This blogpost summarizes some of the main points from the book titled “Antifragile”, by Nassim Taleb

Prologue

The main themes in the book are

• There are certain systems in life that gain from disorder, randomness, volatility. Such systems are called antifragile
  • It is easy to detect the fragility-antifragility in systems.
  • Understanding anything from the point of view of fragility, robustness and antifragility
  • Antifragility is different from robustness; the latter is the type of system in which the breaking point of the system is far away and hence is protected from the regular shocks received by the system.
• There are ways to move from the fragility to antifragility
• If systems are left fragile for whatever reasons, it is more likely we are going to see a huge blowup
• Skin in the game - there are many actors in today’s society who make predictions, take actions without skin in the game. They get to ride the upside when thing go their way, but more crucially, they pass on the downside to others

Between Damocles and Hydra

Taleb starts explaining the reason for inventing a new word, “antifragile”, as there seems to be no word that describes the property of a system that gains from disorder. There is also a mythological equivalence between the concept of fragility and antifragility: Damocles-Pheonix-Hydra. Damocles enjoys a fancy banquet with a sword hanging over his head, i.e fragile system that can annihilate all the payoffs that he might receive by enjoying a lavish meal every day. Pheonix, a bird that always come back even after destruction; is equivalent to a system that is robust. Hydra, a serpent like creature that grows two heads when one is cut,is equivalent to a system that is antifragile

Taleb weaves a new word “Mithridatization” to mean that a result of a exposure to a small dose of a substance, that, over time makes one immune to additional, larger quantities of it. It is not a way to be antifragile, but atleast a way to become robust. Another term, “hormesis”, a word coined by pharmacologists, which means a small dose of harmful substance is actually beneficial for the organism, acting as a medicine. All of these terms are meant to drive home the point that stressors are important in one’s life.

We are all in some sort of domain dependence. You work in a field for sometime and automatically it is difficult to translate or identify patterns in other domains. It is only through conscious broadening of skillsets across domains do we become antifragile careerist

Overcompensation and Overreaction everywhere

Taleb introduces the term “Post Traumatic Growth”, a phenomenon where people harmed by past events surpass themselves.

The excess energy released from overreaction to setbacks is what innovates!

Unfortunately many people try to innovate from comfortable places, but unless there is a stressor in our lives, there cannot be genuine innovation. One example mentioned in the chapter is the effect of automation on pilots - resulting in dulling of pilot’s attention and skills.

Noise produced by the person is inverse to the pecking order. The most powerful traders are the least audible.

I came across this statement and it made me reflect in my own life whether there was any overcompensation that I have experienced by being a generalist.

Once one makes an effort to overcome domain dependence, the phenomenon of overcompensation appears ubiquitous.

Where did I build a redundancy ? I think the skills that I have acquired seemed to be redundant at any given point in time. But I guess the redundancy also gives me the confidence that I will be able to sail through any Black Swan event in my career. Redundancy can be a savior in times of distress or very valuable in terms of payoff. Think of Scott Adams who combined skills from various domains to create something extremely valuable. So, in a way, everyone who tries to create skillsets across domains is creating redundancy is some ways, i.e. the skillset cannot be directly used for the current task(for which he/she is getting paid for). However this redundancy is what keeps them afloat or rich with the passage of time

Redundancy can also be viewed as overcompensation. Try to overcompensate your programming skills by learning more than a handful of languages. Try to overcompensate your trading career by trading more than one asset class. Try to overcompensate your marketing career by being a part time lecturer at an academy. I guess there are many ways to overcompensation and this goes against the usual efficiency crap that we get to hear.

Information is antifragile; it feeds more on attempts to harm it than it does on efforts to promote it. For instance, many wreck their reputations merely by trying to defend it.

Taleb says criticism can also be antifragile, citing the example of Ayn Rand books.

I think rereading some of the passages from this chapter makes a reader start thinking about the triad fragility-robustness-antifragility in every aspect of life that he/she comes across. May be in a way, you will seek out all people who harm you, as it is those who harm you, that make you stronger

It is quite perplexing that those from whom we have benefied the most aren’t those who have tried to help us but rather those who have actively tried - but eventually failed- to harm us.

The Cat and the Washing Machine

The world we are living is hyperconnected and we are awash with causal opacity, the inability to identify specific factors that cause events, especially low probability events.

Taleb gives the example of human bones where most of us carry the notion that old age causes bone weakening. Research shows that it is not so straightforward as there is evidence that bone weakening causes aging.

Well, the fact that we all need stressors is important. I think may be one should reflect every week and take a count of all the stressors experienced in one’s life so that one can be sure that one is obtaining regular information about oneself. Taleb also mentions the kind of stressors that become important for us

Humans tend to do better with acute than with chronic stressors, particularly when the former are followed by ample time for recovery, which allows the stressors to do their jobs as messengers.

Taleb is also against the intake of drugs to restore normalcy in our conditions. He says we should experience the world in all its volatile nature so that we become stronger, we become more resistance to the shocks.

Measures that aim at reducing variability and swings in the lives of children are also reducing variability and differences within our said to be Great Culturally Globalized Society

Another term from the chapter, “Touristification”

Touristification is the term for an aspect of modern life that treats humans as washing machines, with simplified mechanical responses - and a detailed user’s manual. It is the systematic removal of uncertainty and randomness from things, trying to make matter highly predictable in the smallest details. All that for the sake of comfort, convenience and efficiency

The worst touristification is the life we moderns have to lead in captivity, during our leisure hours: Friday night opera, scheduled parties, scheduled laughs. This “goal-driven” attitude hurts deeply inside my existential-self

After reading this chapter, it is obvious to a reader that one must seek volatility in life to gain upside. Seeking antifragile properties means that setting up various aspect of one’s life to maximize volatility from asymmetric payoffs

An environment with variability does not expose us to chronic stress injury, unlike human-designed systems. If you walk on uneven, not man-made terrain, no two steps will ever be identical - compare that to the randomness-free-gym machine offering the exact opposite: forcing you into endless repetitions of the very same movement.

What Kills Me Makes Others Stronger

I loved this chapter for some reason. The fact that there were layers of fragility-antifragility in a system was pretty novel way of seeing the world. Restaurant business is fragile but overall the restaurant industry is antifragile. Individuals are fragile but Nature is antifragile. Systems that can lead to catastrophic errors are fragile but one can learn from those errors and become antifragile; learning from titanic disaster, plane crashes, nuclear disasters.

In a way, if the system has random independent errors, the system become antifragile over a period of time.

You may never know what type of person someone is unless they are given opportunities to violate moral or ethical codes

My characterization of 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, and tries to explain why he made the mistake rather than moving on.

Taleb makes an interesting perspective between aggregate vs individual. The aggregate wants individual to be fragile so that as a whole the system becomes antifragile.

The Souk and the Office Building

Taleb starts off discussing the careers of two hypothetical characters, John and George, the former is employed as a clerk, the latter as a taxi driver. He says even through John’s looks stable and peaceful, it is far more fragile than George’s career.

The central illusion in life

randomness is risky, that it is a bad thing - and that eliminating randomness is done by eliminating randomness

Taxi drivers, prostitutes, carpenters, plumbers, tailor and dentists, have some volatility in their income but they are robust to a minor professional Black Swan, one that would bring their income to a complete halt. Their risks are visible. Not so with employees, who have no volatility, but can be surprised to see their income going to zero after a phone call from the personnel department.

There is a difference in the way we perceive mistakes when we are self-employed vs salaried employee. When you are your own boss, a mistake is a way to learn and move in a certain direction. On the other hand, if you are working in a big corporation, the mistake does not lent clear direction as your direct role is limited; there could be a number of factors at play. In fact human mind rationalizes that it is the system at fault and not one’s individual action

This means that the way we are programmed to take feedback differs if we are an entrepreneur vs salaried person. In the former, you are always ok with small errors as you know that it will help you avoid big black swan events. In the case of salaried by avoiding small mistakes gives rise to a large mistake

Humans are afraid of the variability and naively fragilize systems by protecting them. In other words, a point worth repeating every time it applies, this avoidance of small mistakes makes the large ones more severe.

There is an interesting account of Switzerland being one of the most robust places on earth because there is no central government. It is a country that is entirely bottom-up. Also a point to note that this is not scalable model,i.e. if you vastly increase the size of each of the constituent municipalities in Switzerland, the system as a whole becomes fragile

I use the example of Switzerland to show the natural antifragility of political systems and how stability is achieved by managing noise, having a mechanism for letting it run its natural course, not by minimizing it.

Taleb also gives a quick reminder of the terms - Mediocristan and Extermistan. The former refers to the world where there are a number of small variations, random independent variations. The latter refers to the world where there is seemingly stable amount of variations, but once in a while gets wiped out by Black Swan.

There are also examples(Northern Lavant) that illustrate that randomness, strife, conflict in a country made it stable and developed immunity towards Black Swans

Tell them I Love (Some) Randomness

James Clerk Maxwell published a paper in 1867 with his findings that tight control of engine speeds lead to instability. Taleb says the above observations also holds true across several domains; randomness makes the system stronger, less prone to the impact of negative Black Swan events. Small forest fires periodically cleanse the system of the most flammable material, so this does not have the opportunity to accumulate. Systematically preventing forest fires from taking place “to be safe” makes the big one much worse.

Taleb mentions a thought experiment of injecting randomness via “hungry donkey” problem that is stuck between food and water and doesn’t know which direction to go, unless you give a shot of randomness in either of the direction after which it starts moving. This idea that a dose of randomness is used in many fields such as metallurgy, simulated annealing based search etc.

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 risks. Since volatility is information, the systems lack a feedback mechanism

If one tries to relate the above to managing one’s career, there needs to be a way to bring some sort of volatility in one’s work, be it by accepting different types of challenges, accepting a different location for work, working in different teams, working in different domains - all of these inject a dose of randomness which is good for a career.

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

Taleb gives a prelude to the concept of “modernity” that is discussed in the subsequent chapters

Humans' large scale domination of the environment, the systematic smoothing of the world’s jaggedness and the stifling of volatility and stressors. Modernity corresponds to the systematic extraction of humans from their randomness laden ecology-physical and social, even epistemological. Modernity is not just the postmedieveal, postagrarian and postfeudal historical period as defined in sociology textbooks. It is rather the spirit of an age marked by rationalization, the idea that society is understandable, hence must be designed, by humans. With it was born statistical theory, hence the beastly bell curve. So was linear science. So was the notion of “efficiency” or optimization.

Modernity is a Procrustean bed, good or bad - a reduction of humans to what appears to be efficient and useful.

Naive Intervention

I have learned a new word from this chapter, iatrogenics, meaning one that causes more harm than benefit. In simple words, causing harm while trying to help

Examples of iatrogenics

• Death of George Washington in 1799 by using a standard treatment of bloodletting
• Medical errors - cost of action kills has caused more harm
• Alan Greenspan
• Supply a typical copy editor with a text

Opposite of iatrogenics

• Ayn Rand books

There is an interesting table that talks about various domains where attempts to “improve matters” have only made matters worse.

Taleb talks about various examples where catalyst is mistaken to be the cause of the event.

Prediction as a child of modernity

One gets to see several examples of the triad Fragile-Robust-AntiFragile, in various chapters of the book.

When faced with the random forecast about an uncertain event, there is evidence that one increases risk taking actions. Indeed if a close friend of yours says that that a specific crypto coin is going to make a ton of money in the next few x days, and if the prediction happens to be a random forecast based on a set of random events, it is likely that you will atleast consider investing in the coin.

Taleb says, the share of extremistan is increasing. Indeed if you look at the way success is measured in today’s world, it is winner-take-all in many fields. Five tech companies in the world dominate world, a few youtubers make millions while rest are in oblivion, a few twitter accounts have more influence than millions of accounts. A few crypto coins have given insane returns. Are these predictable ? Are the unicorns predictable ? Is Crypto space predictable ?

Today more than ever, we are witnessing complicated models that hypothesize that they can predict stuff in the Black Swan World.

Fat Tony and the Fragilistas

This chapter gives an account of two fictional characters - Nero and Fat Tony. Ofcourse the undertone of the chapter gives a clue that Nero is what Taleb identifies himself with. Both characters understand that prediction is a suckers game and it is better to identify the suckers who believe in fragile world and profit from the actions of the suckers

Seneca’s Upside and Downside

To become a successful philosopher king, it is much better to start as a king than as a philosopher

Taleb introduces Seneca to the readers and shows that his strategies and life hacks that we read even after two millenia encapsulate movement from fragile to antifragile worlds. Stoicism is a way to become robust by becoming immune to one’s external circumstances.

I had listened to a talk by Sadhguru who offers a story about a wise person who strips to his bare essentials every time he has to make an important decision; rationale being that unburdened by the current excesses in his material and intellectual possession, he can take a calm decision. Taleb mentions that Seneca also followed a similar hack where he begins his day assuming that a ship wreck has destroyed all his wealth.

An intelligent life is all about such emotional positioning to eliminate the sting of harm, which as e 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.

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

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

Never Marry a Rock Star

Fragility has one dangerous attribute, irreversible damage.Suppose one makes a living in a fragile profession - let’s say banking. It is likely that you have made a steady set of income for many years and then a black swan event wipes out the entire savings.

The barbell strategy is a way to achieve antifragility and move to the right side of the Triad. In the context of the book, one can imagine any object that is a combination of two extremes with nothing in the middle. For example, extreme risk aversion strategy along with extremely risky strategy. By pursuing the strategies together, one can see the barbell technique remedies the problem that risks of rare events are incomputable and fragile to estimation error.

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

The title of this chapter is derived from observing the mating behavior of some of the females in the animal kingdom. The mating approach is where the females tend to mate with boring and stable males 90% of the time and 10% of the time with adventurous males, the rationale being that the desired offspring should have both economic-social stability and good genes

One can also see barbell strategy applied by people in the literature field. There are many brilliant French authors who take up a boring day job( a low risk job that ceases to exist when you leave the office ) that frees them to experiment freely with the remaining time.

Barbell strategy can also be followed in the way you do work- Pure action, then pure reflection.

I find it preferable to work intensely for very short hours, then do nothing for the rest of the time, until I recover completely and look forward to a repetition, rather than being subjected to the tedium of Japanese style low-intensity interminable office hours with sleep deprivation. Main course and dessert are separate.

My writing approach is as follows; on one hand a literary essay that can be grasped by anyone and on the other technical papers, nothing in between - such as interviews with journalists or newspaper articles or op-ed pieces, outside of the requirements of the publishers.

Do you really know where you are going?

Taleb introduces teleological fallacy that might influence the way we think and act in various domains of our life

Teleological fallacy is an illusion that you know exactly where you are going, and that you knew exactly where you were going in the past, and others have succeeded in the past by knowing where they were going

Learnt a new way of labeling two different mindsets that we might have - flaneur vs tourist. A rational flaneur is someone who, unlike a tourist, makes a decision at every step to revise his schedule, so he can imbibe things based on new information. Tourist however is one that follows pre-packaged activities that are put in place by a tourist operator, or a map.

Thales' sweet grapes

Taleb mentions Thales, a greek philosopher who walked the talk, when he made a small fortune by putting a down payment on the seasonal use of every olive press in the vicinity of Miletus. The example is meant to show the power of option contracts as an agent of antifragility

You will never get to know yourself- your real preferences - unless you face options and choices. Recall that the volatility of life helps provide information to us about others, but also about ourselves. Plenty of people are poor against their initial wish and only become robust by spinning a story that it was their choice to be poor - as if they had the option. Some are genuine; many don’t really have the option - they constructed it. Sour grapes is when someone convinces himself that the grapes he cannot reach are sour.

The essayist Michel de Montaigne sees the Thales episode as a story of immunity to sour grapes: you need to know whether you do not like the pursuit of money and wealth because you genuinely do not like it, or because you are rationalizing your inability to be successful at it with the argument that wealth is not a good thing because it is bad for one’s digestive system or disturbing for one’s sleep or other such arguments.

The above resonates with me. I have been spending the last decade under the assumption that whatever I am learning, doing is all going to help me in trading, an activity I do not know whether I would enjoy. However the fact that I have not spent a single professional day in the last few years trading full time says that may be I have not been honest with myself. I have not walked the talk. It is high time I do it.

Average of outcomes is not what the option derives it value from. It gets from the dispersion of outcomes

Taleb advocates trial and error convex tinkering that has a low-cost mistakes, with known maximum losses, and large potential payoff

Option = asymmetry + Rationality

The rationality part lies in keeping what is good and ditching the bad, knowing to take the profits. Life is long gamma is a good aphorism to keep in mind while choosing various paths in life, making various decisions in life. If one looks at life closely, many of the big benefits accrue from volatility.

Life is long gamma - In layman’s terms, both financial markets and human beings ultimately benefit from volatility over the course of their respective lives.

Lecturing birds on how to fly

Taleb takes a dig on all the people who are of the view that formal education, research leads to science which in turn leads to technologies which in turn leads to tools. He offers a ton of examples to show that is in fact the other way around. Birds do not need formal education in order to fly but by giving lectures to bird on flying and then seeing them fly, one comes to the mistaken conclusion that birds have learnt to fly after receiving the education.

There is something sneaky in the process of discovery and implementation. Randomness plays a role at two levels: the invention and implementation

Implementation does not necessarily proceed from invention. It requires luck and circumstance

Learned about “Epiphenomena”

In an epiphenomena, you don’t usually observe A without observing B with it, so you are likely to think that A causes B, or that B causes A, depending on the cultural framework or what seems plausible to the local journalist.

When two things are not the “same thing”

Taleb starts out the chapter saying that a lot of people have a misrepresentation of the importance of education in creating wealth and useful technologies. It is often hypothesized that education leads to wealth and economic growth, but it is usually the other way. Wealth and Economic growth leads to education.

Education is a good for stabilizing your income and keeps you devoid of experiencing stressors. However the aggregate effect of education is washed away at the nation level. It is tinkering, trial and error, exploiting optionality that leads to better outcomes in terms of wealth generation.

Taleb introduces Green Lumber fallacy, a behavior observed in a successful commodities trading in “green lumber”. He had falsely assumed that “green lumber” refers to lumber painted in green, when in fact the it was freshly cut lumber that was not dried. This misrepresentation of the knowledge of green lumber did not stop him from making a killing in the market trading “green lumber”.

The fact is that predicting the order flow in lumber and the usual narrative had little to do with the details one would assume from the outside are important. People who do things in the field are not subjected to a set exam; they are selected in the most non-narrative manner - nice arguments don’t make much difference. Evolution does not rely on narratives, humans do. Evolution does not need a word for the color blue

Taleb’s experience with forex traders showed that most of the forex traders did not read economic research reports and did not theorize about the real world. They were the real tinkerers, learning by trial and error.

I had never looked at “trial and error” as optionality until reading this book. One must be doing trial and error as it is nothing but a way to explore antifragility. You have a set of low possible errors and finally you are rewarded with a big payoff if things go your way. From this perspective, the process of exploring the world with trial and error is being long gamma in life. Nobody is writing these options like a financial security. These are embedded options in real life that you must recognize and start adopting them.

Suppose you want to create something that can be useful to the community, it is better to tinker and create something, rather than theorizing about it.

Another interesting mental model from this chapter relates to conflation

When you have optionality, or some antifragility, and can identify betting opportunities with big upside and small downside, what you do is remotely connected to what Aristotle thinks you do.

There is something(perception, ideas, theories) and a function of something(price, reality). The conflation problem is to mistake one for the other, forgetting that there is a “function” and that such function has different properties.

The more asymmetries there are between the something and the function of something, then the more difference there is between the two. They may end up having nothing to do with each other

Examples quoted relating to people who escaped the conflation are Jim Simons and Ariel Rubenstein

Taleb talks about two brothers from the Greek Legend, “Prometheus” and “Epimethus”; the former was forward looking whereas the latter was backward looking. You make forays in to the future by opportunism and optionality. Optionality is Promethean.

All this does not mean that tinkering and trial and error are devoid of narrative; they are just not overly dependent on the narrative being true- the narrative is not epistemological but instrumental

This chapter makes me stop doing what I am doing right now and start working on things rather than spending time about theorizing the way it works. I think I am not cut out to be a consultant as the profession by default does not have one’s skin in the game. Also a consultant is playing the game of Mediocristan, nothing wrong but the payoff is very limited.

An idea does not survive because it is better than the competition, but rather because the person who holds it has survived. Accordingly, the wisdom you learn from your grandmother should be vastly superior to what you get from a class in a business school

History written by the losers

Taleb makes a strong case against theoretical principles saying that irrespective of the discipline, they are derived from the actions of practitioners. Option traders did not know Girsanov theorem. They knew a way to price options and the theory of option pricing was developed after the practice. Hence thinking that solid understanding of principles of pseudo science will help you make a better trader is total BS. It is only through tinkering and playing with real life data, doing real life trading, does one realize the way world works. Of course, one can then dip in to theory if you are curious about the way things work.

Whenever you pick a solid theoretical book that you think will help you understand the field better, may be an alternative is to start tinkering without the baggage.

Traders trader - traders figure out techniques and products - academic economists find formulas and claim traders are using them - new traders believe academics - blowups

“Charlatan” was held to be a synonym for empirick. The word “empiric” designated someone who relied on experiment and experience to ascertain what was correct. In other words, trial and error and tinkering.

Taleb issues a few rules based on the content of the chapter

1. Look for optionality, in fact, rank things according to optionality
2. Preferably with open-ended, not closed-ended payoffs
3. Do not invest in business plans but in people, so look for someone capable of changing six of seven times over his careerOne gets immunity from backfit narratives of the business plan by investing in people
4. Make sure you are barbelled

A lesson in disorder

I loved this chapter. Taleb talks about the importance of being an autodidact in life and starts off by talking about soccer moms

Soccer moms try to eliminate the trial and error, the antifragility, from children’s lives, move them away from the ecological and transform them in to nerds working on preexisting maps of reality.

I believe that one can be an intellectual without being a nerd provided one has a private library instead of a classroom, and spends time as an aimless flaneur benefiting from what randomness can give us inside and outside the library. Provided we have the right type of rigor, we need randomness, mess, adventures, uncertainty, self-discovery, near-traumatic episodes, all these things that make life worth living, compared to the structured, fake and ineffective life of an empty-suit CEO with a preset schedule and an alarm clock.

Taleb gives a glimpse in to his own life on how he followed a barbell strategy in his auto-didactic life. Whatever people might have opinions about Taleb, I think this chapter in the book is priceless and is very inspiring, atleast to people like me who do not have formal education in math but have over a period of time self-taught many aspects of math and today I love the intersection of math and statistics.

Much of what other people know isn’t worth knowing

I wasn’t exactly an autodidact, since I did get degrees; I was rather a barbell autodidact as I studies the exact minimum necessary to pass any exam, overshooting accidentally once in a while, and only getting in trouble a few times by undershooting. But I read voraciously, wholesale, initially in the humanities,later in mathematics and science, and now in history.

The minute I was bored with a book or subject I moved to another one, instead of giving up on reading altogether. When you are limited to the school material and you get bored, you have a tendency to give up and do nothing or play hooky out of discouragement. The trick is to be bored with a specific book, rather than with the act of reading. So, the number of pages absorbed could grow faster than otherwise. And you find gold, so to speak, effortlessly, just as in rational but undirected trial-and-error based research. it is exactly like options, trial and error, not getting stuck, bifurcating when necessary but keeping a sense of broad freedom and opportunism. Trial and error is freedom.

So, I went to the bookstore and ordered almost every book with “probability” and “stochastic” in its title. i read nothing else for a couple of years, no course material, no newspaper, no literature, nothing. I read them in bed, jumping from one book to the next when stuck with something I did not get immediately or felt ever so slightly bored. I was hungry to go deeper in to the problem of small probabilities.

Fat Tony debates Socrates

Taleb takes a dig at philosophers like Socrates who tried intellectualizing everything. Via Fat Tony, Taleb engages in a duel with Socrates and tries to make the point that

You are taking the joy of ignorance out of the things we don’t understand. And you have no answer you have no answer to offer them

And this priority of definitional knowledge led to Plato’s thesis that you cannot know anything unless you know the Forms, which are what definitions specify.

What is not intelligible to me is not necessarily unintelligent

To Tony, the distinction in life isn’t True or False, but rather sucker or nonsucker. Things are always simpler with him. In real life, as we saw with the ideas of Seneca and the bets of Thales, exposure is more important than knowledge. Decision effects supersede logic. Textbook “knowledge” misses a dimension, the hidden asymmetry of benefits - just like the notion of average. The need to focus on the payoff from your actions instead of studying the structure of the world has been largely missed by intellectual history.

The payoff, what happens to you is always the most important thing, not the event itself.

Taleb makes an important point that it is futile to estimate the probabilities of tail events. By default there is a lot of noise in their estimation. Instead by thinking about payoffs, one can align one’s work in such a way that you deal with a world of asymmetric payoffs. Yes, there are failures and there are probabilities of failures that go with it. However there is a massive payoff with a minuscule probability that might make all the slog through failures worth the time and effort.

The predictors' reply when we point out their failure has typically been “we need better computation” in order to predict the event better and figure out the probabilities, instead of the vastly more effective “modify your exposure” and learn to get out of trouble, something religions and traditional heuristics have been better at enforcing than naive and cosmetic science.

I think the theme of “tinkering” is also subtly mentioned in this chapter as it is only through “tinkering” that you can move in a direction of asymmetric payoff. The less you tinker with the world, the less you give the world what you the world wants, the less is the chance of asymmetric payoff.

On the difference between a large stone and a thousand pebbles

Taleb gives a simple example of fragile object - porcelain and says that it can sustain a lot of small random shocks but becomes completely useless if it is dropped. Cup is fragile because it is hurt by the volatility.

For the fragile, shocks being higher harm as their intensity increases(up to a certain level)

For the fragile, the cumulative effect of small shocks is smaller than the single effect of an equivalent single large shock. For the antifragile, shocks being more benefits as their intensity increases

Other examples mentioned to highlight fragility are

• Parable of “King and his Son” : harm from stone particles is far less than the harm from a stone
• jumping from various heights
• consuming wine
• financial events
• earthquakes
• fire sale of securities
• large theater with the same exit door
• travel time
• project completion cost with randomness

The idea of convexity and concavity are discussed so that antifragile and fragile system characteristics can be further elaborated.

There is also an interesting example of NY traffic that illustrates the problem with seeking efficiency. There is a need for building redundancy in the systems so that the they are robust and antifragile.

This is the central problem of efficiency; these types of errors compound, multiply, swell, with an effect that only goes in one direction - the wrong direction

By the end of this chapter, my mind is spinning with terms such as nonlinearity, redundancy, not chasing inefficiency, convexity, concavity, injecting randomness, payoffs. I think the book has a magic spell on the reader, i.e. he/she will start seeing everything from the eyes of fragile-robust-antifragile

May be I am following a barbel type of strategy in my career. I have always loved reading books, exploring programming languages, lead wherever my curiosity lead to, while keeping a day job that pays the bills. The flip side is that I have not been able to leverage on the skills that I have built over time. May be it is high time I do so.

The philosophers stone and its inverse

Taleb talks about Fannie Mae, a company that went belly up during the 2008 meltdown and highlights the fragile aspect of its business; linear increase in risk creates a disproportionately large risk

Once I figured out that fragility was directly from nonlinearity and convexity effects, and that convexity was measurable, I got all excited.

We can classify things by three simple distinctions: things that, in the long run, like disturbances(or errors), things that are neutral to then, and those that dislike them. By now, we have seen that evolution likes disturbances.

I think the point Taleb is trying to make is that there is a massively disproportionate negative or positive payoff in the tail events; this is applicable in many aspects of life. Call this f(X) and most of the time the summary statistics such as average, median of the function is useless as tail payoffs are asymmetric. This means that there is no point in trying to estimate the probabilities of X. There will always be error in estimating small numbers. The better approach to life is to make sure that the life is aligned in such a way that whatever your X is, make sure that X has randomness in it and f(X) that you choose is convex. This nonlinearity convex function coupled with the randomness of X equates to long vol and hence a scope for a disproportionately large payoff

The hidden benefit of antifragility is that you can guess wrong than random and still end up outperforming. Here lies the power of optionality- your function of something is very convex, so you can be wrong and still do fine - the more uncertainty, the better.

The above holds good for the way you choose your career too. If you are in a trading career where you have the sole control on the P&L, a wrong trade with risk controls would not harm you, but one right trade can fetch you massive money. Also as an entrepreneur, you have control on the way you spend your time and energy. This means that you tinker with the world, check out how things are working and then whatever bets you lose are an indication of the way you have to move. Ultimately there is a possibility of an asymmetric payoff. The life of an entrepreneur is antifragile. The life of a data analyst is fragile.

It looks like almost every chapter the same math principles are elaborated with different set of examples, i.e. convexity, non linearity, Jensen’s inequality

Time and fragility

Taleb’s key idea from the chapter is that time is the biggest destroyer of fragile systems. Hence if a system has survived time, then in all probability the system has antifragility built in to it

Taleb talks about via negativa method,

The principle that we know what is wrong with more clarity than what we know is right, and that knowledge grows by subtraction. Also it is easier to know that something is wrong than to find the fix. Actions that remove are more robust that the ones we add, as addition may have unseen complicated loops.

In that sense, if you predict that fragile systems will break, eventually your prediction will be right.

So, the prime error is as follow. When asked to imagine the future, we have the tendency to make the present as a baseline, then product a speculative destiny by adding new technologies and products to it and what sort of makes sense, given an interpolation of past developments. We also represent society according to our utopia of the moment, largely driven by our wishes - except for a few people called doomsayers, the future will be largely inhabited by our desires. So we will tend to over-technologize it and underestimate the might of the equivalent of these small wheels on suitcases that will be staring us for the next millenia

We notice what varies and changes more than what plays a large role but doesn’t change.

If something that makes no sense to you, if that something has been around for a very, very long time, then irrational or not, you can expect it to stick around much longer, and outlive those who call for its demise

By issuing warning based on vulnerability- that is, subtractive prophecy - we are closer to the original role of the prophet; to warn, not necessarily to predict, and to predict calamities if people don’t listen.

Medicine, Convexity and Opacity

If you are presented with something new and it seems to be doing good to you, how would you think about a statement that criticizes what you are doing saying that it might harm you? Well, one of the responses would be that “what is the evidence ?”. Any number of examples can be cited in this context: smoking, driving fast, bungee jumping, adventure sports, taking drugs. To respond to questions, Taleb says

The non-natural needs to prove its benefits, not the natural. Nature is to be considered much less of a sucker than humans

One must not mistake evidence of no harm to the no evidence of harm

The hidden costs of health care are largely in the denial of antifragility. The disease of civilization can result from the attempt by humans to make life comfortable for ourselves against out own interest, since the comfortable is what fragilizes.

I think that one must always question the value of comfort that we are all seeking in our modern life. Why should one’s life be comfortable if it makes us fragile ?

Taleb talks about two principles of iatrogenics

1. We do need evidence of harm to claim that a drug is dangerous. The harm is in the future, not in the narrowly defined past
2. Iatrogenics is not linear

When we look at modern drugs that seem to help us in becoming healthier, if you are already moderately healthy, then there is no point in taking these drugs. More likely they will harm you in the long run, even though they might yield incremental benefits in the short run. It is similar to someone finding alpha in the mature markets. There is no free lunch

The iatrogenics is in the patient, not in the treatment. 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 doctor

The modus operandi in every venture is to remain as robust as possible to changes in theories. Our understanding of the biological processes is coupled with a decline of pharmaceutical discoveries, as if rationalistic theories were blinding and somehow a handicap.

Taleb talks about three kinds of traditions in medieval medicine - rationalists, skeptical empiricists and methodists. Rationalists are the ones that are based on preset theories; skeptical empiricists are the ones who refuse theories and are skeptical of the ideas making claims about the unseen, the methodists are the ones who taught each other some simple medical heuristics stripped of theories and found an even more practical way to be empiricists.

Even though the above traditions are relevant to medicine, it can be applied to the way we choose modern life. Whatever work that we do, are you in the world of theorizing without feedback, are you in the world of being skeptical and not doing anything about it, are you in the world where you are tinkering ?

To Live Long, but Not Too Long

Taleb is of the opinion that there are many types of cases in medicine where human life has been harmed by medicine, rather a lack of it. He calls it ‘iatrogenics’. He suggests that it is better not to treat patients that are mildly ill and offer maximum treatment that are going through life

reason backward, starting from iatrogenics to the cure, rather than the other way around. Whenever possible, replace the doctor with human antifragility. But otherwise don’t be shy with aggressive treatments

I am sure there are other things in life that is better left untreated than treated. Bringing randomness in to antifragile systems is a good way to get the best out of the system. If you are an autodictat, reading a wide range of books around a topic, bringing randomness to the way you read books around a topic could be very useful. This randomness led approach might create a antifragile informational system for the subject that you are learning.

The greatest and the most robust contribution to knowledge consists in removing what we think is wrong - subtractive epistemology

We know a lot more what is wrong that what is right, or, phrased according to the fragile/robust classification, negative knowledge. So knowledge grows by subtraction much more by addition - given that what we know today might turn out to be wrong but what we know to be wrong cannot turn out to be right, at least not easily.

Steve Jobs:

People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1000 things

Skin in the game

This chapter talks about the agency problem that plagues many fields, where the doers have no skin in the game and are prepared to take risks with a peculiar characteristic - they get to keep the upside but they pass on the downside

Table 7 in the chapter talks about three categories of people

• No Skin in the game
• Skin in the game
• Skin in the game for the sake of others, or Soul in the game

Data miners mentioned in the “No Skin in the game” column and immediately realized the way my current life has panned out. It is a game where I am merely analyzing data and I have no skin in the game for the recommendations I am making. The demos I get to create to show to my clients are just that. Feedback is the sale associated with the demos but apart from that I don’t have any skin in the game. The bad part of that is that I do not get to see the upside of my efforts. Time and again I have seen that my efforts don’t get the necessary payoff because of the structure that I am in. In a typical work setting, it is difficult to get a massive upside as your life does not have periodic shocks - there are no stressors in the life, like that of an entrepreneur

Risk vendors, data vendors, analytic vendors also fall in the category of “No Skin in the game”. At a philosophical level, there is less of learning. One gets to maximize their learnings only if one has a skin in the game. So, if one’s career is built around selling analytics, the opportunity to learn from the real world is limited

Another idea I picked up from a youtube talk on antifragility is that “robustness” simply means that the breaking point of something is distant. Something being robust means that the material can withstand stressors. This is different from being antifragile that becomes stronger from stressors.

Whenever you get to hear opinions, stories, predictions from others, it is better to go with two rules

• See if there is asymmetry in rewards and punishments for the person who is recommending
• See if there is redundancy layer for the actions

Taleb gives a spate of examples of people from the three categories mentioned in table 7. The more I think about the various roles in my current workplace, the more I see that people do not have a skin in the game. There are many teams that are working on sustainable finance, be it creating datasets or creating relevant offerings in this space. Mostly it is talk and there is no skin in the game for the people doing this talk.

Fitting ethics to a profession

The ideas mentioned in this chapter are as follows:

• Big Data problems: With the rise of big data, there is also a massive increase in finding spurious correlations. Couple this with the fact that researchers are inclined and incentivized to find something, most of the the papers published contain results that are essentially useless. Researchers cherry pick from the results and report whatever they find it convenient. In a sense, researchers have an optionality

• Big Data can be used for debunking hypothesis

• Absence of evidence is not the same as evidence of absence

• Once you have a vested interest in something, it is easy to dress up an opinion that benefits you, as one that benefits everyone

• Treadmill effect: You have to run to just remain at the same place

• Alan Blinder problem

  • Using privileges of office retrospectively at the expense of citizens.
  • Violating moral rules while complying perfectly with the law; confusion of ethical and legal
  • The regulator’s incentive to make complicated regulations in order to subsequently sell his “expertise” to the private sector

• Ethical inversion - fitting one’s ethics to actions or profession rather than the reverse

  

Conclusion

Taleb manages to give a one line summary of the entire book

Everything gains or loses from volatility. Fragility is what loses from volatility and uncertainty.

Takeaway

I think the biggest takeaway from this book is to approach your life with a mindset of seeing things as fragile-robust-antifragile. In some areas of life, you want robustness, In some areas of life you might want to avoid fragility and in some areas of life you might want to develop antifragility. For every activity you do on a daily basis, I think it makes sense to ask the following questions:

1. What am I tinkering on a daily basis ?
2. Do my daily activities have any chance of an asymmetric payoff ?
3. Am I falling for iatrogenics ?
4. Is my current profession fragile ? If so, how does one build redundancies in professional life ?
5. Am I following Barbell strategy in any of the facets of my life ?
6. What systems around me that are fragile ?
7. What systems around me that are robust ?
8. What systems around me that are antifragile ?
9. When people dish out projections, are they giving positive predictions or negative predictions ?
10. What can you do to make sure that you have an asymmetric payoff structure in your career ?
11. Why should one starve on a regular basis ?
12. Why should one insert randomness in one’s schedule on a regular basis ?
13. Randomness is good - What are the systems, people, ideas around you that have survived because of randomness ?
14. What are the positive Black Swans that everyone is talking about ? Is there a way to position yourself to capitalize on it?
15. In whatever type of education process that you are following, are you being a tourist or a flaneur ?
16. When you are building models, are you building sophisticated models that perform worse than simple heuristics ?
17. What are the number based signals that you are tracking on a regular basis ?
18. Can you build a black-swan protected systems if you think your career is fragile ?
19. Given x and f(x), and the latter is a convex function, can you play a barbell strategy in life so that you can get the benefit of Jensen’s inequality ?
20. Are you injecting randomness in some of your routines so that you get more feedback from the way the real world function is behaving?