never the same error more than once—is more reliable than someone who has never made any.

Turkey Story (butcher loves turkey and feeds it till the day before Thanksgiving); the mother of all harmful mistakes: mistaking the absence of evidence (of harm) for evidence of absence.  A mistake that prevails in intellectual circles and one that is grounded in the social sciences (e.g., like saying that nuclear bombs are safer because they explode less often).

One of life’s packages: no stability without volatility.

The problem with artificially suppressed volatility is not just that the system tends to become extremely fragile, it is that, at the same time, it exhibits no visible risk.  They become prone to Black Swans.

Iatrogenics: Harm done by the healer, as when the doctor’s interventions do more harm than good due to the lack of awareness of the need to look for the break-even point between benefits and harm.

It is generally accepted that harm from doctors accounts for more deaths than any single cancer.  Hippocratic Oath: Primum non nocere (First, do no harm).

A legal way to kill people: If you want to accelerate someone’s death, just give him a personal doctor.  Not a bad doctor.  Just pay for him to choose his doctor.  Any doctor will do.

“No doctor derives pleasure from the health of his friends.”

The Greek term “Pharmakon” is ambigious as it can mean both “poison” and “cure”.

If the patient is close to death, all speculative treatments should be encouraged—no holds barred.  Conversely, if the patient is near healthy, then Mother Nature should be the better doctor.

A main source of the economic crisis—that started in 2007—lies in the iatrogenics of the attempt by Überfragilista Alan Greenspan.

Just a little bit of harm—here and there—in an economy weeds out the vulnerable firms early enough to allow them to “fail early” (so that they can start again) and minimize the long-term damage to the system (“too big to fail”).

Do try to avoid exiting the gene pool.  By the way, fewer pedestrians die jaywalking than using regulated crossings.

In the US, they burn twelve calories in the transportation for every calorie of nutrition; in Soviet Russia, it was one to one.

Stoicism’s Emotional Robustification: When you become rich, the pain of losing your fortune exceeds the emotional gain of getting additional wealth, so you start living under continuous emotional stress.  Loss aversion creates an asymetry => you are fragile.

Do write your resignation letter before starting in your new job, lock it up in a drawer, and feel free while you are there.  If I have “nothing to lose”, then it is all gain, and I am antifragile.

“F*** you money”: a sum large enough to get most of the advantages of wealth (the most important one being independence and the abilitiy to only occupy your mind with matters that interest you), but not its side effects.

If you “have optionality”, you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and those complicated things that take place in in your brain cells.  Because you don’t have to be right often.  All you need is the wisdom to not do unintelligent things to hurt yourself, and to recognize favourable outcomes when they occur.

Evolution can produce astonishingly sophisticated objects without intelligence, simply thanks to a combination of optionality and some type of selection filter, plus some randomness.

Optionality is about getting the upper half of luck.  Option = asymmetry + rationality.  Option is the weapon of antifragility.

Risk taking ain’t gambling, and optionality ain’t lottery tickets.

Seneca said, “Non vitae, sed scolae discimus.”  “We do not study for life, but only for the lecture room.”  This was turned around by many colleges in the US to “Non scolae, sed vitae discimus”.

Avoidance of boredom is the only worthy mode of action.  Life otherwise is not worth living.

Fragility, not probability: Almost all of my decisions have had asymmetric payoff.  I principally decide based on fragility, not so much on True/False (= probability).

Government deficits are particularly concave to changes in economic conditions.  Every additional deviation in, say, the unemployment rate makes deficits worse.  They need to borrow more and more to get the same effect.  Just as in a Ponzi scheme!

The nonlinearity of wealth: Simply by being richer, the world is troubled with additional unpredictability and fragility.  Even at an individual level, wealth means more headaches; we may need to work harder at mitigating the complications arising from wealth than we do at acquiring it.

If you have favourable asymmetries or positive convexity, then in the long run you will do reasonably well, outperforming the average in the presence of uncertainty.  The more uncertainty, the more role for optionality to kick in, and the more you will outperform.  This property is very central to life.

Obvious decisions (robust to error) require no more than a single reason!

We notice what varies and changes more than what plays a large role but doesn’t change.  We rely more on water than on cell phones, but because water does not change, and cell phones do, we are prone to think that cell phones play a larger role than they do.

To live long, but not too long: To account for the effect of “progress”, we need to deduct, of course, from the gains in medical treatment, the costs of the disease of civilization (primitive societies are largely free of cardiovascular disease, cancer, dental cavities, economic theories, lounge music, and other modern ailments).

Treating the tumor that will not kill you  shortens your life as chemotherapy is always toxic.  If all of those dying prematurely from cancer had a malignant tumor, that does not mean that all malignant tumors lead to death from cancer.  That’s looking at the chain backwards, like from all bankers are corrupt follows that all corrupt people are bankers.

Skin in the Game: Antifragility and Optionality at the expense of others.

If you don’t take risks, there is nothing you can do that makes you grand, nothing.

Engineers should spend some time under the bridge they built, something that should be required of financial engineers today.

Any prediction without skin in the game can be dangerous for others as unmanned nuclear plants without the engineer sleeping on the premises.  Pilots should be on the plane.

A writer with arguments can harm more people than any serial criminal (e.g., Thomas Friedman).  He promoted the “earth is flat” idea of globalization without realizing that globalization brings fragilities, causes more extreme events as a side effect, and requires a great deal of redundancies to operate properly.

“I want predictors to have visible scars on their body from prediction errors, not distribute these errors to society.”

Economists often suffer under a harmful misunderstanding of small probabilities and blindness to fragility.  It is a severe disease, one that explains why economists will blow us up again.  They have no skin in the game.  Professors are not penalized when they teach you something that blows up the financial system, which perpetuates the fraud.

Stiglitz Syndrome = Fragilista (with good intention) + ex post Cherry-Picking (Hindsight Bias).

The problem with people who do not incur harm is that they cherry-pick from statements they’ve made in the past; many of them contradictory and end up convincing themselves of their mental lucidity (= a presumed capacity to perceive truth directly and instantaneously).

Never ask anyone for their opinion, forecast, or recommendation.  Just ask them what they have—or don’t have—in their portfolio.

The antifragile can lose for a long time with impunity (= freedom of punishment or harm), so long as he happens to be right once; for the fragile, a single loss can be terminal.

Does the scientific researcher whose ideas are applicable to the real world apply his ideas to his daily life?  If so, take him seriously.  Otherwise ignore him.

The stock market is the greatest, industrial-sized, transfer of antifragility in history—due to a vicious form of asymmetric skin in the game.

A corporation does not have natural ethics; it just obeys the balance sheet.  The problem is that its sole mission is the satisfaction of some metric imposed by security analysts, themselves (very) prone to charlatanism.

A corporation does not have generosity.  Just imagine what would happen to a corporation that decided to unilaterally cancel its receivables—just to be nice.  Yet societies function, thanks to random acts of generosity between people, even sometimes strangers.

Banking industry: Banks have lost more than they ever made in their history, with their managers being paid billions in compensation— taxpayers take the downside, bankers get the upside.  If one does not see this transfer of antifragility as theft, one certainly has a problem.

I wonder why people don’t realize that, by definition, what is being marketed is necessarily inferior, otherwise it would not be advertised.  You certainly need an advertising apparatus to convince people that Coke brings “happiness”—and it works.

The Tobacco Industry is engaged in the business of killing people for a profit.

We have never been richer in the history of mankind.  And we have never been more in debt (for the ancients, someone in debt was not free).  So much for economic growth.

Being self-owned is a state of mind.  The definition of the free man, according to Aristotle, is one who is free with his opinions—as a side effect of being free with his time.  An idle freeman is unpreoccupied with work.  But it does not mean not working; it just means not deriving your personal and emotional identity from your work, and viewing work as something optional, more like a hobby.

And a final statement for all of us Singaporean City-dwellers: People who would have lost their status in the cities conserve it in the provinces.