Read Antifragile: Things That Gain from Disorder Online
Authors: Nassim Nicholas Taleb
Antifragile: Things That Gain from Disorder (35 page)
Another idea from Rory Sutherland: the U.K. guidelines for patients with mild problems coming from alcohol are to reduce the daily consumption to under a certain number of grams of alcohol per day. But the optimal policy is to avoid alcohol three times a week (hence give the liver a lengthy vacation) then drink liberally the remaining four. The mathematics behind this and other barbell ideas are outlined with the later discussion of Jensen’s inequality.
Most items on the right of the Triad have a barbell component, necessary, but not sufficient.
So just as Stoicism is the domestication, not the elimination, of emotions, so is the barbell a domestication, not the elimination, of uncertainty.
1
There is evidence of such a barbell strategy but no clarity about the theory behind it—evolutionary theorists enjoy narratives but I prefer evidence. We are not sure if the strategy of extrapair copulation in the animal domain actually enhances fitness. So the barbell—accountant plus cheating—while it exists, might not be aiming at the improvement of the species; it can be just be for “fun” at low risk.
2
In finance, I stood in 2008 for banks to be nationalized rather than bailed out, and other forms of speculation not entailing taxpayers left free. Nobody was getting my barbell idea—some hated the libertarian aspect, others hated the nationalization part. Why? Because the halfway—here, the regulation of both—doesn’t work, as it can be gamed by a good lawyer. Hedge funds need to be unregulated and banks nationalized, as a barbell, rather than the horror we now have.
3
Domain dependence again. People find insuring their house a necessity, not something to be judged against a financial strategy, but when it comes to their portfolios, because of the way things are framed in the press, they don’t look at them in the same way. They think that my barbell idea is a strategy that needs to be examined for its
potential return
as an investment. That’s not the point. The barbell is simply an idea of insurance of survival; it is a necessity, not an option.
N
ow we get into innovation, the concept of options and optionality. How to enter the impenetrable and completely dominate it, conquer it.
Summa Theologiae
by Saint Thomas Aquinas is the kind of book that no longer exists, the book-as-monument, a
summa
being the comprehensive treatment of a given discipline, while freeing it from the structure the authorities had given it before—the antitextbook. In this case its subject matter is theology, meaning everything philosophical, and it comments on every body of knowledge as it relates to his arguments. And it reflects—and largely directs—the thought of the Middle Ages.
Quite a departure from the book with a simple closed-end subject matter.
The erudite mind’s denigration of antifragility is best seen in a sentence that dominates the
Summa,
being repeated in many places, one variant of which is as follows: “An agent does not move except out of intention for an end,”
agen autem non movet nisi ex intentione finis
. In other words, agents are supposed to know where they are going, a teleological argument (from
telos,
“based on the end”) that originates with Aristotle. Everyone, including the Stoics, but excluding the skeptics, fell
for such teleological arguments intellectually, but certainly not in action. Incidentally, it is not Aristotle whom Aquinas is quoting—he calls him the Philosopher—but the Arab synthesizer of Aristotle’s thinking, Ibn Rushd, also known as Averroes, whom Aquinas calls the Commentator. And the Commentator has caused a great deal of damage. For Western thought is vastly more Arabian than is recognized, while post-Medieval Arabs have managed to escape medieval rationalism.
This entire heritage of thinking, grounded in the sentence “An agent does not move except out of intention for an end,” is where the most pervasive human error lies, compounded by two or more centuries of the illusion of unconditional scientific understanding. This error is also the most fragilizing one.
So let us call here the teleological fallacy the illusion that you know exactly where you are going, and that you knew exactly where you were going in the past, and that others have succeeded in the past by knowing where they were going.
The rational flâneur 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, what Nero was trying to practice in his travels, often guided by his sense of smell. The flâneur is not a prisoner of a plan. Tourism, actual or figurative, is imbued with the teleological illusion; it assumes completeness of vision and gets one locked into a hard-to-revise program, while the flâneur continuously—and, what is crucial, rationally—modifies his targets as he acquires information.
Now a warning: the opportunism of the flâneur is great in life and business—but not in personal life and matters that involve others. The opposite of opportunism in human relations is loyalty, a noble sentiment—but one that needs to be invested in the right places, that is, in human relations and moral commitments.
The error of thinking you know exactly where you are going and assuming that you know
today
what your preferences will be
tomorrow
has an associated one. It is the illusion of thinking that
others,
too, know where they are going, and that they would tell you what they want if you just asked them.
Never ask people what they want, or where they want to go, or where they think they should go, or, worse, what they think they will
desire tomorrow. The strength of the computer entrepreneur Steve Jobs was precisely in distrusting market research and focus groups—those based on asking people what they want—and following his own imagination. His modus was that people don’t know what they want until you provide them with it.
This ability to switch from a course of action is an
option
to change. Options—and optionality, the character of the option—are the topic of
Book IV
. Optionality will take us many places, but at the core, an option is what makes you antifragile and allows you to benefit from the positive side of uncertainty, without a corresponding serious harm from the negative side.
And it is optionality that makes things work and grow—but it takes a certain type of person for that. Many people keep deploring the low level of formal education in the United States (as defined by, say, math grades). Yet these fail to realize that the
new
comes from here and gets imitated elsewhere. And it is not thanks to universities, which obviously claim a lot more credit than their accomplishments warrant.
Like Britain in the Industrial Revolution, America’s asset is, simply, risk taking and the use of optionality, this remarkable ability to engage in rational forms of trial and error, with no comparative shame in failing, starting again, and repeating failure. In modern Japan, by contrast, shame comes with failure, which causes people to hide risks under the rug, financial or nuclear, making small benefits while sitting on dynamite, an attitude that strangely contrasts with their traditional respect for fallen heroes and the so-called nobility of failure.
Book IV
will take this idea to its natural conclusion and will show evidence (ranging from medieval architecture to medicine, engineering, and innovation) that, perhaps, our greatest asset is the one we distrust the most: the built-in antifragility of certain risk-taking systems.
Where we discuss the idea of doing instead of walking the Great Walk—The idea of a free option—Can a philosopher be called nouveau riche?
An anecdote appears in Aristotle’s
Politics
concerning the pre-Socratic philosopher and mathematician Thales of Miletus. This story, barely covering half a page, expresses both antifragility and its denigration and introduces us to optionality. The remarkable aspect of this story is that Aristotle, arguably the most influential thinker of all time, got the central point of his own anecdote exactly backward. So did his followers, particularly after the Enlightenment and the scientific revolution. I am not saying this to denigrate the great Aristotle, but to show that intelligence makes you discount antifragility and ignore the power of optionality.
Thales was a philosopher, a Greek-speaking Ionian of Phoenician stock from the coastal town of Miletus in Asia Minor, and like
some
philosophers, he enjoyed what he was doing. Miletus was a trading post and had the mercantile spirit usually attributed to Phoenician settlements. But Thales, as a philosopher, was characteristically impecunious. He got tired of his buddies with more transactional lives hinting at him that “those who can, do, and others philosophize.” He performed the following prowess: he put a down payment on the seasonal use of every olive press in the vicinity of Miletus and Chios, which he got at low rent.
The harvest turned out to be extremely bountiful and there was demand for olive presses, so he released the owners of olive presses on his own terms, building a substantial fortune in the process. Then he went back to philosophizing.
What he collected was large, perhaps not enough to make him massively wealthy, but enough to make the point—to others but also, I suspect, to himself—that he talked the talk and was truly above, not below, wealth. This kind of sum I’ve called in my vernacular “f*** you money”—a sum large enough to get most, if not all, of the advantages of wealth (the most important one being independence and the ability to only occupy your mind with matters that interest you) but not its side effects, such as having to attend a black-tie charity event and being forced to listen to a polite exposition of the details of a marble-rich house renovation. The worst side effect of wealth is the social associations it forces on its victims, as people with big houses tend to end up socializing with other people with big houses. Beyond a certain level of opulence and independence, gents tend to be less and less personable and their conversation less and less interesting.
The story of Thales has many morals, all of them linked to asymmetry (and the construction of an antifragile payoff). The central one is related to the following account by Aristotle:
“But from his knowledge of astronomy he had observed while it was still winter that there was going to be a large crop of olives …”
So for Aristotle, clearly, the stated reason was Thales’ superior knowledge.