Antifragile introduced me to the concept of non-linear effects of volatility which can be applied to various fields.
The idea of hormesis and eurstress wasn’t new to me as it was explained to my by my father as I was little. Poison or stress in low doses may strengthen the organism to a point where a lethal dosis could be easily metabolized or survived.
So the idea of “antifragility” too wasn’t entirely new to me. But Taleb maps these principles to other domains.
Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better
I had my problems with the way he writes. His writing feels like a 600 page rant, so from time to time I was about to throw away the book and shout into my room because of the fuzzy-ness of some arguments which were dealt out in the most arrogant way.
Also I had my problems with the references not being inline. I would have loved to quickly find references for certain arguments which seemed superficial from time to time.
Still, the ideas and thoughts on the topic are incredibly interesting. I always felt that many people are superficial or dismissive regarding risk management. Talebs theories explain what may be missing.
Skin in the Game
To me, every opinion maker needs to have “skin in the game” in the event of harm caused by reliance on his information or opinion (not having such persons as, say, the people who helped cause the criminal Iraq invasion come out of it completely unscathed). Further, anyone producing a forecast or making an economic analysis needs to have something to lose from it, given that others rely on those forecasts (to repeat, forecasts induce risk taking; they are more toxic to us than any other form of human pollution).
Via-negativa
Via negativa is a type of theological thinking that attempts to describe God by negation or in other words, by what God is not. Taleb extends this by applying the same reasoning to other subjects by focusing not on what something is but rather what it is not.
I would add that, in my own experience, a considerable jump in my personal health has been achieved by removing offensive irritants: the morning newspapers (the mere mention of the names of the fragilista journalists Thomas Friedman or Paul Krugman can lead to explosive bouts of unrequited anger on my part), the boss, the daily commute, air-conditioning (though not heating), television, emails from documentary filmmakers, economic forecasts, news about the stock market, gym “strength training” machines, and many more.
Lindy Effect
A not-living things (like ideas, books, information and more) life expectancy increases with every day of its existance.
A living thing loses in life-expectancy with every day.
So a book that has been a hundred years in print is likely to stay in print another hundred years. The opposite is Neomania, a love of change for its own sake.
Barbell Strategy
A dual strategy, a combination of two extremes, one safe and one speculative, deemed more robust than a “monomodal” strategy; often a necessary condition for antifragility. For instance, in biological systems, the equivalent of marrying an accountant and having an occasional fling with a rock star; for a writer, getting a stable sinecure and writing without the pressures of the market during spare time. Even trial and error are a form of barbell.
Green Lumber Fallacy
The Green Lumber Fallacy, Mathematically, is the use of an incorrect function that, by chance, returns the correct output, such that one conflates g(x) with f(x). The root of the fallacy is that although people may be focusing on the right things, due to complexity of the thing, they are not good enough to figure it out intellectually.
The term green lumber refers to a story by authors Jim Paul and Brendan Moynihan in their book What I Learned Losing A Million Dollars, where a trader made a fortune trading lumber he thought was literally “green” rather than fresh cut.
The protagonist makes a big discovery. He remarks that a fellow named Joe Siegel, one of the most successful traders in a commodity called “green lumber,” actually thought that it was lumber painted green (rather than freshly cut lumber, called green because it had not been dried). And he made it his profession to trade the stuff! Meanwhile the narrator was into grand intellectual theories and narratives of what caused the price of commodities to move, and went bust. It is not just that the successful expert on lumber was ignorant of central matters like the designation “green.” He also knew things about lumber that nonexperts think are unimportant. People we call ignorant might not be ignorant. 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 nonnarrative manner—nice arguments don’t make much difference.
This gets at the idea that a supposed understanding of an investment rationale, a narrative or a theoretical model is unhelpful in practical trading.
Summary
- Strain is good
- Strain is a stressor that cannot hurt the antifragile.
- Do not optimize without redundancy
- Redundancy is a natural property of the antifragile