Can we exploit the fact that life is unpredictable, chaotic, full of shocks and disasters? Trader-turned-scholar Nassim Nicholas Taleb is based at the Polytechnic Institute of New York University and the University of Oxford. His latest book is Antifragile: How To Live in a World We Don't Understand.
Linda Geddes: In your new book you talk about things being "antifragile." What do you mean exactly?
Nassim Nicholas Taleb: When you ask people what is the opposite of fragile, they mostly answer something that is resilient or unbreakable—an unbreakable package would be robust. However, the opposite of fragile is something that actually gains from disorder. In the book, I classify things into fragile, robust, or antifragile.
LG: Can you give me some examples?
NNT: Nature builds things that are antifragile. In the case of evolution, nature uses disorder to grow stronger. Occasional starvation or going to the gym also makes you stronger, because you subject your body to stressors and gain from them. Another example is the restaurant industry. It benefits from the fact that individual restaurants are fragile by exploiting their mistakes as it tries to figure out why a particular restaurant went bust. Trial and error is an antifragile activity.
LG: How is antifragility different from the saying "what doesn't kill you makes you stronger"?
NNT: I look at it in terms of systems: Situations where what kills me makes others stronger, how the fragility of some parts of the system brings overall benefits. There are good and bad systems organized in terms of whether the system gets stronger or weaker from errors made by an individual part. Every plane crash makes the next one less likely, but every bank going bust makes the next one more likely.
LG: How would you make something antifragile?
NNT: If antifragility is the property of all these natural complex systems that have survived, then depriving them of volatility, randomness, and stressors will harm them. Just as spending a month in bed leads to muscle atrophy, complex systems are weakened or even killed when deprived of stressors.
If you want to move away from fragility, you must avoid centralization and debt and foster aggressive risk-takers who are willing to fail seven times in a lifetime. The economy of the West was initiated through trial and error. We still have a pocket of that in California, where there are small costs of failure and big gains once in a while. The top-down approach blocks antifragility and growth, whereas everything bottom-up thrives under the right amount of stress and disorder.
LG: Are you saying that capitalism is good but that 21st-century capitalism has gone too far?
NNT: What we do today has nothing to do with capitalism or socialism. It is a crony type of system that transfers money to the coffers of bureaucrats. The largest "fragilizer" of society is a lack of skin in the game. If you are mayor of a small town, you are penalized for your mistakes because you are made accountable when you go to church. But we are witnessing the rise of a new class of inverse heroes—bureaucrats, bankers, and academics with too much power. They game the system while citizens pay the price. I want the entrepreneur to be respected, not the CEO of a company who has all the upsides and none of the downsides.
LG: Politicians like U.K. Prime Minister David Cameron seem interested in your ideas. Is the West making its economies antifragile?
NNT: I think Cameron's government is aware of the problem and doing what it can given the circumstances it inherited. The economic class doesn't realize an economy lives by stressors rather than by top-down control. This is what the previous prime minister, Gordon Brown, did with "we want to eliminate boom and bust." He mistook the economy for something you take for repair. Governments shoot for robustness, but you must make the economy gain from errors. Bailing out every bank that fails makes the system riskier, not safer.
LG: But surely your idea risks economic collapse via the "natural selection" approach you seem to advocate? What leader would take that risk?
NNT: First, the situation is similar to surgery or chemotherapy—delay results in the worst effects, such as severe blow-ups. Second, we need to protect the weak and the young. The current system hurts the weak and helps companies and individuals who benefit from the bailouts and preserving the status quo.
LG: Some of this sounds similar to the "small is beautiful" ideas of British economist E. F. Schumacher and his mentor, Leopold Kohr.
NNT: They had the right intuitions, but for romantic reasons. I share their idea that people are happier in smaller corporations and in municipal governments. However, I put some science behind these claims. There are some fragilities associated with size, linked to sensitivity, to volatility.
LG: Does all this connect to your black swans?
NNT: Those are rare events with extreme impacts that lie outside the realm of regular expectations because nothing in the past can convincingly point to their possibility. The global financial collapse is one example (it was a black swan for those who took risks they didn't understand). Some people have misconstrued my original idea to think that we have to try to predict these events. We can't; we've just got to get out of their way.
LG: How do we get out of the way of these rare catastrophic events?
NNT: We can't measure the probability of rare events because small measurement errors will cause those predictions to explode. The real point of my book The Black Swan is not to talk about the weird things that can happen but to be able to identify how resistant and robust you are to computationally small probabilities. It is far easier to figure out if something is fragile than to predict the occurrence of an event that may harm it. If something is fragile you can take steps to make it antifragile instead.
LG: Your book Fooled By Randomness upset Wall Street by suggesting success is largely down to luck, not judgment. Did the financiers forgive you? Are you about to create more upset?
NNT: There are plenty of open-minded individuals who weren't upset by what I said. This coming book will upset bureaucrats and academics—academics because I suggest trial and error is superior to knowledge. The process of discovery, innovation, or technological progress depends on antifragile tinkering and aggressive risk-bearing rather than education. A country's assets reside in the tinkerers, the hobbyists, and the risk-takers.
LG: Can people apply antifragility to their lives?
NNT: In Africa, Asia, and the Americas people head-load water—gyms don't stress your bones, nature does. People also don't talk about post-traumatic growth, but some trauma is good for you. I also believe that people should go against academic education and focus instead on certification of skills.
LG: Do you apply these principles to your life?
NNT: I lift stones and do weightlifting. I don't go to the doctor except when I'm very ill, and when I go to India, I drink a drop of local water. Things like this harness the body's antifragility. I have never had personal debt and never will. I also picked a profession in which I am antifragile, because any attack makes me stronger. When I write about something, I have skin in the game, and I have benefited more from attacks on The Black Swan than been harmed by them.
This article originally appeared in New Scientist.
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