Thursday, March 6, 2014
_Anti-Fragile_ by Nassim Nicholas Taleb
NY: Random House, 2012
(3) 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.
(12) The strangest thing is that this obvious property that _anything fragile hates volatility_, and vice versa, has been sitting completely outside the scientific and philosophical discourse.
(17) As a member of the Christian minority in the Near East, I can vouch that commerce, particularly small commerce, is the door to tolerance - the only door, in my opinion, to any form of tolerance. It beats rationalizations and lectures.
NB: direct marketing, local ag and biz
It is worth re-explaining the following: the robust or resilient is neither harmed nor helped by volatility and disorder, while the antifragile benefits from them.
(20) Recall that the fragile wants tranquility, the antifragile grows from disorder, and the robust doesn't care too much.
(56) In the complex world, the notion of "cause" itself is suspect; it is either nearly impossible to detect or not really defined - another reason to ignore newspapers, with their constant supply of causes for things.
(58) Humans tend to do better with acute than with chronic stressors, particularly when the former are followed by ample time for recovery, which allows the stressors to do their jobs as messengers.
(64) Much of modern life is preventable chronic stress injury.
(69) Black Swan Management 101: nature (and nature-like systems) likes diversity _between_ organisms rather than diversity _within_ an immortal organism, unless you consider nature itself the immortal organism, as in the pantheism of Spinoza or that present in Asian religions, or the Stoicism of Chrisippus or Epictetus.
(74) Further, my characterization of a loser is someone who, after making a mistake, doesn't introspect, doesn't exploit it, feels embarrassed and defensive rather than enriched with a new piece of information, and tries to explain why he made the mistake rather than moving on. These types often consider themselves the "victims" of some large plot, a bad boss, or bad weather.
(77) There is something like a switch in us that kills the individual in favor of the collective when people engage in communal dances, mass riots, or war. Your mood is now that of the herd. You are part of what Elias Canetti calls the _rhythmic and throbbing crowd_. You can also feel a different variety of crowd experience during your next street riot, when fear of authorities vanishes completely under group fever.
NB: zombies as crowd
(88) … my (mathematical) point is that a collection of small units with semi-independent variations produces vastly different risk characteristics than a single large unit.
(95) In the recent nostalgic book, _Levant_, Philip Mansel documents how the cities of the Eastern Mediterranean operated as city-states separated from the hinterland.
(98) Some people have fallen for the naive turkey-style belief that the world is getting safer and safer, and of course they naively attribute it to the holy "state" (though bottom-up Switzerland has about the lowest rate of violence of any place on the planet). It is exactly like saying that nuclear bombs are safer because they explode less often. The world is subjected to fewer and fewer acts of violence, while wars have the potential to be more criminal. We were very close to the mother of all catastrophes in the 1960s when the United States was about to pull the nuclear trigger on the Soviet Union. Very close. When we look at risks in Extremistan, we don't look at evidence (evidence comes too late), we look at potential damage: never has the world been more prone to more damage: never. It is hard to explain to naive data-driven people that risk is in the future, not in the past.
(101) Light control works; close control leads to overreaction, sometimes causing the machinery to break into pieces. In a famous paper "On Governors," published in 1867, Maxwell modeled the behavior and showed mathematically that tightly controlling the speed of engines leads to instability.
(109) Modernity starts with the state monopoly on violence, and ends with the state's monopoly on fiscal irresponsibility.
(118) Beware what you wish for: small government might in the end be more effective at whatever it needs to do. Reduction in size and scope may make it even more intrusive than large government.
(121) The ideas advanced here are not political, but risk-management based. I do not have a political affiliation or allegiance to a specific party; rather, I am introducing the idea of harm and fragility into the vocabulary so we can formulate appropriate polices to ensure we don't end up blowing up the planet and ourselves.
(132) It is the system and its fragility, not events, that must be studied - what physicists call "percolation theory," in which the properties of randomness of the terrain are studied rather than those of a single element of the terrain.
(152) My point is that wisdom in decision making is vastly more important - not just practically, but philosophical - than knowledge.
(155) LIkewise, when I was a trader, a profession rife with a high dose of randomness, with continuous psychological harm that drills deep into one's soul, I would go through the mental exercise of assuming every morning that the worst possible thing had actually happened - the rest of the day would be a bonus.
(156) My idea of the modern Stoic sage is _someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking_.
He [Seneca] said that wealth is the slave of the wise man and master of the fool.
(157) Seneca in De Beneficiis: "The bookkeeping of benefits is simple: it is all expenditure; if anyone returns it, that is clear _gain_ (my emphasis); if he does not return it, it is not lost, I gave it for the sake of giving."
NB: generosity, gratitude
(163) Yiddish proverb: "Provide for the worst; the best can take care of itself."
(176) And, it is worth repeating, options, any options, by allowing you more upside than downside, are vectors of antifragility.
(178) Authors, artists, and even philosophers are much better off having a very small number of fanatics behind them than a large number of people who appreciate their work.
NB: True Fan Theory
(188) We said that the intellectual society rewards "difficult" derivations, compared to practice in which there is no penalty for simplicity.
(189) The history of medicine is littered with the strange sequence of discovery of a cure followed, much later, by implementation - as if the two were completely separate ventures, the second harder, much harder, than the first.
(190) The key is that the significant can only be revealed through practice.
(191) We saw the gap between the wheel and its use. Medical researchers call such lag the "translational gap," the time difference between formal discovery and first implementation, which, if anything, owing to excessive noise and academic interests, has been shown by Countopoulos-Ioannidis and her peers to be lengthening in modern times.
…(as I keep saying, removal of something non-natural does not carry long-term side effects; it is typically iatrogenics-free).
(198) Is democracy epiphenomenal? Supposedly, democracy works because of this hallowed rational decision making on the part of voters. But consider that democracy may be something completely accidental to something else, the side effect of people liking to cast ballots for completely obscure reasons, just as people enjoy expressing themselves just to express themselves.
(199) If life is lived forward but remembered backward, as Kierkegaard observed, then books exacerbate this effect - our own memories, learning and instinct have sequences in them. Someone standing today looking at events _without having lived them_ would be inclined to develop illusions of causality, mostly from being mixed-up by the sequence of events.
(203) … master aphorist Publilius Syrus: "poverty makes experiences" (hominem experirir multi pauperitas iubet)
(205) Julien Gracq - good literature
(222) It is just that things that are implemented tend to want to be born from practice, not theory.
NB: politics of swadeshi
(237) Recall our mission to "not be a turkey." The take-home is that, when facing a long sample subjected to turkey problems, one tends to estimate a _lower_ number of adverse events - simply, rare events are rare, and tend not to show up in past samples, and given that _the rare is almost always negative_, we get a rosier picture than reality. But here we face the mirror image, the reverse situation. Under positive asymmetries, that is, the antifragile case, the "unseen" is positive. So "empirical evidence" tends to miss positive events and underestimate the total benefits.
(238) Let me stop to issue rules based on the chapter so far (i) Look for optionality; in fact, rank things according to optionality, (ii) preferably with open-ended, not closed-ended, payoffs; (iii) Do not invest in business plans but in people, so look for someone capable of changing six or seven times over his career, or more (an idea that is part of the modus operandi of the venture capitalist Marc Andreesen); one gets immunity from the backlit narratives of the business plan by investing in people. It is simply more robust to do so; (iv) Make sure you are barbelled, whatever that means in your business.
(242) Only the autodidacts are free. And not just in school matters - those who decommoditize, detouristify their lives.
(245-246) The trick is to be bored with a specific book, rather than with the act of reading. So the number of pages absorbed could grow faster than otherwise. And you find gold, so to speak, effortlessly, just as in rational but undirected trial-and-error-based research. It is exactly like options, trial and error, not getting stuck, bifurcating when necessary but keeping a sense of broad freedom and opportunism. Trial and error is freedom.
(I confess I still use that method at the time of this writing. Avoidance of boredom is the only worthy mode of action. Life otherwise is not worth living.)
(248) But there is something central in following one's own direction in the selection of readings: what I was given to study in school I have forgotten; what I decided to read on my own, I still remember.
(249) Indeed, the most severe mistake made in life is to mistake the unintelligible for the unintelligent - something Nietzsche figured out.
(256) … Nietzsche understood something that I did not find explicitly stated in his work: that growth in knowledge - or in anything - cannot proceed without the Dionysian.
(260) _You decide principally based on fragility, not probability_. Or to rephrase, _You decide principally based on fragility, not so much on True/False_.
Scientists have something called "confidence level"; a result obtained with a 95 percent confidence level means that there is no more than a 5 percent probability of the result being wrong. The idea of course is inapplicable as it ignores the size of the effects, which of course, makes things worse with extreme events.
So, to repeat, the probability (hence True/False) does not work in the real world; it is the payoff that matters.
(269) Jumping from a height of thirty feet (ten meters) brings more than ten times the harm of jumping from a height of three feet (one meter) - actually, thirty feet seems to be the cutoff point for death from free fall.
(275) When you hear of a "second-order" effect, it means convexity is causing the failure of approximation to represent the real story.
(278) A squeeze occurs when people have no choice but to do something, and do it right away, regardless of the costs.
(279) In spite of what is studied in business schools concerning "economies of scale," size hurts you at times of stress; it is not a good idea to be large during difficult times.
NB: what about production?
But the numbers show, at best, no gain from such increase in size - that was already true in 1978, when Richard Roll voiced the "hubris hypothesis," finding it irrational for companies to engage in mergers given their poor historical record.
(282) … it is the size per segment of the project that matters, not the entire project - some projects can be divided into pieces, not others. Bridge and tunnel projects involve monolithic planning, as these cannot be broken up into small portions; their percentage costs overruns increase markedly with size.
It is wrong to use the calculus of benefits without including the probability of failure.
As with the European Union's subsidiary principle, "small" here means that smallest possible unit for a given function or task that can operate with a certain level of efficacy.
(286) visionary researcher on extreme events Daniel Zajdenweber… The economy can get more and more "efficient," but fragility is causing the costs of errors to be higher.
(288) Ancestral humans did it differently. Jennifer Dunne, a complexity researcher who studies hunter-gatherers, examined evidence about the behavior of the Aleuts, a North American native tribe, for which we have ample data, covering five millennia. They exhibit a remarkable lack of concentration in their predatory behavior, with a strategy of prey switching. They were not as sticky and rigid as us in their habits. Whenever they got low on a resource, they switched to another one, as if to preserve the ecosystem. So they understood convexity effects - or, rather, their habits did.
NB: flexibility, antifragility
(295) The notion of average is of no significance when one is fragile to variations - the dispersion in possible thermal outcomes here matters much more. Your grandmother is fragile to variations of temperature, to the volatility of the weather. Let us call that second piece of information the _second-order effect_, or, more precisely, the _convexity effect_.
(301) The "apophatic" focuses on what cannot be said directly in words, from the Greek _apophasis_ (saying no, or mentioning without mentioning).
(302) 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…
Yet in practice it is the negative that's used by the pros, those selected by evolution: chess grandmasters usually win by not losing; people become rich by not going bust...
(305) Just worry about Black Swan exposures, and life is easy.
(306) Few realize that we are moving into the far more uneven distribution of 99/1 across many things that used to be 80/20: 99 percent of Internet traffic is attributable to less than 1 percent of sites, 99 percent of book sales come from less than 1 percent of authors… and I need to stop because numbers are emotionally stirring. Almost everything contemporary has winner-take-all effects, which includes sources of harm and benefits. Accordingly, as I will show, 1 percent modification of systems can lower fragility (or increase antifragility) by about 99 percent - and all it takes is a few steps, a very few steps, often at low cost, to make things better and safer.
(308) I discovered that I had been intuitively using the less-is-more idea as an aid in decision making (contrary to the method of putting a series of pros and cons side by side on a computer screen). For instance, if you have more than one reason to do something (choose a doctor or veterinarian, hire a gardener or an employee, marry a person, go on a trip), just don't do it. It does not mean that one reason is better than two, just that by invoking more than one reason you are trying to convince yourself to do something. Obvious decisions (robust to error) _require_ no more than a single reason.
I have often followed what I call Bergson's razor: "A philosopher should be known for one single idea, not more" ( I can't source it to Bergson, but the rule is food enough).
(309) Antifragility implies - contrary to initial instinct - that the old is superior to the new, and much more than you think. No matter how something looks to your intellectual machinery, or how well or poorly it narrates, time will know more about its fragilities and break it when necessary.
(314) Technothinkers tend to have an "engineering mind" - to put it less politely, they have autistic tendencies. While they don't usually wear ties, these types tend, of course, to exhibit all the textbook characteristics of nerdiness - mostly lack of charm, interest in objects instead of persons, causing them to neglect their looks. They love precision at the expense of applicability. And they typically share an absence of literary culture.
This absence of literary culture is actually a marker of future blindness because it is usually accompanied by a denigration of history, a by product of unconditional neomania. Outside of the niche and isolated genre of science fiction, literature is about the past. We do not learn physics or biology from medieval textbooks, but we still read Homer, Plato, or the very modern Shakespeare. We cannot talk about sculpture without knowledge of the works of Phidias, Michelangelo, or the great Canova.
(316) So it may be a natural property of technology to only want to be displaced by itself.
(317) _For the perishable, every additional day in its life translates into a _shorter_ additional life expectancy. For the nonperishable, every additional day may imply a _longer_ life expectancy_.
(319) Remember the following principle: I am not saying that _all_ technologies do not age, only that those technologies that were prone to aging are already dead.
(321) Another mental bias causing the overhyping of technology comes form the fact that we notice change, not statics. The classic example discovered by the psychologists Daniel Kahneman and Amos Tversky, applies to wealth. (The pair developed the idea that our brains like minimal effort and get trapped that way, and they pioneered attraction of cataloging and mapping human biases with respect to perception of random outcomes and decision making under uncertainty.) If you announce to someone "you lost $10,000," he will be much more upset than if you tell him "you portfolio value, which was $785,000, is now $775,000." Our brains have a predilection for shortcuts, and the variation is easier to notice (and store) than the entire record. It requires less memory storage. This psychological heuristic (often operating without our awareness), the error of variation in place of total, is quite pervasive, even with matters that are visual.
We notice what varies and changes more than what plays a large role but doesn't change.
NB: Not with money if you're poor
(324) But consider the difference between the artisanal - the other category - and the industrial. What is artisanal has the love of the maker infused in it, and tends to satisfy - we don't have this nagging impression of incompleteness we encounter with electronics.
(325) What is top-down is generally unwrinkled (that is, unfractal) and feels dead.
Wealth of details, ironically, leads to inner peace.
(331) 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.
He [Taleb's student] told me that after his detoxification, he realized that all his peers do is read _timely_ material that becomes instantly obsolete.
(335) There are secrets to our world that only practice can reveal, and no opinion or analysis will ever capture in full.
Let's take this idea of Empedocles' dog a bit further: If something that makes no sense to you (say, religion - if you are an atheist - or some age-old habit or practice called irrational); if that something has been around for a very, very long time, then, irrational or not, you can expect it to stick around much longer, and outlive those who call for its demise.
(337) As usual, the solution is simple, an extension of via negativa and Fat Tony's _don't-be a sucker_ rule: 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.
The "do you have evidence" fallacy, mistaking evidence of no harm for no evidence of harm, is similar to the one misinterpreting NED (no evidence of disease) for evidence of no disease. This is the same error as mistaking absence of evidence for evidence of absence, the one that tends to affect smart and educated people, as if education made people more confirmatory in their responses and more liable to fall into simple logical errors.
(348-349) Let me repeat the argument here in one block to make it clearer. Evolution proceeds by undirected, convex bricolage or tinkering, inherently robust, i.e., with the achievement of potential stochastic gains thanks to continuous, repetitive, small, localized mistakes. 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. In this particular case, because of the scalability of the errors, you are exposed to the wildest possible form of randomness.
Simply, humans should not be given explosive toys (like atomic bombs, financial derivatives, or tools to create life).
Let me phrase the last point a bit differently. If there is something in nature you don't understand, odds are it makes sense in a deeper way that is beyond your understanding. So there is a logic to natural things that is much superior to our own. Just as there is a dichotomy in law: _innocent until proven guilty_ as opposed to _guilty until proven innocent_, let me express my rule as follows: what Mother Nature does is rigorous until proven otherwise; what humans and science do is flawed until proven otherwise.
NB: stochastic 1. Of, relating to, or characterized by conjecture; conjectural. 2. Statistics a. Involving or containing a random variable or variables: stochastic calculus.b. Involving chance or probability: a stochastic stimulation.
(350) We are built to be dupes for theories. But theories come and go; experience stays.
(380) 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.
(381) …(to repeat, forecasts induce rise taking; they are more toxic to us than any other form of human pollution).
(382) Commentators need to have a status _below_ ordinary citizens. Regular citizens, at least, face the downside of their statements.
So counter to the entire idea of the intellectual and commentator as a detached and protected member of society, I am stating here that I find it profoundly unethical to talk without doing, without exposure to harm, without having one's skin in the game, without having something at risk. You express your opinion; it can hurt others (who rely on it), yet you incur no liability. Is this fair?
(383) As in anything with words, it is not the victory of the most correct, but that of the most charming - or the one who can produce the most academic-sounding material.
(384) There is no penalty for opinion makers who harm society.
(387) An academic is not designed to remember his opinions because he doesn't have anything at risk from them.
(389) Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have - or don't have - in their portfolio.
The psychologist Gerd Gigerenzer has a simple heuristic. Never ask the doctor what _you_ should do. As him what _he_ would do if he were in your place. You would be surprised at the difference.
(390) To put in Fat Tony terms: suckers try to be right, nonsuckers try to make the buck, or:
_Suckers try to win arguments, nonsuckers try to win._
To put it again in other words: it is rather a good thing to lose arguments.
(393) Almutanabbi, the best poet
(401) … (business schools are more like acting schools) …
(403) Anything one needs to market heavily is necessarily either an inferior produce or an evil one.
And marketing beyond conveying information is insecurity.
(404) A (publicly listed) corporation does not feel shame. We humans are restrained by some physical, natural inhibition.
A corporation does not feel pity.
A corporation does not have a sense of honor - while, alas, marketing documents mention "pride."
A corporation does not have generosity. Only self-serving actions are acceptable. Just imagine what would happen to a corporation that decided to unilaterally cancel its receivables - just to be nice. Yet societies function thanks to random acts of generosity between people, even sometimes strangers.
All of these defects are the result of the absence of skin in the game, cultural or biological - an asymmetry that harms others for their benefit.
(405) Only a sense of honor can lead to commerce. Any commerce.
(408) Tony: Nero, you sucker. Don't be fooled by money. These are just numbers. Being self-owned is a state of mind.
(410) The definition of the _free man_, according Aristotle, is one who is free with his opinions - as a side effect of being free with his time.
Freedom in this sense is only a matter of sincerity in political opinions.
(412) A simple solution, but quite drastic; anyone who goes into public service should not be allowed to _subsequently_ earn more from any commercial activity than the income of the highest paid civil servant. It is like a voluntary cap (it would prevent people from using public office as a credential-building temporary accommodation, then going to Wall Street to earn several million dollars). This would get priestly people into office.
(417) There is a certain property of data: in large data sets, large deviations are vastly more attributable to noise (or variance) than to information (or signal).
The Tragedy of Big Data. The more variables, the more correlations that can show significance in the hands of a "skilled" researcher. Falsity grows faster than information; it is nonlinear (convex) with respect to data.
(419) Mistakes made collectively, not individually, are the hallmark of organized knowledge - and the best argument against it. The argument "because everyone is doing it" or "that's how others do it" abounds. It is not trivial: people who on their own would not do something because they find it silly now engage in the same thing but in groups. And this is where academia in its institutional structure tends to violate science.
(421) Everything in religions law comes down to the refinements, applications, and interpretations of the Golden Rule, "Don't do unto others what you don't want them to do to you." This we saw was the logic behind Hammurabi's rule.
NB: Kung Fu Tze's formulation not Jesus', Silver Rule rather than Golden Rule
Shaiy's extraction was: _Everything gains or loses from volatility. Fragility is what loses from volatility and uncertainty._
(430) Agency Problem: Situation in which the manager of a business is not the true owner, so he follows a strategy that cosmetically seems to be sound, but in a hidden way benefits him and makes him antifragile at the expense (fragility) of the true owners or society. When he is right, he collects large benefits; when he is wrong, others pay the price. Typically this problem leads to fragility, as it is easy to hide risks. It also affects politicians and academics. A major source of fragility.
(447) Something estimated needs to have an estimation error. So probability cannot be zero if it is estimated, its lower bound is linked to the estimation error; the higher the estimation error, the higher the probability, up to a point. As with Laplace's argument of total ignorance, an infinite estimation error pushes the probability toward 1/2.
(468) Evolutionary heuristics: This is central but I hide it here. To summarize the view - a merger of what it is in the literature and the ideas of this book: an evolutionary heuristic in a given activity has the following attributes: (a) you don't know you are using it, (b) it has been done for a long time in the very same, or rather similar environment, by generations of practitioners, and reflects some evolutionary collective wisdom, (c) it is free of the agency problem and those who use it survived (this excludes medical heuristics used by doctors since the patient might not have survived, and is in favor of collective heuristics used by society), (d) it replaces complex problems that require a mathematical solution, (e) you can only learn it by practicing and watching others, (f) you can always do "better" on a computer, as these do better on a computer than in real life. For some reason, these heuristics that are second best do better than those that seem to be best, (g) the field in which it was developed allows for rapid feedback, in the sense that those who make mistakes are penalized and don't stick around for too long. Finally, as the psychologists Kahneman and Tversky have shown, outside the domains in which they were formed, these can go awfully wrong.
(483) Scott Berkun, _The Myths of Innovation_ Sebastopol, CA: O'Reilly, 2007
(486) Robert Dahl and Edward Tufte, _Size and Democracy_ Stanford: Stanford Univ Press, 1973
(495) Darrin McMahon, _Enemies of the Enlightenment: The French Counter-Enlightenment and the Making of Modernity_ Oxford: Oxford Univ Press, 2001
(498) Martin Rees, _Our Final Century: Will Civilisation Survive the Twenty-First Century?_ Arrow Books, 2003