How to Become Anti-Fragile?

Photo Credit: Torsten Dederichs

Volatility is Not all Bad

Taleb illustrates the difference between fragile and anti-fragile by discussing the response to a black swan event. A black swan refers to events in economics, politics, or social science that are large in magnitude and unexpected. For example, contrasting a banker and his steady job and predictable income with a taxi-driver who has volatile up-and-down type income. While the banker’s income appears stable, a big shock like a black swan event in the economy such as the 2008 financial crisis could take his otherwise stable income to 0. Whereas for the taxi driver, who has been making subtle adjustments all the time to his small business on where to pick-up fares, how to adjust to local dynamics, can continue adjusting and weather such unpredictable stresses much better than the banker. Perhaps the taxi driver even knows how to take advantage of such a crisis and can find new ways to make money or charge more. While the banker is fragile to such stressors and volatility the taxi driver is anti-fragile.

Predictions are Fragile

Black swan events by definition are those events that are unlikely to happen AND are usually not similar to events that have happened before. As a result, using past experience is not helping in predicting them. Experts, fragilistas as Taleb affectionally calls them, can often rationalize a justify an event after the fact — but past experience is not helping in actual predicting the future.

Optionality

As a former options trader, Taleb goes into good depth on the importance and benefits of being on the right side of the option and of volatility.

Various Other Thoughts

Strategic Planning:Corporations are in love with the idea of the strategic plan. They need to pay to figure out where they are going. Yet there is no evidence that strategic planning works — we even seem to have evidence against it.” > better to invest in people, vision and allow for the work to take place rather than trying to drive it all from above, central planner style.

Conclusion

This is a good and worthwhile read — with several interesting concepts and examples. Beware though, Taleb’s tone is arrogant and a bit off-putting. One of my favorite lines in the book is: “We accept that people who boast are boastful and turn people off.” For someone who claims to be so self-aware, it was a particularly ironic line given the author’s own smugness throughout the book.

References

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Zubair Talib

Zubair Talib

Loves Technology, Startups, and Tacos.