Antifragile: Benefiting from Uncertainty

Compiled from sunnj87. Book Introduction The author Nassim Nicholas Taleb, a Lebanese-American, was a successful financial trader in his early years and later became a researcher at the Courant Institute of Mathematics at New York University. He has a unique perspective on "uncertainty" and "risk management." The title "Antifragile" is a word coined by the author to mean the opposite of "fragile." Many people think the opposite of "fragile" is words like "robust/stable." However, the author has a deeper insight. He believes: Fragile systems - when the environment changes, the system will be significantly damaged Robust systems - when the environment changes, the system neither significantly suffers nor significantly benefits Antifragile systems - when the environment changes, the system significantly benefits The book delves into various fields (economics, politics, philosophy, education, healthcare, etc.). Book Notes The notes summarize a clear attitude towards randomness and uncertainty. Regarding randomness, uncertainty, and chaos: you should leverage them, not avoid them. We don't just want to survive uncertainty or merely overcome it. Besides surviving uncertainty, we want to have the final say. Our mission is to tame, dominate, and even conquer those invisible, opaque, and inexplicable things. Some things benefit from shocks; they thrive and grow stronger when exposed to volatility, randomness, chaos, pressure, risk, and uncertainty. However, despite this phenomenon being ubiquitous, we still lack a word to describe the opposite of fragility. So, let's call it antifragility. Antifragility surpasses resilience or robustness. Antifragility favors randomness and uncertainty, which means - crucially - it also favors errors, to be precise, a certain type of error. Antifragility helps us better understand fragility. Antifragility: Introduction The Sword of Damocles and the Hydra The toxic excitement effect is the norm; the lack of it can be harmful to us. Depriving a system of stress or important stressors is not necessarily a good thing; it may even be very harmful. Widespread Overcompensation and Overreaction The excess energy released from an excessive reaction to setbacks leads to innovation! We often see a perplexing phenomenon: those who bring us the greatest benefits are not necessarily those who have tried to help us (such as providing "advice"), but those who have tried to harm us but failed in the end. Cats and Washing Machines In this complex world, the concept of "cause" is always very vague: either almost impossible to confirm or impossible to truly define. We not only detest pressure but also fail to comprehend it. Little do we know that completely eliminating fluctuations and changes will only jeopardize life, livelihood, science, and wisdom. The value of writing lies in its ability to provide us with a sense of adventurous stimulation. Killing what weakens me makes others stronger In fact, the most intriguing aspect of evolution is that it is achieved through antifragility; it thrives on pressure, randomness, uncertainty, and chaos—while individual organisms are relatively fragile. The gene pool utilizes shocks to ensure survival of the fittest, enhancing overall adaptability. Modernization and the denial of antifragility Open-air markets and office buildings Fortunately, the volatility of income grants professions like technical workers a bit of antifragility: minor changes prompt continuous learning from the environment and maintaining competitiveness and adaptability under sustained pressure. Remember, pressure is information: technical workers continuously adjust due to ongoing pressure. Additionally, they have the opportunity to receive unexpected gifts and surprises, as well as the power of free choice—key indicators of antifragility. Tell them I love randomness Stability is not conducive to economic development: due to the lack of setbacks for tempering, companies become extremely fragile during long periods of stable prosperity, accumulating hidden fragility beneath the calm surface. Therefore, postponing crises is not a wise strategy. Similarly, a lack of market volatility leads to unchecked growth of hidden risks. The longer the market avoids turmoil, the more severe the losses when a crisis truly strikes. Naive interventions Few realize that procrastination is our natural defense instinct, allowing things to develop naturally and exercise their antifragility instinct; it stems from certain ecological or natural wisdom, and the results are not always negative. I have been emphasizing that in a natural environment, the source of pressure is information. Therefore, an excess of information indicates excessive pressure, surpassing the threshold of antifragility. In conclusion, the best way to reduce intervention is to limit the supply of information and acquire information in as natural a manner as possible. This is challenging to accept in the internet age. Prediction is a product of modernization What's worse now is that due to the development of modernization, the proportion of extreme events continues to rise. The winner-takes-all effect is worsening: an author, a company, a viewpoint, a musician, an athlete can either be globally renowned or completely unknown. This further deteriorates predictability, as everything in socio-economic life is now dominated by "black swans." Our complexity constantly pushes us beyond ourselves, advancing ahead, creating things that increasingly surpass our understanding and control. In recent years, after the concept of "black swans" emerged, the world began to move in another direction. Opportunists began using more complex models derived from the theory of oscillation-complexity-catastrophe-fractals to predict, foresee, and prophesy "black swans." However, we must reiterate once again: less is more. A worldview of unpredictability Fat Tony and the fragile pusher Tony, the chubby guy, uses a very simple model. He identifies vulnerabilities, bets on the collapse of fragile things, then starts to write lengthy articles criticizing Nile, attacking each other on social and cultural issues, or refuting Nile's sarcasm about New Jersey life. After the thing he bet on collapses as expected, he makes a big profit, then goes to enjoy lunch. Seneca's Favorable and Unfavorable Factors Fragility equals losing more than gaining, equals more unfavorable factors than favorable factors, that is, (unfavorable) asymmetry. Antifragility equals gaining more than losing, equals more favorable factors than unfavorable factors, that is, (favorable) asymmetry. If potential gains are greater than potential losses, then you have antifragility towards the source of volatility (and vice versa). Moreover, if there are more potential favorable factors than unfavorable factors, you may be harmed due to insufficient volatility and pressure. Never Marry a Rock Star The barbell strategy can refer to any strategy consisting of two radically different options, abandoning the ambiguous middle path, often forming a favorable asymmetry. This also means exposing people to some (but not too much) pressure to awaken their potential. But at the same time, they also need protection from serious dangers - you should ignore minor risks and focus on protecting them from serious harm, please note, only focus on serious harm. This strategy can be applied to social policies, healthcare, and more fields. Careers can also be phased: start with very safe jobs, then move on to more speculative work. More barbell strategies: do something crazy (occasionally break furniture), like the Greeks do at drinking symposiums in the second half, and remain "rational" in bigger decisions. Read useless entertainment magazines, as well as classic books or complex works, but avoid mediocre books. Communicate with college students, taxi drivers, gardeners, or the best scholars, but avoid mediocre scholars with big ambitions. If you don't like someone, either go along with them or crush them, don't just stick to verbal attacks. So, remember, a random barbell strategy will enhance antifragility by reducing vulnerability, eliminating unfavorable risks caused by harm, that is, reducing the pain caused by unfavorable events while ensuring potential gains. Legendary investor Ray Dalio gives a golden rule to those entering speculative gambling: "Ensure the probability of unacceptable events (i.e., destruction or disaster) is zero." Selectivity, Technology, and the Wisdom of Antifragility Taylor's Sweet Grapes If one can wisely achieve financial independence, it can make you more resilient, provide you with more choices, and enable you to make the right decisions. Freedom is the ultimate choice. Choice = Asymmetry + Rationality Teaching Birds How to Fly Naive rationalism leads us to overestimate the second type of knowledge, namely academic knowledge in human affairs, while underestimating the unwritten, more complex, more intuitive, or more experiential type of knowledge. When Two Things Are Not the Same Rigorous empirical investigations show - largely thanks to Lant Pritchett and a later economist at the World Bank - that there is no evidence to suggest that raising the overall level of education can increase a country's income level. However, we know that the reverse of this statement is true, that the accumulation of wealth drives the development of education - this is not an illusion. Wealth and economic growth → Education The expert problem (that is, experts know a lot, but they know less than they think) often leads to fragility, while admitting ignorance has the opposite effect. The expert problem puts you on the wrong side of the asymmetry error, so let's check the issue of risk. When you appear fragile, you need to know more information than when you have anti-fragility. Conversely, when you think you know more than you actually do, you are fragile (in the face of error). History Written by the Losers Clearly, money should be invested in free explorers, those proactive explorers you trust will help you gain option returns. The right approach requires some form of "wide planting and thin harvesting." In other words, the correct strategy is to adopt a "one over n" or "1/n" model, spreading funds as much as possible across many attempts: if you face n choices, invest equally in all choices, that is, invest a small amount in each experiment, but more than you are willing to invest in projects. Summarize some rules: Look for selectivity; in fact, rank the business you want to engage in based on selectivity; It is better to choose businesses with open rather than closed returns; Do not invest in business plans, but in people, look for someone who can switch between 6 or 7, or even more jobs in their career - this is the method used by venture capitalist Marc Andreessen; investing in people helps us develop immunity to textual narratives like business plans. This is the only way to ensure that you enhance your resilience; No matter what your business is, make sure you choose a barbell strategy. Order in Chaos "Many things that people know are actually not worth knowing." So far, I still instinctively believe that valuable knowledge, the knowledge you need for a profession, is definitely not in the database, so stay away from the center as much as possible. What I was taught in school, I have completely forgotten; what I chose to read, I still remember very well. The importance of following your interests in choosing what to read cannot be overstated. Fat Tony and the Socratic Debate In fact, the most serious mistake in life is mistaking the unspeakable for something foolish. Again, probability (true/false) is not important in the real world, what matters is the impact of events. Nonlinearity vs. Linearity The Difference Between a Big Rock and a Thousand Small Stones For fragile objects, the cumulative effect of mild impacts is lower than the impact of an equally severe single impact. Extreme events cause much greater damage to fragile things than a series of mild events. Philosopher's Stone and Anti-Philosopher's Stone This method can show us where the mathematics used in economic models are false - or which models are fragile and which are not. Just make a small change to the assumptions, see how much impact it has, and whether this impact will continue to escalate. If the impact escalates, like in the case of Longbridge, it means that those relying on the model will suffer catastrophic consequences under the "Black Swan" effect. If someone is fragile in the face of change, the concept of averages is meaningless - deviations in temperature are far more important than average temperature. Many people in the Middle Ages were obsessed with finding the Philosopher's Stone. It is essential to remember that the word "chemistry" comes from alchemy. The essence of alchemy is to seek chemical powers from substances, with alchemists mainly focusing on transforming metals into gold through transmutation to create value. The crucial power of alchemy comes from the Philosopher's Stone, which fascinated many. If you have favorable asymmetry or convexity (options are a special case), in the long run, you will do quite well, performing better than the average in uncertain situations. The stronger the uncertainty, the greater the role of selectivity, and the better your performance. This attribute is crucial in life. Negation Since a small exception can overturn a proposition, although we cannot determine what something is, falsification is always easier to find evidence for than verification. Time and Fragility I firmly believe that using negation for predictions is the only effective method: using other methods to predict is unlikely to avoid encountering "turkey" problems in some areas, especially in the complex environment we live in today. This lack of literary literacy is actually a sign of a lack of judgment about the future, as it often comes with a depreciation of history, a byproduct of unconditional pursuit of novelty. All you need to do is: retain some respect for the past, maintain curiosity about historical records, retain a thirst for the wisdom of the elderly, and grasp the concept of "heuristic method," these unwritten rules of experience play a decisive role in survival. In other words, you will be forced to value things that can be passed down through generations and survive. Through self-reduction, technology can eliminate the impact of harmful technologies. The peak state of technology is often when we cannot see it. I believe that when a technology replaces harmful, unnatural, unfriendly, and inherently fragile old technologies, it brings us the greatest benefits. For things that will naturally perish, every day added shortens their life expectancy. For things that will not naturally perish, every day added may mean a longer expected remaining life. The relative proportion of the expected lifespan of things does not need to be explicitly tested, this is a direct manifestation of the "winner takes all" effect in terms of lifespan. Encourage children to read classic works. The future is contained within the past. In fact, there is an Arabic proverb that says it well: "A person without a past has no future." Medicine, Convexity, and Opacity If you have antifragility towards something (i.e., convexity), it is better for it to be randomly distributed rather than regularly supplied. If a person's condition is very severe, there is no need to worry about iatrogenic harm. Only marginal cases pose a danger. Living a Long Life, But Not Too Long The system's antifragility comes from the death of its components - and I am just a part of this larger system called humanity. I came into this world to eventually contribute to the collective good, to prepare for the future of offspring (to provide for their future lives and sustenance), or ultimately to die like a hero for books - in the end, it is my information, my genes, or my antifragility that should seek immortality, not me. The Ethics of Fragility and Antifragility Personal Interests: Antifragility and the Selectivity of Sacrificing Others In fact, the resilience of society, even antifragility, relies on these people: the reason we can still live in this world today is because some people took risks for us at some point. If you are willing to take risks, face your fate with dignity, then nothing you do will diminish the value of your actions; if you do not take risks, nothing you do will make you great. If you take risks, then the insults from those who do not take risks are just like the barking of livestock: you cannot feel insulted because a dog barks at you. For me, every decision-maker should "bet in the game," if the people relying on his information or opinions may be harmed (do not let the perpetrators of the invasion of Iraq go unscathed). Furthermore, anyone making predictions or economic analyses should stake something, as the interests of others depend on the accuracy of these predictions (again, those making predictions should bear the risk; because for us, this is more harmful than any other form of man-made pollution). We need to establish redundancy, safety margins, avoid optimization, to mitigate or even eliminate the asymmetry in our sensitivity to risk. If you speak without substance, act inconsistently, do not take risks of loss, do not bet in the game, do not risk any of your interests, then it is extremely unethical. If expressing your opinion may harm others (those relying on these opinions), but you do not take any responsibility. Is that fair? Asymmetry (antifragility of post-hoc predictors): Post-hoc predictors can use a filtering selection method to choose examples where their opinions are accepted and discard incorrect predictions into the historical trash heap. This is a free choice for them; we, however, must pay the price for it. I hope that for every prediction error, predictors leave a visible scar on themselves, rather than spreading the cost of mistakes to the entire society. Stiglitz Syndrome = (possibly well-intentioned) fragile push + post-filter selection The solution to ethical issues is actually a good strategy to solve the Stiglitz Syndrome, and that is: do not ask for anyone's opinions, predictions, or advice. Just ask what is in their investment portfolio or what is not. People can say whatever they want, but their investment portfolio must match. And, of course, regulators should not act as fragile pushers, endorsing their forecasting methods - thus endorsing their junk science. Psychologist Gerald Gigerenzer has a simple heuristic. Don't ask the doctor what you should do; instead, ask the doctor what he would do if he were in your situation. You will be surprised to see the difference. In Tony's words: Stupid people always try to prove themselves right, while smart people try to make money, or: Stupid people always try to win arguments, while smart people seek profits. In other words, losing an argument may not be a bad thing. Adding an Ethical Halo to the Profession Please note the relationship with vested interests. If someone has a viewpoint, such as the banking system being very fragile and likely to collapse, I hope he invests based on his viewpoint, so that when his audience suffers, he suffers too - like a credit certificate proving he is not just talking nonsense. But for general statements about collective welfare, such investments are not necessary. This is the negation of law. All I want is to eliminate selectivity, to eliminate actions that sacrifice the interests of others to gain antifragility. This simple method is the negation of law. The rest will follow naturally. Conclusion A glass is dead, only living things like volatility. The best way to verify if you are alive is to check if you like change. Remember, if you don't feel hungry, delicacies will taste like wax; without hard work, the results will be meaningless; similarly, without experiencing pain, one cannot understand joy; without going through hardships, beliefs will not be strong; deprived of personal risks, a morally sound life will naturally be meaningless.