Antifragile

Proto-Antifragility

• Let us call Mithridatization the result of an exposure to a small dose of a substance that, over time, makes one immune to additional, larger quantities of it. It is the sort of approach used in vaccination and allergy medicine. It is not quite antifragility, still at the more modest level of robustness, but we are on our way. And we already have a hint that perhaps being deprived of poison makes us fragile and that the road to robustification starts with a modicum of harm.

Chapter 2. Overcompensation and Overreaction Everywhere

• a phenomenon called post-traumatic growth, the opposite of post-traumatic stress syndrome, by which people harmed by past events surpass themselves. I had never heard about it before, and, to my great shame, had never made the effort to think of its existence: there is a small literature but it is not advertised outside a narrow discipline. We hear about the more lurid post-traumatic disorder, not post-traumatic growth, in the intellectual and so-called learned vocabulary. But popular culture has an awareness of its equivalent, revealed in the expression “it builds character.”
• How do you innovate? First, try to get in trouble. I mean serious, but not terminal, trouble. I hold—it is beyond speculation, rather a conviction—that innovation and sophistication spark from initial situations of necessity, in ways that go far beyond the satisfaction of such necessity
• The world as a whole has never been richer, and it has never been more heavily in debt, living off borrowed money. The record shows that, for society, the richer we become, the harder it gets to live within our means. Abundance is harder for us to handle than scarcity.

How to Win a Horse Race

• I find it better to whisper, not shout. Better to be slightly inaudible, less clear. When I was a pit trader (one of those crazy people who stand in a crowded arena shouting and screaming in a continuous auction), I learned that the noise produced by the person is inverse to the pecking order: as with mafia dons, the most powerful traders were the least audible. One should have enough self-control to make the audience work hard to listen, which causes them to switch into intellectual overdrive.

Antifragile Responses as Redundancy

• these antifragile hormetic responses were just a form of redundancy, and all the ideas of Mother Nature converged in my mind. It is all about redundancy. Nature likes to overinsure itself. Layers of redundancy are the central risk management property of natural systems. We humans have two kidneys (this may even include accountants), extra spare parts, and extra capacity in many, many things (say, lungs, neural system, arterial apparatus), while human design tends to be spare and inversely redundant, so to speak—we have a historical track record of engaging in debt, which is the opposite of redundancy (fifty thousand in extra cash in the bank or, better, under the mattress, is redundancy; owing the bank an equivalent amount, that is, debt, is the opposite of redundancy). Redundancy is ambiguous because it seems like a waste if nothing unusual happens. Except that something unusual happens—usually.
• the fool believes that the tallest mountain in the world will be equal to the tallest one he has observed. We consider the biggest object of any kind that we have seen in our lives or hear about as the largest item that can possibly exist. And we have been doing this for millennia.

On the Antifragility of Riots, Love, and Other Unexpected Beneficiaries of Stress

• Like tormenting love, some thoughts are so antifragile that you feed them by trying to get rid of them, turning them into obsessions. Psychologists have shown the irony of the process of thought control: the more energy you put into trying to control your ideas and what you think about, the more your ideas end up controlling you.

Please Ban My Book: The Antifragility of Information

• So here is a simple rule of thumb (a heuristic): to estimate the quality of research, take the caliber of the highest detractor, or the caliber of the lowest detractor whom the author answers in print—whichever is lower.

Get Another Job

• With few exceptions, those who dress outrageously are robust or even antifragile in reputation; those clean-shaven types who dress in suits and ties are fragile to information about them.
• When you don’t have debt you don’t care about your reputation in economics circles—and somehow it is only when you don’t care about your reputation that you tend to have a good one. Just as in matters of seduction, people lend the most to those who need them the least.
• So I end this section with a thought. It is quite perplexing that those from whom we have benefited the most aren’t those who have tried to help us (say with “advice”) but rather those who have actively tried—but eventually failed—to harm us.

Stressors Are Information

• Your skin lightens in the winter and tans in the summer (especially if you have Mediterranean origins, less so if you are of Irish or African descent or from other places with more uniform weather throughout the year).
• For instance, having an intense emotional shock from seeing a snake coming out of my keyboard or a vampire entering my room, followed by a period of soothing safety (with chamomile tea and baroque music) long enough for me to regain control of my emotions, would be beneficial for my health, provided of course that I manage to overcome the snake or vampire after an arduous, hopefully heroic fight and have a picture taken next to the dead predator. Such a stressor would be certainly better than the mild but continuous stress of a boss, mortgage, tax problems, guilt over procrastinating with one’s tax return, exam pressures, chores, emails to answer, forms to complete, daily commutes—things that make you feel trapped in life. In other words, the pressures brought about by civilization. In fact, neurobiologists show that the former type of stressor is necessary, the second harmful, for one’s health. For an idea of how harmful a low-level stressor without recovery can be, consider the so-called Chinese water torture: a drop continuously hitting the same spot on your head, never letting you recover.

Evolution and Unpredictability

• So evolution benefits from randomness by two different routes: randomness in the mutations, and randomness in the environment—both act in a similar way to cause changes in the traits of the surviving next generations.
• as I will keep repeating, nature is antifragile up to a point but such point is quite high—it can take a lot, a lot of shocks. Should a nuclear event eradicate most of life on earth, but not all life, some rat or bacteria will emerge out of nowhere, perhaps the bottom of the oceans, and the story will start again, without us, and without the members of the Office of Management and Budget, of course.

Learning from the Mistakes of Others

• Had the Titanic not had that famous accident, as fatal as it was, we would have kept building larger and larger ocean liners and the next disaster would have been even more tragic. So the people who perished were sacrificed for the greater good; they unarguably saved more lives than were lost. The story of the Titanic illustrates the difference between gains for the system and harm to some of its individual parts.

How to Become Mother Teresa

• 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. Finally, a thought. He who has never sinned is less reliable than he who has only sinned once. And someone who has made plenty of errors—though never the same error more than once—is more reliable than someone who has never made any.

Why the Aggregate Hates the Individual

• The problem is graver than you think. People go to business school to learn how to do well while ensuring their survival—but what the economy, as a collective, wants them to do is to not survive, rather to take a lot, a lot of imprudent risks themselves and be blinded by the odds. Their respective industries improve from failure to failure. Natural and naturelike systems want some overconfidence on the part of individual economic agents, i.e., the overestimation of their chances of success and underestimation of the risks of failure in their businesses, provided their failure does not impact others. In other words, they want local, but not global, overconfidence.

What Does Not Kill Me Kills Others

• Sometimes we see people having survived trials and imagine, given that the surviving population is sturdier than the original one, that these trials are good for them. In other words, the trial can just be a ruthless exam that kills those who fail. All we may be witnessing is that transfer of fragility (rather, antifragility) from the individual to the system that I discussed earlier. Let me present it in a different way. The surviving cohort, clearly, is stronger than the initial one—but not quite the individuals, since the weaker ones died. Someone paid a price for the system to improve.

National Entrepreneur Day

• For there is no such thing as a failed soldier, dead or alive (unless he acted in a cowardly manner)—likewise, there is no such thing as a failed entrepreneur or failed scientific researcher, any more than there is a successful babbler, philosophaster, commentator, consultant, lobbyist, or business school professor who does not take personal risks. (Sorry.)
• 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.

Book II: Modernity and the Denial of Antifragility

• This section, Book II, deals with the fragility that comes from the denial of hormesis, the natural antifragility of organisms, and how we hurt systems with the very best of intentions by playing conductor. We are fragilizing social and economic systems by denying them stressors and randomness, putting them in the Procrustean bed of cushy and comfortable—but ultimately harmful—modernity.
• Procrustes was an inn-keeper in Greek mythology who, in order to make the travelers fit in his bed, cut the limbs of those who were too tall and stretched those who were too short. But he had the bed fitting the visitor with total perfection.

Lenin in Zurich

• Note for now that this is the last major country that is not a nation-state, but rather a collection of small municipalities left to their own devices.

Bottom-up Variations

• if you increase the size, say, multiply the number of people in a community by a hundred, you will have markedly different dynamics. A large state does not behave at all like a gigantic municipality, much as a baby human does not resemble a smaller adult. The difference is qualitative: the increase in the number of persons in a given community alters the quality of the relationship between parties. Recall the nonlinearity description from the Prologue. If you multiply by ten the number of persons in a given entity, you do not preserve the properties: there is a transformation. Here conversations switch from the mundane—but effective—to abstract numbers, more interesting, more academic perhaps, but, alas, less effective.
• There is another issue with the abstract state, a psychological one. We humans scorn what is not concrete. We are more easily swayed by a crying baby than by thousands of people dying elsewhere that do not make it to our living room through the TV set. The one case is a tragedy, the other a statistic. Our emotional energy is blind to probability.

Away from Extremistan

• Mediocristan has a lot of variations, not a single one of which is extreme; Extremistan has few variations, but those that take place are extreme.
• Human overintervention to smooth or control processes causes a switch from one kind of system, Mediocristan, into another, Extremistan. This effect applies to all manner of systems with constrained volatility—health, politics, economics, even someone’s mood with and without Prozac. Or the difference between the entrepreneur-driven Silicon Valley (first) and the banking system (second).
• Fat tails—a synonym for Extremistan—mean that remote events, those in what is called the “tails,” play a disproportionate role.

The Great Turkey Problem

• the mother of all harmful mistakes: mistaking absence of evidence (of harm) for evidence of absence, a mistake that we will see tends to prevail in intellectual circles and one that is grounded in the social sciences.

War or No War

• 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.6 It is hard to explain to naive data-driven people that risk is in the future, not in the past.

Chapter 6. Tell Them I Love (Some) Randomness

• the risk properties of the first brother (the fragile bank employee) are vastly different from those of the second one (the comparatively antifragile artisan taxi driver). Likewise, the risk characteristic of a centralized system is different from that of a messy municipally-led confederation. The second type is stable in the long run because of some dose of volatility.
• I was told of a heuristic used by veterans, and only old seasoned veterans: when a market reaches a “new low,” that is, drops to a level not seen in a long time, there is “a lot of blood” to come, with people rushing to the exit. Some people unused to losing shekels will be experiencing a large loss and will incur distress. If such a low market level has not been seen in years, say two years, it will be called “a two-year low” and will cause more damage than a one-year low. Tellingly, they call it a “cleanup,” getting the “weak hands” out of the way. A “weak hand” is clearly someone who is fragile but doesn’t know it and is lulled by a false sense of security. When many such weak hands rush to the door, they collectively cause crashes. A volatile market doesn’t let people go such a long time without a “cleanup” of risks, thereby preventing such market collapses.

Hungry Donkeys

• So far we have argued that preventing randomness in an antifragile system is not always a good idea. Let us now look at the situation in which adding randomness has been a standard operating method, as the needed fuel for an antifragile system permanently hungry for it.

Political Annealing

• For instance, I actually practice such randomizing heuristic in restaurants. Given the lengthening and complication of menus, subjecting me to what psychologists call the tyranny of choice, with the stinging feeling after my decision that I should have ordered something else, I blindly and systematically duplicate the selection by the most overweight male at the table; and when no such person is present, I randomly pick from the menu without reading the name of the item, under the peace of mind that Baal made the choice for me.

The Opposite of Iatrogenics

• Perhaps the idea behind capitalism is an inverse-iatrogenic effect, the unintended-but-not-so-unintended consequences: the system facilitates the conversion of selfish aims (or, to be correct, not necessarily benevolent ones) at the individual level into beneficial results for the collective.

Non-Naive Interventionism

• Let me warn against misinterpreting the message here. The argument is not against the notion of intervention; in fact I showed above that I am equally worried about underintervention when it is truly necessary. I am just warning against naive intervention and lack of awareness and acceptance of harm done by it. It is certain that the message will be misinterpreted, for a while. When I wrote Fooled by Randomness, which argues—a relative of this message—that we have a tendency to underestimate the role of randomness in human affairs, summarized as “it is more random than you think,” the message in the media became “it’s all random” or “it’s all dumb luck,” an illustration of the Procrustean bed that changes by reducing.
• Here, all I am saying is that we need to avoid being blind to the natural antifragility of systems, their ability to take care of themselves, and fight our tendency to harm and fragilize them by not giving them a chance to do so.
• Let me simplify my take on intervention. To me it is mostly about having a systematic protocol to determine when to intervene and when to leave systems alone. And we may need to intervene to control the iatrogenics of modernity—particularly the large-scale harm to the environment and the concentration of potential (though not yet manifested) damage, the kind of thing we only notice when it is too late. 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 policies to ensure we don’t end up blowing up the planet and ourselves.

Catalyst-as-Cause Confusion

• CATALYST-AS-CAUSE CONFUSION When constrained systems, those hungry for natural disorder, collapse, as they are eventually bound to, since they are fragile, failure is never seen as the result of fragility. Rather, such failure is interpreted as the product of poor forecasting. As with a crumbling sand pile, it would be unintelligent to attribute the collapse of a fragile bridge to the last truck that crossed it, and even more foolish to try to predict in advance which truck might bring it down. Yet it is done all too often.
• studied—what physicists call “percolation theory,” in which the properties of the randomness of the terrain are studied, rather than those of a single element of the terrain.
• 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.

Chapter 8. Prediction as a Child of Modernity

• I improvised, on the spot, my solution. We can’t put all false predictors in jail; we can’t stop people from asking for predictions; we can’t tell people not to hire the next person who makes promises about the future. “All I want is to live in a world in which predictions such as those by Mr. Kato do not harm you. And such a world has unique attributes: robustness.” The idea of proposing the Triad was born there and then as an answer to my frustration: Fragility-Robustness-Antifragility as a replacement for predictive methods.

The Idea of Becoming a Non-Turkey

• There are two different domains, one in which we can predict (to some extent), the other—the Black Swan domain—in which we should only let turkeys and turkified people operate. And the demarcation is as visible (to non-turkeys) as the one between the cat and the washing machine.
• Fourth Quadrant—the Fourth Quadrant is the scientific name I gave to the Black Swan domain, the one in which we have a high exposure to rare, “tail” events and these events are incomputable.3 Now, what is worse, because of modernity, the share of Extremistan is increasing. Winner-take-all effects are worsening: success for an author, a company, an idea, a musician, an athlete is planetary, or nothing. These worsen predictability since almost everything in socioeconomic life now is dominated by Black Swans. Our sophistication continuously puts us ahead of ourselves, creating things we are less and less capable of understanding. No

No More Black Swans

• technical footnote (to skip): What are the Quadrants? Combining exposures and types of randomness we get four combinations: Mediocristan randomness, low exposure to extreme events (First Quadrant); Mediocristan randomness, high exposure to extreme events (Second Quadrant); Extremistan randomness, low exposure to extreme events (Third Quadrant); Extremistan randomness, high exposure to extreme events (Fourth Quadrant). The first three quadrants are ones in which knowledge or lack of it bring inconsequential errors. “Robustification” is the modification of exposures to make a switch from the fourth to the third quadrant.

What the Nonpredictor Can Predict

• You can’t predict in general, but you can predict that those who rely on predictions are taking more risks, will have some trouble, perhaps even go bust. Why? Someone who predicts will be fragile to prediction errors. An overconfident pilot will eventually crash the plane. And numerical prediction leads people to take more risks.

Less Downside from Life

• The traditional understanding of Stoicism in the literature is of some indifference to fate—among other ideas of harmony with the cosmos that I will skip here. It is about continuously degrading the value of earthly possessions. When
• Stoicism makes you desire the challenge of a calamity. And Stoics look down on luxury: about a fellow who led a lavish life, Seneca wrote: “He is in debt, whether he borrowed from another person or from fortune.”1 Stoicism, seen this way, becomes pure robustness—for the attainment of a state of immunity from one’s external circumstances, good or bad, and an absence of fragility to decisions made by fate, is robustness. Random events won’t affect us either way (we are too strong to lose, and not greedy to enjoy the upside), so we stay in the middle column of the Triad.
• the standard message of the Stoics—robustness, protection against harm from emotions, how to move away from the first column of the Triad, that sort of thing. Second step, we will show how he truly proposed antifragility. And, third step, we will generalize his trick into a general method of detection of antifragility in Chapters 18 and 19.

Stoicism’s Emotional Robustification

• Let me rephrase it in modern terms. Take the situation in which you have a lot to lose and little to gain. If an additional quantity of wealth, say, a thousand Phoenician shekels, would not benefit you, but you would feel great harm from the loss of an equivalent amount, you have an asymmetry. And it is not a good asymmetry: you are fragile.
• An intelligent life is all about such emotional positioning to eliminate the sting of harm, which as we saw is done by mentally writing off belongings so one does not feel any pain from losses. The volatility of the world no longer affects you negatively.
  • I resonate with this so much because ihave been thinking in similar fashion in my life

The Domestication of Emotions

• My idea of the modern Stoic sage is someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking.

How to Become the Master

• Seneca even outlined his strategy in De beneficiis, explicitly calling it a cost-benefit analysis by using the word “bookkeeping”: “The bookkeeping of benefits is simple: it is all expenditure; if any one 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.” Moral bookkeeping, but bookkeeping nevertheless. So he played a trick on fate: kept the good and ditched the bad; cut the downside and kept the upside.

The Foundational Asymmetry

• Fragility implies more to lose than to gain, equals more downside than upside, equals (unfavorable) asymmetry and Antifragility implies more to gain than to lose, equals more upside than downside, equals (favorable) asymmetry

On the Irreversibility of Broken Packages

• In other words, if something is fragile, its risk of breaking makes anything you do to improve it or make it “efficient” inconsequential unless you first reduce that risk of breaking. As Publilius Syrus wrote, nothing can be done both hastily and safely—almost nothing.

Seneca’s Barbell

• This brings us to the solution in the form of a barbell—about all solutions to uncertainty are in the form of barbells.
• That is extreme risk aversion on one side and extreme risk loving on the other, rather than just the “medium” or the beastly “moderate” risk attitude that in fact is a sucker game (because medium risks can be subjected to huge measurement errors).

The Accountant and the Rock Star

• “Provide for the worst; the best can take care of itself.” This may sound like a platitude, but it is not: just observe how people tend to provide for the best and hope that the worst will take care of itself. We have ample evidence that people are averse to small losses, but not so much toward very large Black Swan risks (which they underestimate), since they tend to insure for small probable losses, but not large infrequent ones. Exactly backwards.

The Domestication of Uncertainty

• the barbell does not need to be in the form of investment in inflation-protected cash and the rest in speculative securities. Anything that removes the risk of ruin will get us to such a barbell. The legendary investor Ray Dalio has a rule for someone making speculative bets: “Make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil.” Such a rule gets one straight to the barbell.3
• So just as Stoicism is the domestication, not the elimination, of emotions, so is the barbell a domestication, not the elimination, of uncertainty.

The Teleological Fallacy

• the opportunism of the flâneur is great in life and business—but not in personal life and matters that involve others. The opposite of opportunism in human relations is loyalty, a noble sentiment—but one that needs to be invested in the right places, that is, in human relations and moral commitments.
• Optionality will take us many places, but at the core, an option is what makes you antifragile and allows you to benefit from the positive side of uncertainty, without a corresponding serious harm from the negative side.

Chapter 12. Thales’ Sweet Grapes

• Thales had the right—but not the obligation—to use the olive presses in case there would be a surge in demand; the other party had the obligation, not the right. Thales paid a small price for that privilege, with a limited loss and large possible outcome. That was the very first option on record. The option is an agent of antifragility.

Things That Like Dispersion

• One property of the option: it does not care about the average outcome, only the favorable ones (since the downside doesn’t count beyond a certain point).
• Options like dispersion of outcomes and don’t care about the average too much.

The Rationality

• The rationality part lies in keeping what is good and ditching the bad, knowing to take the profits. As we saw, nature has a filter to keep the good baby and get rid of the bad. The difference between the antifragile and the fragile lies there. The fragile has no option. But the antifragile needs to select what’s best—the best option.

Life Is Long Gamma

• “Life is long gamma.” (To repeat, in the jargon, “long” means “benefits from” and “short” “hurt by,” and “gamma” is a name for the nonlinearity of options, so “long gamma” means “benefits from volatility and variability.”

Next

• Let me summarize. In Chapter 10 we saw the foundational asymmetry as embedded in Seneca’s ideas: more upside than downside and vice versa. This chapter refined the point and presented a manifestation of such asymmetry in the form of an option, by which one can take the upside if one likes, but without the downside. An option is the weapon of antifragility.
• the option is a substitute for knowledge—actually I don’t quite understand what sterile knowledge is, since it is necessarily vague and sterile. So I make the bold speculation that many things we think are derived by skill come largely from options, but well-used options, much like Thales’ situation—and much like nature—rather than from what we claim to be understanding.

Greed as a Cause

• Likewise “lack of vigilance” is often proposed as the cause of an error (as we will see with the Société Générale story in Book V, the cause was size and fragility). But lack of vigilance is not the cause of the death of a mafia don; the cause of death is making enemies, and the cure is making friends.

Debunking Epiphenomena

• This makes me suspicious of the master-pupil relationships we read about in cultural history: about all the people that have been called my pupils have been my pupils because we were like-minded.

Polished Dinner Partners

• the halo effect, the mistake of thinking that skills in, say, skiing translate unfailingly into skills in managing a pottery workshop or a bank department, or that a good chess player would be a good strategist in real life).2

The Green Lumber Fallacy

• So let us call the green lumber fallacy the situation in which one mistakes a source of necessary knowledge—the greenness of lumber—for another, less visible from the outside, less tractable, less narratable.

How Fat Tony Got Rich (and Fat)

• journalist at the time, he would have predicted a rise in the price of oil in the event of war. But that causal link was precisely what Tony could not take for granted. So he bet against it: they are all prepared for a rise in oil from war, so the price must have adjusted to it. War could cause a rise in oil prices, but not scheduled war—since prices adjust to expectations. It has to be “in the price,” as he said.

Conflation

• There is something (here, perception, ideas, theories) and a function of something (here, a price or reality, or something real). The conflation problem is to mistake one for the other, forgetting that there is a “function” and that such function has different properties. Now, the more asymmetries there are between the something and the function of something, then the more difference there is between the two. They may end up having nothing to do with each other.

Chapter 15. History Written by the Losers

• Practitioners don’t write; they do. Birds fly and those who lecture them are the ones who write their story. So it is easy to see that history is truly written by losers with time on their hands and a protected academic position.

Governments Should Spend on Nonteleological Tinkering, Not Research

• in Extremistan, it is more important to be in something in a small amount than to miss it. As one venture capitalist told me: “The payoff can be so large that you can’t afford not to be in everything.”

Matt Ridley’s Anti-Teleological Argument

• argument for unpredictability and Black Swan effects: since you cannot forecast collaborations and cannot direct them, you cannot see where the world is going. All you can do is create an environment that facilitates these collaborations, and lay the foundation for prosperity.

The Inverse Turkey Problem

• absence of evidence is not evidence of absence, a simple point that has the following implications: for the antifragile, good news tends to be absent from past data, and for the fragile it is the bad news that doesn’t show easily.
  • Extremely Profound
• 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.
• inverse-turkey mistake, not realizing that in a business with limited losses and unlimited potential (the exact opposite of banking),

To Fail Seven Times, Plus or Minus Two

• To Fail Seven Times, Plus or Minus Two 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 Andreessen); one gets immunity from the backfit 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.

Fat Tony Versus Socrates

• But Fat Tony’s power in life is that he never lets the other person frame the question. He taught Nero that an answer is planted in every question; never respond with a straight answer to a question that makes no sense to you.

Primacy of Definitional Knowledge

• What Socrates is seeking relentlessly are definitions of the essential nature of the thing concerned rather than descriptions of the properties by means of which we can recognize them.

Fragility, Not Probability

• If you sat with a pencil and jotted down all the decisions you’ve taken in the past week, or, if you could, over your lifetime, you would realize that almost all of them have had asymmetric payoff, with one side carrying a larger consequence than the other. You decide principally based on fragility, not probability. Or to rephrase, You decide principally based on fragility, not so much on True/False.

Conflation of Events and Exposure

• the problem is deeply ingrained in standard reactions; the predictors’ reply when we point out their failures has typically been “we need better computation” in order to predict the event better and figure out the probabilities, instead of the vastly more effective “modify your exposure” and learn to get out of trouble, something religions and traditional heuristics have been better at enforcing than naive and cosmetic science.

What Will Happen Next?

• The next two books, V and VI, will deal with the notion that fragile things break—predictably. Book V will show how to detect fragility (in a more technical manner) and will present the mechanics behind the philosopher’s stone. Book VI is based on the idea that Time is an eraser rather than a builder, and a good one at breaking the fragile—whether buildings or ideas.4

Chapter 18. On the Difference Between a Large Stone and a Thousand Pebbles

• The realization that fragility was simply vulnerability to the volatility of the things that affect it was a huge personal embarrassment for me, since my specialty was the link between volatility and nonlinearity; I know, I know, a very strange specialty. So let us start with the result.

A Simple Rule to Detect the Fragile

• The difference between a thousand pebbles and a large stone of equivalent weight is a potent illustration of how fragility stems from nonlinear effects.
  • Here nassim is telling us that non linearity gives rise to fragility. Because the ill effect can grow non linearly
• Your car is fragile. If you drive it into the wall at 50 miles per hour, it would cause more damage than if you drove it into the same wall ten times at 5 mph. The harm at 50 mph is more than ten times the harm at 5 mph.

Why Is Fragility Nonlinear?

• This leaves us with the following: what is fragile is something that is both unbroken and subjected to nonlinear effects—and extreme, rare events, since impacts of large size (or high speed) are rarer than ones of small size (and slow speed).
  • Here he is calling non linear as rare event. Rare events occur rarely and with more force
• For the fragile, the cumulative effect of small shocks is smaller than the single effect of an equivalent single large shock.
• For the antifragile, shocks bring more benefits (equivalently, less harm) as their intensity increases (up to a point).

Traffic in New York

• When you hear of a “second-order” effect, it means convexity is causing the failure of approximation to represent the real story.

Where More Is Different

• Just look at how different the large stone is from the pebbles: the latter have the same weight and the same general shape, but that’s about it. Likewise, we saw in Chapter 5 that a city is not a large village; a corporation is not a larger small business. We also saw how randomness changes in nature from Mediocristan to Extremistan, how a state is not a large village, and many alterations that come from size—and speed. All these show nonlinearity in action.

Run, Don’t Walk

• The very idea of exercise is to gain from antifragility to workout stressors—as we saw, all kinds of exercise are just exploitations of convexity effects.

How to Be Squeezed

• There appears to be something about size that is harmful to corporations.
  • This hasnt turn out to b true incase big corporation during covid like amazon reliance

How to Exit a Movie Theater

• Bottlenecks are the mothers of all squeezes.

Conclusion

• Conclusion To conclude this chapter, fragility in any domain, from a porcelain cup to an organism, to a political system, to the size of a firm, or to delays in airports, resides in the nonlinear.

How to Detect Who Will Go Bust

• It all boils down to the following: figuring out if our miscalculations or misforecasts are on balance more harmful than they are beneficial, and how accelerating the damage is.
• The technique, a simple heuristic called the fragility (and antifragility) detection heuristic, works as follows. Let’s say you want to check whether a town is overoptimized. Say you measure that when traffic increases by ten thousand cars, travel time grows by ten minutes. But if traffic increases by ten thousand more cars, travel time now extends by an extra thirty minutes. Such acceleration of traffic time shows that traffic is fragile and you have too many cars and need to reduce traffic until the acceleration becomes mild (acceleration, I repeat, is acute concavity, or negative convexity effect).
• Remarkably—as has been shown—if you can say something straightforward in a complicated manner with complex theorems, even if there is no large gain in rigor from these complicated equations, people take the idea very seriously. We got nothing but positive reactions, and we were now told that this simple detection heuristic was “intelligent” (by the same people who had found it trivial). The only problem is that mathematics is addictive.

The Idea of Positive and Negative Model Error

• Now what I believe is my true specialty: error in models.
• realized how fragile their computation of small probabilities was—in fact all small probabilities tend to be very fragile to errors, as a small change in the assumptions can make the probability rise dramatically, from one per million to one per hundred. Indeed, a ten-thousand-fold underestimation.
• Simply do a small change in the assumptions, and look at how large the effect, and if there is acceleration of such effect. Acceleration implies—as with Fannie Mae—that someone relying on the model blows up from Black Swan effects.

How to Lose a Grandmother

• 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.

Now the Philosopher’s Stone

• Someone with a linear payoff needs to be right more than 50 percent of the time. Someone with a convex payoff, much less. The hidden benefit of antifragility is that you can guess worse than random and still end up outperforming. Here lies the power of optionality—your function of something is very convex, so you can be wrong and still do fine—the more uncertainty, the better. This explains my statement that you can be dumb and antifragile and still do very well. This hidden “convexity bias” comes from a mathematical property called Jensen’s inequality. This is what the common discourse on innovation is missing. If you ignore the convexity bias, you are missing a chunk of what makes the nonlinear world go round. And it is a fact that such an idea is missing from the discourse. Sorry.4

How to Transform Gold into Mud: The Inverse Philosopher’s Stone

• Let me summarize the argument: if you have favorable asymmetries, or positive convexity, options being a special case, then in the long run you will do reasonably well, outperforming the average in the presence of uncertainty. The more uncertainty, the more role for optionality to kick in, and the more you will outperform. This property is very central to life.

Less Is More

• there are domains in which the rare event (I repeat, good or bad) plays a disproportionate share and we tend to be blind to it, so focusing on the exploitation of such a rare event, or protection against it, changes a lot, a lot of the risky exposure. Just worry about Black Swan exposures, and life is easy.
• 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. Likewise the French army had a heuristic to reject excuses for absenteeism for more than one reason, like death of grandmother, cold virus, and being bitten by a boar.

From Simonides to Jensen

• Odds are that your imagination will be adding things to the present world. I am sorry, but I will show in this chapter that this approach is exactly backward: the way to do it rigorously, according to the notions of fragility and antifragility, is to take away from the future, reduce from it, simply, things that do not belong to the coming times. Via negativa. What is fragile will eventually break; and, luckily, we can easily tell what is fragile. Positive Black Swans are more unpredictable than negative ones.
• insist on the via negativa method of prophecy as being the only valid one: there is no other way to produce a forecast without being a turkey somewhere, particularly in the complex environment in which we live today. Now, I am not saying that new technologies will not emerge—something new will rule its day, for a while. What is currently fragile will be replaced by something else, of course. But this “something else” is unpredictable. In all likelihood, the technologies you have in your mind are not the ones that will make it, no matter your perception of their fitness and applicability—with all due respect to your imagination.

To Age in Reverse: The Lindy Effect

• 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.
• The proportionality of life expectancy does not need to be tested explicitly—it is the direct result of “winner-take-all” effects in longevity.

Neomania and Treadmill Effects

• So with so many technologically driven and modernistic items—skis, cars, computers, computer programs—it seems that we notice differences between versions rather than commonalities.
• These impulses to buy new things that will eventually lose their novelty, particularly when compared to newer things, are called treadmill effects.
• It also so happens that whatever is technological happens to be fragile. Articles made by an artisan cause fewer treadmill effects. And they tend to have some antifragility—recall how my artisanal shoes take months before becoming comfortable. Items with an on-off switch tend to have no such redeeming antifragility.

Architecture and the Irreversible Neomania

• Urban planning, incidentally, demonstrates the central property of the so-called top-down effect: top-down is usually irreversible, so mistakes tend to stick, whereas bottom-up is gradual and incremental, with creation and destruction along the way, though presumably with a positive slope.

Metrification

• all cultures seem to have similar measurements with some physical correspondence to the everyday. A meter does not match anything; a foot does. I can imagine the meaning of “thirty feet” with minimal effort. A mile, from the Latin milia passum, is a thousand paces. Likewise a stone (14 pounds) corresponds to … well, a stone. An inch (or pouce) corresponds to a thumb. A furlong is the distance one can sprint before running out of breath. A pound, from libra, is what you can imagine holding in your hands.

Turning Science into Journalism

• The problem in deciding whether a scientific result or a new “innovation” is a breakthrough, that is, the opposite of noise, is that one needs to see all aspects of the idea—and there is always some opacity that time, and only time, can dissipate.
  • All aspect of the innovation is important. Time can tell if this works.
• belief—well tested—by traders that companies that get hyped up for their potential and called “best” on the cover of magazines or in books such as Good to Great are about to underperform and one can derive an abnormal profit by shorting their stock).
• 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.

Chapter 21. Medicine, Convexity, and Opacity

• 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 of 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. And recall that under nonlinearities, the simple statements “harmful” or “beneficial” break down: it is all in the dosage.

First Principle of Iatrogenics (Empiricism)

• Recall my comment earlier with the turkey problem that harm is in the future, not in the narrowly defined past. In other words, empiricism is not naive empiricism.
  • Here nassim is telling us that no evidence of harm is not evidence of no harm. But the harm may be hidden in the future. So when considering situation like this consider if the gain is small and hidden cost may be fatal
• These two mistakes are quite telling because, in both cases, the benefits appeared to be obvious and immediate, though small, and the harm remained delayed for years, at least three-quarters of a generation.
• Now we can see the pattern: iatrogenics, being a cost-benefit situation, usually results from the treacherous condition in which the benefits are small, and visible—and the costs very large, delayed, and hidden. And of course, the potential costs are much worse than the cumulative gains.

Second Principle of Iatrogenics (Nonlinearity in Response)

• Second principle of iatrogenics: it is not linear. We should not take risks with near-healthy people; but we should take a lot, a lot more risks with those deemed in danger.1
• 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.

Guilty or Innocent

• 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.

The Ancients Were More Caustic

• An attribution problem arises when the person imputes his positive results to his own skills and his failures to luck.

Subtraction Adds to Your Life

• Subtraction of a substance not seasoned by our evolutionary history reduces the possibility of Black Swans while leaving one open to improvements. Should the improvements occur, we can be pretty comfortable that they are as free of unseen side effects as one can get.

Chapter 23. Skin in the Game: Antifragility and Optionality at the Expense of Others

• dignity is worth nothing unless you earn it, unless you are willing to pay a price for it.
• 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.

Postdicting

• as humans crave self-consistency, they will retain those elements of what they thought in the past that cohere with their perception of the present.

The Stiglitz Syndrome

• The psychologist Gerd Gigerenzer has a simple heuristic. Never ask the doctor what you should do. Ask him what he would do if he were in your place. You would be surprised at the difference.

The Problem of Frequency, or How to Lose Arguments

• betting against the fragile is antifragile.
• 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.

The Right Decision for the Wrong Reason

• Karl Popper’s ideas on evolutionary epistemology; not being a decision maker, he was under the illusion that ideas compete with each other, with the least wrong surviving at any point in time. He missed the point that it is not ideas that survive, but people who have the right ones, or societies that have the correct heuristics, or the ones, right or wrong, that lead them to do the good thing. He missed the Thalesian effect, the fact that a wrong idea that is harmless can survive. Those who have wrong heuristics—but with a small harm in the event of error—will survive. Behavior called “irrational” can be good if it is harmless.

Artisans, Marketing, and the Cheapest to Deliver

• The mechanism of cheapest-to-deliver-for-a-given-specification pervades whatever you see on the shelves. Corporations, when they sell you what they call cheese, have an incentive to provide you with the cheapest-to-produce piece of rubber containing the appropriate ingredients that can still be called cheese—and do their homework by studying how to fool your taste buds.
• Anything one needs to market heavily is necessarily either an inferior product or an evil one. And it is highly unethical to portray something in a more favorable light than it actually is. One may make others aware of the existence of a product, say a new belly dancing belt, but I wonder why people don’t realize that, by definition, what is being marketed is necessarily inferior, otherwise it would not be advertised.
• marketing beyond conveying information is insecurity.

Next

• We saw how, thanks to the misunderstanding of antifragility (and asymmetry or convexity), some classes of people use hidden options and harm the collective without anyone realizing. We also saw the solution in forcing skin in the game.

Big Data and the Researcher’s Option

• Science must not be a competition; it must not have rankings—we can see how such a system will end up blowing up. Knowledge must not have an agency problem.

The Tyranny of the Collective

• Whenever I hear the phrase “I am ethical” uttered, I get tense. When I hear about classes in ethics, I get even more tense. All I want is to remove the optionality, reduce the antifragility of some at the expense of others. It is simple via negativa. The rest will take care of itself.