Antifragile. Thriving in Disorder
Recommended by Investire Semplicemente. A very difficult and long book, but decidedly illuminating. Taleb is sharply polemical and candid, offering a unique perspective on modern economics and the fragility of systems. It is based on the concept of antifragility, meaning something that benefits from volatility (unlike fragile things and robust ones, which merely recover). It is anything that has more upside than downside from random events. Here are the main ideas:
- Nature is very important for Taleb (at times, in my view, a bit extreme). If nature, after centuries of experimentation and equilibria, does something, changing or removing it should be done with great care, ideally understanding long-term effects
- Domain Dependence: we often fail to see the effects of our choices in another domain. E.g., statisticians who do not grasp the implications in the economic world
- Procrustean Bed: because of our biases, we tend to “fit” the world to our existing idea, effectively manipulating experiments to say what we want. More data, more ways to distort
- The Turkey Problem: a Black Swan (a shocking random event) cannot be predicted by calculations. Modern theories often miss this fundamental part, like the turkey before Thanksgiving
- Hormesis. The absence of stress and competition, as well as an overabundance of choices, harms us. Taleb favors constant self-testing, “poisoning” oneself in small doses to build strength
- Barbell Method: to benefit from Black Swans, the ideal is a method that loses a little and often and gains when a shock occurs. E.g., 90% bonds, 10% bitcoin?
- Green Lumber Fallacy: example of someone who sold “fresh” lumber thinking it was painted green. We are surrounded by cases where we assume we must know what we are doing, when in truth we do not
- Via Negativa: the key is removing things from life (smoking, sugars, new fads), not adding more. Also, if something has been around for 100 years, it will probably be around for another 100; something around for 10 will likely be around for 10 more. They are the opposite
- Important: do not listen to those who do not practice what they preach. There are many statisticians who share calculations but do not take the risk of their choices, or worse, are at the mercy of lobbyists
All in all, it is an intriguing read, with very direct critiques of current economists (including Markowitz, who won a Nobel but did not adopt his own theory). In the end I have a somewhat hazy idea of antifragility. I am not really putting it into practice, aside from extreme examples like lifting 100 kg and stopping, but Taleb is clearly very intelligent. I think I will also read the book on Black Swans.