Antifragile by Nassim Nicholas Taleb

Antifragile

Antifragile: Things That Gain From Disorder was one of the longest short books I’ve ever read. The chapters are short but they are dense. I found myself spending more time thinking than reading. I enjoy reading about systems and Taleb’s book is all about systems.

I was hoping he would have some practical investing advise. Taleb doesn’t offer much other than to a keeping your eyes open to opportunities with limited downside and unlimited upside. Sure, I’ll do that.

In addition to finance and economics, Taleb also covers Medicine, Lifestyles, Politics, and Ethics- with varying degrees of success. I have always been wary of modern medicine and Taleb does a good job of explaining why. His visceral attacks against those who only work in their own best interest seems a little misplaced, although I agree it is stupid to set up complex systems that not only allow this sort of misbehavior, but encourage it. This is a problem that needs to be addressed- or at least explained to the body politic.

It almost seems you could read this book in reverse order and get more out of it. There are certainly strong chapters and weak chapters, and there are appendixes with detailed charts, formulas, and mini book reviews (bibliographies) for those who have trouble grasping Taleb’s concepts. Some of the side stories are distracting, but generally I liked them as it lightened the read a bit.

A
544 pages [more of my comments below]

Excerpts From My Kindle

In short, the fragilista (medical, economic, social planning) is one who makes you engage in policies and actions, all artificial, in which the benefits are small and visible, and the side effects potentially severe and invisible. – location 476

A complex system, contrary to what people believe, does not require complicated systems and regulations and intricate policies. The simpler, the better. Complications lead to multiplicative chains of unanticipated effects. Because of opacity, an intervention leads to unforeseen consequences, followed by apologies about the “unforeseen” aspect of the consequences, then to another intervention to correct the secondary effects, leading to an explosive series of branching “unforeseen” responses, each one worse than the preceding one. – location 486-90
[I would argue this may be the biggest problem with politicians and voters today.]

Not only are we averse to stressors, and don’t understand them, but we are committing crimes against life, the living, science, and wisdom, for the sake of eliminating volatility and variation. – location 1286-87
[The heart of the book: asking that we  change how we look at stress and other elements of life that we have decided are bad. They not all bad or all good but usually can be expressed by a curve: a convex, concave, or compound curve. We need to know what the curve is and where we are on the curve to make proper decisions.]

It is the systematic removal of uncertainty and randomness from things, trying to make matters highly predictable in their smallest details. All that for the sake of comfort, convenience, and efficiency. – location 1319-20
[This is a problem with modern living.]

My dream–the solution–is that we would have a National Entrepreneur Day, with the following message: Most of you will fail, disrespected, impoverished, but we are grateful for the risks you are taking and the sacrifices you are making for the sake of the economic growth of the planet and pulling others out of poverty. You are at the source of our antifragility. Our nation thanks you. – location 1630-33

Depriving political (and other) systems of volatility harms them, causing eventually greater volatility of the cascading type. – location 1658-59
[by trying to remove volatility we actually make it more catastrophic when it occurs.]

Table 3 provides a glimpse of these attempts to “improve matters” across domains and their effects. Note the obvious: in all cases they correspond to the denial of antifragility.  – location 2236-38

Likewise, Obama’s blaming “bad intelligence” for his administration’s failure to predict the uprising that took place in Egypt is symptomatic of both the misunderstanding of complex systems and the bad policies involved. And superpowers are plain turkeys in that story. – location 2531-33

As Mark Abdollahian of Sentia Group, one of the contractors who sell predictive analytics to the U.S. government (those that failed to warn), noted regarding Egypt, policy makers should “think of this like Las Vegas. In blackjack, if you can do four percent better than the average, you’re making real money.” But the analogy is spurious–pretty much everything I stand against. There is no “four percent better” on Egypt. This was not just money wasted but the construction of a false confidence based on an erroneous focus. It is telling that the intelligence analysts made the same mistake as the risk-management systems that failed to predict the economic crisis–and offered the exact same excuses when they failed. Political and economic “tail events” are unpredictable, and their probabilities are not scientifically measurable. No matter how many dollars are spent on research, predicting revolutions is not the same as counting cards; humans will never be able to turn politics and economics into the tractable randomness of blackjack. – location 2543-50

An idea does not survive because it is better than the competition, but rather because the person who holds it has survived! – location 3859-60
[Good ideas last long, because they last long, not because they’re good ideas.]

Expert problems put you on the wrong side of asymmetry. Let us examine the point with respect to risk. When you are fragile you need to know a lot more than when you are antifragile. Conversely, when you think you know more than you do, you are fragile (to error). – location 3863-66
[If you set up your systems to be antifragile you don’t have to know as much, but politics and academics hate this because they love complexity and can set themselves up as experts.]

We showed earlier the evidence that classroom education does not lead to wealth as much as it comes from wealth (an epiphenomenon). Next let us see how, similarly, antifragile risk taking–not education and formal, organized research–is largely responsible for innovation and growth, while the story is dressed up by textbook writers. It does not mean that theories and research play no role; it is that just as we are fooled by randomness, so we are fooled into overestimating the role of good-sounding ideas. We will look at the confabulations committed by historians of economic thought, medicine, technology, and other fields that tend to systematically downgrade practitioners and fall into the green lumber fallacy. – location 3866-71
[Classic cause and effect swap.]

No, we don’t put theories into practice. We create theories out of practice. That was our story, and it is easy to infer from it–and from similar stories–that the confusion is generalized. – location 3951-52

Remarkably, to get a bit more philosophical with the ideas of Algazel, one can see religion’s effect here in reducing dependence on the fallibility of human theories and agency–so Adam Smith meets Algazel in that sense. For one the invisible hand is the market, for the other it is God. It has been difficult for people to understand that, historically, skepticism has been mostly skepticism of expert knowledge rather than skepticism about abstract entities like God, and that all the great skeptics have been largely either religious or, at least, pro-religion (that is, in favor of others being religious). – location 4186-90

we find it hard to apply this lesson to technical skills acquired in schools, that is, to accept the crucial fact that what is picked up in the classroom stays largely in the classroom. Worse even, the classroom can bring some detectable harm, a measure of iatrogenics hardly ever discussed: – location 4329-31
[After years of believing the reverse, I have recently come around on my thinking to: classroom education is of limited value.]

My idea was to be rigorous in the open market. This made me focus on what an intelligent antistudent needed to be: an autodidact–or a person of knowledge compared to the students called “swallowers” in Lebanese dialect, those who “swallow school material” and whose knowledge is only derived from the curriculum. The edge, I realized, isn’t in the package of what was on the official program of the baccalaureate, which everyone knew with small variations multiplying into large discrepancies in grades, but exactly what lay outside it. – location 4382-86
[Finding a niche and exploiting it.]

It is completely wrong to use the calculus of benefits without including the probability of failure. – location 5001-2

But wars–with more than twentyfold errors–are only illustrative of the way governments underestimate explosive nonlinearities (convexity effects) and why they should not be trusted with finances or any large-scale decisions. Indeed, governments do not need wars at all to get us in trouble with deficits: the underestimation of the costs of their projects is chronic for the very same reason 98 percent of contemporary projects have overruns. They just end up spending more than they tell us. This has led me to install a governmental golden rule: no borrowing allowed, forced fiscal balance. – location 5063-67

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. – location 5107-8
[I have a hard time, a real hard time excepting this even as I live it. I constantly doubt myself and the choices I have made to minimize my lifestyle. So I would never tell people they should live their lives this way.]

I have used all my life a wonderfully simple heuristic: charlatans are recognizable in that they will give you positive advice, and only positive advice, exploiting our gullibility and sucker-proneness for recipes that hit you in a flash as just obvious, then evaporate later as you forget them. – location 5350-52

In political systems, a good mechanism is one that helps remove the bad guy; it’s not about what to do or who to put in. For the bad guy can cause more harm than the collective actions of good ones. – location 5389-90

Finally, consider this modernized version in a saying from 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 1,000 – location 5394-97

The situation in science is similar to detective novels in which the person with the largest number of alibis turns out to be to be the guilty one. And you do not need reams of paper full of data to destroy the megatons of papers using statistics in economics: the simple argument that Black Swans and tail events run the socioeconomic world–and these events cannot be predicted–is sufficient to invalidate their statistics. – location 5441-44
[Hence the Global Warming Debate.]

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 thinking that cell phones play a larger role than they do. Second, because the new generations are more aggressive with technology, we notice that they try more things, but we ignore that these implementations don’t usually stick. Most “innovations” are failures, just as most books are flops, which should not discourage anyone from trying. – location 5682-85
[People may think I’m crazy or not serious, but I believe Plumbers and Farmers have the most important jobs in the world and have done more than profession to increase our lifespans.]

Amateurs in any discipline are the best, if you can connect with them. Unlike dilettantes, career professionals are to knowledge what prostitutes are to love. – location 5854-55

the non-natural needs to prove its benefits, not the natural–according to the statistical principle outlined earlier that nature is to be considered much less of a sucker than humans. In a complex domain, only time–a long time–is evidence. – location 5982-83

In the very ill condition, the benefits are large relative to iatrogenics; in the borderline one, they are small. This means that we need to focus on high-symptom conditions and ignore, I mean really ignore, other situations in which the patient is not very ill. – location 6046-48

Of the hundred and twenty thousand drugs available today, I can hardly find a via positiva one that makes a healthy person unconditionally “better” (and if someone shows me one, I will be skeptical of yet-unseen side effects). Once in a while we come up with drugs that enhance performance, such as, say, steroids, only to discover what people in finance have known for a while: in a “mature” market there is no free lunch anymore, and what appears as a free lunch has a hidden risk. When you think you have found a free lunch, say, steroids or trans fat, something that helps the healthy without visible downside, it is most likely that there is a concealed trap somewhere. Actually, my days in trading, it was called a “sucker’s trade.” – location 6050-55

Further, pharmaceutical companies are under financial pressures to find diseases and satisfy the security analysts. They have been scraping the bottom of the barrel, looking for disease among healthier and healthier people, lobbying for reclassifications of conditions, and fine-tuning sales tricks to get doctors to overprescribe. Now, if your blood pressure is in the upper part of the range that used to be called “normal,” you are no longer “normotensive” but “pre-hypertensive,” even if there are no symptoms in view. There is nothing wrong with the classification if it leads to healthier lifestyle and robust via negativa measures–but what is behind such classification, often, is a drive for more medication. – location 6064-69

Another way to view it: 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. – location 6072-74

What made medicine mislead people for so long is that its successes were prominently displayed, and its mistakes literally buried – location 6097-98

What men have done with top-down, command-and-control science has been exactly the reverse: interventions with negative convexity effects, i.e., the achievement of small certain gains through exposure to massive potential mistakes. Our record of understanding risks in complex systems (biology, economics, climate) has been pitiful, marred with retrospective distortions (we only understand the risks after the damage takes place, yet we keep making the mistake), and there is nothing to convince me that we have gotten better at risk management. – location 6178-81

Simply, humans should not be given explosive toys (like atomic bombs, financial derivatives, or tools to create life). – location 6183

So when the (present) inhabitants of Mother Earth want to do something counter to nature, they are the ones that need to produce the evidence, if they can. Everything nonstable or breakable has had ample chance to break over time. Further, the interactions between components of Mother Nature had to modulate in such a way as to keep the overall system alive. What emerges over millions of years is a wonderful combination of solidity, antifragility, and local fragility, sacrifices in one area made in order for nature to function better. We sacrifice ourselves in favor of our genes, trading our fragility for their survival. We age, but they stay young and get fitter and fitter outside us. Things break on a small scale all the time, in order to avoid large-scale generalized catastrophes. – location 6198-6203

A recent powerful study by Emre Soyer and Robin Hogarth showed that many professionals and experts in the field of econometrics supplying pompous numbers such as “regression” and “correlation” made egregious mistakes translating into practice the numbers they were producing themselves–they get the equation right but make severe translation mistakes when expressing it into reality. In all cases they underestimate randomness and underestimate the uncertainty in the results. And we are talking about errors of interpretation made by the statisticians, not by the users of statistics such as social scientists and doctors. Alas, all these biases lead to action, almost never inaction. – location 6292-97

What I am against is naive rationalized, pseudo-learned discourse, with green lumber problems–one that focuses solely on the known and ignores the unknown. Nor am I against the use of mathematics when it comes to gauging the importance of the unknown–this is the robust application of mathematics. – location 6311-13

Life expectancy has increased (conditional on no nuclear war) because of the combination of many factors: sanitation, penicillin, a drop in crime, life-saving surgery, and of course, some medical practitioners operating in severe life-threatening situations. If we live longer, it is thanks to medicine’s benefits in cases that are lethal, in which the condition is severe–hence low iatrogenics, as we saw, the convex cases. So it is a serious error to infer that if we live longer because of medicine, that all medical treatments make us live longer. – location 6347-51

Another fooled-by-randomness-style mistake is to think that because life expectancy at birth used to be thirty until the last century, that people lived just thirty years. The distribution was massively skewed, with the bulk of the deaths coming from birth and childhood mortality. Conditional life expectancy was high–just consider that ancestral men tended to die of trauma. Perhaps legal enforcement contributed more than doctors to the increase in length of life–so the gains in life expectancy are more societal than from the result of scientific advance. – location 6362-66

And there is this antifragility to the stressor of the fast, as it makes the wanted food taste better and can produce euphoria in one’s system. Breaking a fast feels like the exact opposite of a hangover. – location 6524-25
[I can’t give an opinion on the hangover as I don’t drink to excess, but as to fasting it makes food taste wonderful.]

As I wrote in Chapter 4, while the gene is antifragile, since it is information, the carrier of the gene is fragile, and needs to be so for the gene to get stronger. We live to produce information, or improve on it. Nietzsche had the Latin pun aut liberi, aut libri–either children or books, both information that carries through the centuries. – location 6572-75

The worst problem of modernity lies in the malignant transfer of fragility and antifragility from one party to the other, with one getting the benefits, the other one (unwittingly) getting the harm, with such transfer facilitated by the growing wedge between the ethical and the legal. – location 6620-21
[This has been going on in Finance and Politics and needs to be reversed.]

What we have currently is the opposite: power seems to go to those, like bankers, corporate executives (nonentrepreneurs), and politicians, who steal a free option from society. – location 6627-28

I am even more distraught for the future of the human race when I see a nerd behind a computer in a D.C. suburb, walking distance from a Starbucks coffeehouse, or a shopping mall, capable of blowing up an entire battalion in a remote place, say Pakistan, and afterward going to the gym for a “workout” (compare his culture to that of knights or samurai). Cowardice enhanced by technology is all connected: society is fragilized by spineless politicians, draft dodgers afraid of polls, and journalists building narratives, who create explosive deficits and compound agency problems because they want to look good in the short term. – location 6673-78

many people fight evil in the patient grind of their daily lives without looking like heroes; they suffer society’s ingratitude even more–while media-friendly pseudoheroes rise in status. These people will not get a statue from future generations. – location 6680-82

There is no word for it in Romance languages; in Arabic it is called Shhm–best translated as nonsmall. If you take risks and face your fate with dignity, there is nothing you can do that makes you small; if you don’t take risks, there is nothing you can do that makes you grand, nothing. And when you take risks, insults by half-men (small men, those who don’t risk anything) are similar to barks by nonhuman animals: you can’t feel insulted by a dog. – location 6693-96

The incentive of a regulator is to have complex regulation. Again, the insiders are the enemies of the less-is-more rule. Second, the difference between the letter and the spirit of regulation is harder to detect in a complex system. The point is technical, but complex environments with nonlinearities are easier to game than linear ones with a small number of variables. The same applies to the gap between the legal and the ethical. Third, in African countries, government officials get explicit bribes. In the United States they have the implicit, never mentioned, promise to go work for a bank at a later date with a sinecure offering, say $5 million a year, if they are seen favorably by the industry. And the “regulations” of such activities are easily skirted. – location 7302-8

In short, for a healthy person, there is a small probability of disastrous outcomes (discounted because unseen and not taken into account), and a high probability of mild benefits. – location 7726-29

The sad part is that getting people to accept that every measure has an error has been nearly impossible–the event in Fukushima held to happen once per million years would turn into one per 30 if one percolates the different layers of uncertainty in the adequate manner. – location 7967-69

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About craigmaas

I do a little web design work and support a couple web sites and blogs. My primary focus is lighting and energy consulting where I use a number of computer tools to help my customer find ways of saving money and improving their work environment. See my web site for more information: www.effectiveconcepts.net
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2 Responses to Antifragile by Nassim Nicholas Taleb

  1. Pingback: What The Dog Saw by Malcom Gladwell | Cold Read

  2. Pingback: How To Fail At Almost Everything And Still Win Big by Scott Adams | Cold Read

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