Antifragility: Things that gain from disorder

If you haven't heard about it already, Taleb, the guy behind the Black Swan theory(or as they claim) is out with another book. Although I wasn't intending on buying the book initially, his Saturday essay (WSJ) was what finally convinced me. Then of course Felix Salmon came out with a review along with Matt Ridley , and I just couldn't wait for it to come in.

Although I haven't really read the entire thing(there's some deep stuff which deserves more than a quick read), here are some quick points :

  • Taleb's attitude towards uncertainty can be summarized as - Randomness and uncertainty, you want to use them and not hide from them. You want to be the fire and wish for the wind. The mission is to domesticate, dominate, and conquer the opaque, the unique and the uncertain. But how?
  • Anti-fragile is beyond resilient. The resilient merely resists the shocks and stays the same, the anti-fragile become stronger.
    Taleb uses the example of the mythical creature Hydra, 'you cut the head of a Hydra and two grow out. That's anti-fragility right there.'
  • The anti-fragile loves randomness and uncertainty, and more crucially, loves errors. In fact, we are most better at what we do because of anti-fragility. Taleb says that - he'd rather be dumb and anti-fragile than smart and fragile.'
  • His stance on risk is essentially the same as always and he goes on to mention that-"its far easier to figure out if something is fragile than to predict the occurrence of probability of it being fragile. Anything that has more upside that downside from random events is what is anti-fragile; the reverse is fragile."
  • Just like spending a month in bed would lead to muscle atrophy, complex systems are weakened, even killed when deprived of stressors. This is the tragedy of modernity: as with neurotically overprotective parents, those trying to help are often hurting us the most.
  • But some become anti-fragile at the risk of others, and such anti-fragility is hidden. While in the past, those who took the risk were liable for their actions, today the opposite is prominent. We are witnessing the rise of a new class of heroes who are members of I.A.N.D.(International Association of Name Droppers). They game the system and the citizens pay the price. (Moral Hazard perhaps?)
  • Most of history has been written because of Black Swan events. Such events hijack our brains because they are un-explainable. We don't realize the role of these events because of an illusion of predictability. Because of our fears and our thirst for order, we tend to be harmed by such events rather than benefit from them.
  • Man-made complex systems eliminate predictability and cause out-sized events, so the modern world may be increasing in technological knowledge, but paradoxically, it makes things a lot more predictable.
  • We know a lot less about hundred-year floods than five-year floods, but every time we see a hundred-year flood, we throw it out and call it an outlier instead of learning from it.
  • Mother nature is the best expert at rare events, and the best manager of Black Swans. It has succeeded to in getting here without Ivey League educated instructions. Anti-fragility is not just an antidote to Black Swans; understanding it makes us less intellectually fearful in accepting such events.
  • The anti-fragile gains from errors in prediction. Things that gain from randomness should dominate the world, everything else should be gone. But somehow, we live in this world under the illusion that everything works under rules, an illusion labeled as 'lecturing birds on how to fly.'
  • Taleb's hate for complexity is quite prominent as well, and he mentions that complications lead to multiplicative chains of unanticipated effects. Because of the opacity, an intervention leads to unforeseen consequences. He mentions that simplicity is difficult to implement; or like Steve Jobs would have said-"you have to work hard to get your thinking clean to make it simple."
  • Heuristics are simplified rules of thumb that make things simple and easy to implement. But the main advantage is that the user knows that they are not perfect, and thus is susceptible to be fooled of their simplicity.
  • The anti-fragile likes volatility and it also likes time. Why time? Because time is functionally similar to volatility. Its simply what a grandmother calls experience.
  • Modernity has replaced ethics with legalese, and the law can be gamed with a good lawyer. Fragility is transferable, thus the first ethical rule is: If you see fraud and don't say fraud, you're a fraud.
  • Anti-fragility is desirable in general, but not always, as there are cases when anti-fragility is costly. Further, its hard to consider that robustness is always desirable, or as Nietzche said- "one can die from being immortal. "
  • Although the book seems like a good mix of philosophy, history and finance so far, it does have its elements of humor. Taleb gives examples of how he's allergic to bankers and whenever there's one around, he can sense his irritation.

    I'm sure this book is not for everyone, but for those who are looking for a Christmas downtime read, its definitely worth it.

WSO Elite Modeling Package

  • 6 courses to mastery: Excel, Financial Statement, LBO, M&A, Valuation and DCF
  • Elite instructors from top BB investment banks and private equity megafunds
  • Includes Company DB + Video Library Access (1 year)
Start Discussion

Total Avg Compensation

June 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (35) $364
  • Associates (202) $234
  • 2nd Year Analyst (115) $151
  • Intern/Summer Associate (97) $145
  • 3rd+ Year Analyst (27) $145
  • 1st Year Analyst (420) $131
  • Intern/Summer Analyst (338) $82