Antifragile - Things that gain from disorder

Prologue

This is the tragedy of modernity: as with neurotically overprotective parents, those trying to help are often hurting us the most. 5
The process of discovery (or innovation, or technological progress) itself depends on antifragile tinkering, agressive risk bearing rather than formal education 5
Largest fragilizer in society is lack of skin in the game. 5
But when we see it, we fear it and overreact (randomness) 6
Model error swells when it comes to small probabilities
It succeeded in getting here without much command and control instruction from an Ivy League educated directory nominated search committee 7
Then many things that gain from randomness should be dominating the world today 8
Engineers and tinkerers develop things while history books are written by academics 8
We can detect fragility, see it, in many cases measure it 9
And centrally, you can even make the prediction of which one lasts longer (fragile or antifragile) 9
Our idea is to avoid interference with things we don't understand 9
He tends to mistake the unknown for the non-existent (the fragilista) 9
The fragilista is one who makes you engage in policies and actions, all artificial, in which the benefits are small and visible, and the side affects are potentially severe and invisible. 10
Politicians in their speeches, goals and promises aim at the timid concepts of "resilience", "solidity" not antifragility and in the process are stifling the mechanisms of growth and evolution 10
We got to where we are today thanks to the appetite for risks and errors of a certain class of people we need to encourage, protect and respect 11
Less is more and usually more effective 11
"you have to work hard to get your thinking clean to make it simple" Steve Jobs 11
No skill to understand it, mastery to write it 11
Heuristics - they are not perfect, just expedient, they become dangerous when we forget that 11
Further, everything that does not like volatility does not like stressors, harm, chaos, events, disorder, "unforeseen" consequences, uncertainty and critically, time 12
It is critical that I never believed in our ability to forecast volatility, as I just focused on how things react to it. 12
But only practitioners (or people who do things) tend to spontaneously get the point. 13
Time is functionally similar to volatility: the more time, the more events, the more disorder 13
This is simply what your grandmother calls experience (being antifragile to small errors, time brings reverse errors that end up benefiting you) 13
One's personal experience the stamp of authenticity and sincerity of opinion (nothing more) 15
If you see fraud and do not say fraud, you are a fraud. 15
A man is morally free when … he judges the world, and judges other men, with uncompromising sincerity 16
My experience is that money and transactions purify relations; ideas and abstract matters like "recognition" and "credit" warp them 17
to become antifragile, put yourself in the situation "loves mistakes" 21
Removing medication or some other unnatural stressor is more robust than adding medicine 21

Book I

The Antifragile: An Introduction

Chapter 1 - Between Damocles and Hydra

These populations are culturally, though not biologically, color blind. Just as we are intellectually, not organically, antifragility blind 35
Fiscal deficits have proven to be a prime source of fragility in social and economic systems 36
Small but meaningful lessons that one can not be robust against everything 37
Small dones of a substance that, over time, makes one immune to additional, larger quantities of it 37
The road to robustification starts with a modicum of harm 37
But the larger point is that we can now see that depriving systems of stressors, vital stressors, is not necessarily a good thing, and cane be downright harmful. 38
Humans somehow fail to recognize situations outside the context in which they usually learn about them 38 (context dependent)
We are all, in a way, similarly handicapped, unable to recognize the same idea when it is presented in a different context 39

Chapter 2 - Overcompensation and Overreaction Everywhere

Intellectuals tend to focus on negative responses from randomness (fragility) rather than the positive ones (antifragility). This is not just in psychology: it prevails across the board 41
How do you innovate? First try to get in trouble. (serious but not terminal trouble) 41
Sophistication is born out of hunger, Difficulty is what wakes up the genius (Ovid) 42
The excess energy released from overreaction to setbacks is what innovates! 42
This is a fallacy - note for now the disproportionate contributions from uneducated technicians and entrepreneurs to various technological leaps 42
comfort, as a road to waste 42
weakening of the will 42
an entire society can fall ill 42
Abundance is harder for us to handle than scarcity 42
that pilots often "abdicate too much responsibility to automated systems." 43
Under compensation from the absence of a stressor, inverse hormesis, absence of challenge, degrades the best of the best 43
Most humans manage to squander their free time, ads free time makes them dysfunctional, lazy and unmotivated 43
I learned that noise produced by the person is inverse to the pecking order 43
Concentrate better in the presence of a modicum of background noise 44
but sometimes we need the noise 44
It is all about redundancy. Nature likes to over insure itself 44
Layers of redundancy are the central risk management property of natural systems. 44
Debt is the opposite of redundancy 45
Now, it turns out, the same, very same logic applies to overcompensation: it is just a form of redundancy 45
We saw that redundancy is opportunistic, so such extra strength can be used to some benefit even in the absence of hazard 45
But they never notice the following inconsistency: this so called worst case event, when it happened, exceeded the worst case at the time 45
Nature, unlike fragilista Greenspan, prepares for what has not happened before, assuming worse harm is possible. 46
And boring is the only bad thing for a book 50
I am very disappointed in you, I never hear anything wrong said about you. You have proven yourself incapable of generating envy. 51
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. 53
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 53

Chapter 3 - The Cat and the Washing Machine

The bold conjecture made here is that everything that has life in it is to some extent antifragile (but not the reverse). It looks like the secret is life is antifragile 54
What we observe in "aging" is a combination of maladjustment and senescence, and it appears that the two are separable 55
Another reason to ignore newspapers, with their constant supply of causes for things. 56
errors tand their consequences are information 57
causal opacity: it is hard to see the arrow from cause to consequence 57
Such a stressor would be certainly better than the mild but continuous stress of a boss, mortgage, tax problems or 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. 58
In other words, he disrupted the recovery (referring to how Heracles cauterized Hydra) 59
Machines: use it and lose it; Organisms: use it or lose it 59
Not only are we averse to stressors, and don't understand them, but we are committing crimes against life, the living, science, and wisdom, for the sake of eliminating volatility and variation 61
suspending one's fear of making mistakes (referring to learning a new language by submersion) 62
Obsequios verbosity is something rather painful under the condition of jet lag 62
But the worse touristification is the life we moderns have to lead in captivity, during our leisure hours: Friday night opera, scheduled parties, scheduled laughs. Again, golden jail. This "goal-driven" attitude hurts deeply inside my existential self. 63
Something deep in your soul likes a certain measure of randomness and disorder. 63
life starts tasting like food cooked without salt 64

Chapter 4 - What kills me makes others stronger

The antifragility of some comes necessarily at the expense of the fragility of others 65
So some parts on the inside of a system may be required to be fragile in order to make the system antifragile as a result 66
nature is opportunistic, ruthless and selfish 67
It is as if nature changed itself at every step and modified its strategy every instant 68
epistemic arrogance (in regards to OMB) 68
likes diversity between organisms 68
who fell into the common mental distortion of thinking that the future sends some signal detectable by us. We wish. 68
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 69
nature is antifragile up to a point but such point is quite high - it can take a lot, a lot of shocks 69
When you are fragile you depend on things following the exact planned course, with as little deviation as possible 71
This is why the fragile needs to be very predictive in its approach, and, conversely, predictive systems cause fragility 71
If every trial provides you with information about what does not work, you start zooming in on a solution - so every attempt becomes more valuable, more like an expense than an error. And of course you make discoveries along the way 71
Every bank crash makes the next one more likely. We need to eliminate the second type of error. The one that produces contagion 73
customers overreact and pay up for insurance 73
All they need is to keep their mistakes small enough so they can survive them 73
sometimes you only know about someone's character after you harm them with an error for which you are solely responsible 73
In a non-volatile environment I would have mistaken her for a utopist and a saint. Some members of society - those who did not marry her - got valuable information while others, her victims, paid the price 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 74
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 74
It is painful to think about ruthlessness as an engine of improvement 75
Natural and nature-like systems want some overconfidence on the part of individual economic agents 75
In other words, they want local, but not global, overconfidence 75
risk taking is healthy for the economy - under the condition that not all people take the same risks and that these risks remain small and localized 75
it is transferring fragility from the collective to the unfit (government bailouts) 75
government interventions and social policies end up hurting the weak and consolidating the established 76
Since the sojourn in the Gulak killed the weakest, one had the illusion of strengthening 76 same for usmc?
but not quite the individuals, since the weaker ones died 76
Someone paid a price for the system to improve 76
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 77
sacrificing nature too much may eventually hurt ourselves 78
entrepreneurship is a risky and heroic activity 79
It is also necessarily collective on epistemological grounds - to facilitate the development of expertise 79
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 79
the ingratitude of the masses, is increasing in the age of globalization and the Internet 80
National Entrepreneur Day: 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 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

what is made to fly will not do well trapped on the ground 81
volatility comes from "volare", to fly, in latin 81
we hurt systems with the very best intentions by playing conductor 81
we are pressured to fix things, so we often blow them up with our fear of randomness and our love of smoothness 82
Where simplifications fail, causing the most damage, is when something non-linear is simplified with the linear as a substitute. That is the most common Procrustean bed. 82

Chapter 5 - The Souk and the Office Building

Continuously under pressure to be fit 84
stressors that make them adjust opportunistically 84
such variability helps improve the system 85
this avoidance of small mistakes makes the large ones more severe 85
it is stable because it does not have one (a government, swiss) 87
my (mathematical) point is that a collection of small units with semi-independent variations produces vastly different risk characteristics than a single large unit 88
Eye contact with one's peers changes one's behavior 89
The one case is a tragedy, the other a statistic 89
At the present time, one person is dying of diabetes every seven seconds, but the news can only talk about victims of hurricanes with houses flying in the air 89
we put civil servants in a position to make decisions based on abstract and theoretical matters, with the illusion that they will be making them in a rational, accountable way 89
on techne (crafts and know how), not episteme (book knowledge, know what) 90
principle of subsidiarity: things should be handled by the smallest possible unit that can manage them with efficacy 90
the mother of all harmful mistakes: mistaking absence of evidence (harm) for evidence of absence (turkey story analogy) 93
"prison" he meant the loss of political and economic freedoms 95 (on his grandfather preferring war to prison)
A little bit of agitation gives resources to souls and what makes the species prosper isn't peace, but freedom 96
David Hume in his history of England in favor of small states, as large states get tempted by warfare 96
Until recent history, the central state represented about 5 percent of the economy - compared to about ten times that share in modern Europe. And, further, governments were sufficiently distracted by war to leave economic affairs to businessmen. 97
Randomness is distributed rather than concentrated 98
When we look at risks in Extremistan, we don't look at evidence (evidence comes too late), we look at potential damage 98
It is hard to explain to naive data-driven people that risk is in the future not in the past 98

Chapter 6 - Tell them I love (some) randomness

firms become very weak during long periods of steady prosperity devoid of setbacks, and hidden vulnerabilities accumulate silently under the surface 101
The origin of the financial crisis - George Cooper 101
fluctuates, or floats, but does not sink 102
pruning trees strengthens them 105
Few people are aware of the fact that the bitterness of Iranians toward the united states comes from the fact that the united states - a democracy - installed a monarch, the repressive Shah of Iran, who pillaged the place but gave the united states stability of access to the persian gulf 107
One of life's packages: no stability without volatility 107
We are moving into a phase of modernity marked by the lobbyist, the very, very limited corporation, the MBA, sucker problems, secularization (or rather reinvention of new sacred values like flags to replace alters), the tax man, fear of the boss, spending the weekend in interesting places and the workweek in a putatively less interesting one, the separation of "work" and "leisure" (though the two would look identical to someone from a wiser era), the retirement plan, argumentative intellectuals who would disagree with this definition of modernity, literal thinking, inductive inference, philosophy of science, the invention of social science, smooth surfaces, and egocentric architects. Violence is transferred from individuals to states. So is financial indiscipline. At the center of all this is the denial of antifragility. 108
I've had a hard time conveying to intellectuals the intellectual superiority of practice 109
Modernity starts with the state monopoly on violence, and ends with the state's monopoly on fiscal irresponsibility 109

Chapter 7 - Naive Intervention

probabilistic homicide at work 110
but, worse, it illustrates the lack of awareness of the need to look for a break even point between benefits and harm 110 (naive interventionism)
damage from treatment in excess of benefits, is iatrogenics, literally, "caused by the healer", iatros being a healer in greek 111
every time you visit a doctor and get a treatment, you incur risks of such medical harm, which should be analyzed the way we analyze other trade-offs: probabilistic benefits minus probabilistic costs 111
The worst punishment was his state of helplessness in the face of risks and unfairness 111
And the final lesson is that one should not expect laurels for bringing the truth 112
impression that we humans are so necessary to making things function 113
anything in which there is naive interventionism, nay, even just intervention, will have iatrogenics 113
In social science we should call these constructs "chimeras" rather than theories 117 (as applied to theories)
Reduction in size and scope may make it even more intrusive than large government 118 (small government)
It's much easier to sell "Look what I did for you" than "Look what I avoided for you" 121
wu-wei, passive achievement, Lao Tzu 122
A friend who writes books remarked that painters like painting but authors like "having written". I suggested he stop writing, for his sake and the sake of his readers 123
The verb "overreact" was designed with him in mind, the neurotic 124
For a sample of a composed, calm and pondered voice, listen to interviews with "Sammy the Bull" Salvatore Gravano 125
The supply of information to which we are exposed thanks to modernity is transforming humans from the equable second fellow into the neurotic first one 125 (calm and collected person, required for leadership, vs. neurotic)
And this personal or intellectual inability to distinguish noise is behind over interventionism 125
access to data increases intervention, causing us to behave like the neurotic fellow 125
A very rarely discussed property of data: it is toxic in large quantities - even in moderate quantities 126
That is two hundred times more noise than signal - which is why anyone who listens to the news (except when something very, very significant takes place) is one step below sucker. 126
in a natural environment a stressor is information. Too much information would thus be too much stress 127
The best solution is to only look at very large changes in data or conditions, never at small ones 127
it is almost impossible for someone rational, with a clear, uninfected mind, someone who is not drowning in data, to mistake a vital signal, one that matters for his survival, for noise - unless he is overanxious, oversensitive, and neurotic, hence distracted and confused by other messages. Significant signals have a way to reach you.
the media induce an illusion of understanding the world 128
the media would post bellum auxilium, send troops after the battle 128
People are still under the illusion that "science" means more than data 128
One can imagine what could happen to the US (or Europe) in the event of food disruptions 129
When constrained systems, those hungry for natural disorder, collapse as they are eventually bound to, since they are fragile, failure is never seen as a result of fragility. Rather such failure is interpreted as the product of poor forecasting 131
It is the system and it's fragility, not events, that must be 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 terrain. 132

Chapter 8 - Prediction as a child of modernity

There are ample empirical findings to the effect that providing someone with a random numerical forecast increases his risk taking, even if the person knows the projects are random 135
to have things that don't fall apart, or even benefit, when we make a mistake 136
mother of all stressors, called time 136
Social, economic and cultural life line in the black swan domain 137
Buffett, invest in businesses so wonderful even an idiot can run them. Because sooner or later one will.
Our sophistication continuously puts us ahead of ourselves, creating things we are less and less capable of understanding 138

Book III

A Non predictive View of the World

mixing hight risks and highly conservative actions is preferable to just a simple medium-risk approach to things. 141

Chapter 9 - Fat Tony and the Fragilistas

The sea gets deeper as you go further into it, Venetian proverb 146
Curiosity is antifragile, like an addiction, and is magnified by attempts to satisfy it 146
By betting against fragility, they were antifragile 147
the health eroding dependence on external recognition 148
A man is honorable in proportion to the personal risks he takes for his opinion 149
Someone who predicts will be fragile to prediction errors 150
And numerical prediction leads people to take more risks 150
He identifies fragilities, makes a bet on the collapse of the fragile unit 150

Chapter 10 - Seneca's Upside and Downside

advanced a certain indifference to fate (Seneca) 151
wisdom in decision making is vastly more important - not just practically, but philosophically - than knowledge. 152
It is about continuously degrading the value of earthly possessions (Stoicism) 153
"I lost nothing" after an adverse event 153
Stoicism makes you desire the challenge of a calamity 153
pure robustness - for the attainment of a state of immunity from one's external circumstances 153
protection against harm from emotions 153
Success brings an asymmetry: you now have a lot more to lose than to gain 154
you start living under continuous emotional threat 154
possessions make us worry about downside, thus acting as punishment as we depend on them 154
dependence on circumstances - rather the emotions that arise from circumstances - induces a form of slavery 154
Livy: "Men feel the good less intensely than the bad 155
"mentally adjusting "to the worst" 155
emotional positioning to eliminate the sting of harm 156
Stoic sage is someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking 156
He said that wealth is the slave of the wise man and the master for the fool (Seneca) 156
they might have fit a narrative to the circumstances 156
sour grapes - cognitive games to make yourself believe that the grapes that you can't reach taste sour 157
If you have more to lose than to benefit from events of fate, there is an asymmetry, and not a good one. 157
Simple test: if I have "nothing to lose" then it is all gain and I am antifragile 157
you have less to lose than to gain, more upside than downside, then you like volatility (it will, on balance, bring benefits), and you are antifragile 158
Fragility - implies more to lose than to gain, equals more downside than upside, equals (unfavorable) asymmetry 158
Antifragility - implies more to gain than to lose, equals more upside than downside, equals (favorable) asymmetry 158

Chapter 11 - Never marry the rock star

The first step toward antifragility consists in decreasing downside 159
What matters is the route taken, the order of events, not just the destination - what scientists call a path-dependent property 159
since the broken will tend to stay permanently broken 160
strong logical precedence of survival over success 160
nothing can be done both hastily and safely - almost nothing (Publilius Syrus) 160
and the future economy may collapse upon the need to repay such debt 160
is meant to illustrate the idea of a combination of extremes kept separate, with avoidance of the middle (Seneca's Barbell) bimodal strategy 161
But the barbell also results, because of its construction, in the reduction of downside risk - the elimination of the risk of ruin - 161
90 percent in cash, assuming you are protected from inflation, a (numeraire repository of value) and 10 percent in very risky assets 161
aggressiveness plus paranoia 161
"provide for the worst; the best can take care of itself", people do the opposite, since they tend to insure for small probable losses, but not large infrequent ones. Exactly backwards 163

Book IV

Optionality, Technology, and the Intelligence of Antifragility

"An agent does not move except out of intention for an end" 169
is where the most pervasive human error lie 170 (not sure this is the case, don't most people act with an intention toward an end?)
people don't know what they want until you provide them with it 171
America's asset is, simply, risk taking and the use of optionality, this remarkable ability to engage in rational forms for trial and error 171
our greatest asset, is the one we distrust the most: the built in antifragility of certain risk taking systems 171

Chapter 12 - Thales' Sweet Grapes

Got tired of friends saying "those who can, do, the others philosophize" 173
Thales took an option on a olive presses 173
the most important one being independence and the ability to only occupy your mind with matters that interest you (value of fuck you money) 174
It is an option, "the right but not the obligation" 174
You are only harmed if you repeatedly pay too much for the option 175
but most interesting options are free, or at the worst, cheap 175
we do not need to understand things when we have some edge 175
Financial independence, when used intelligently, can make you robust; it gives you options and allows you to make the right choices. Freedom is the ultimate option. 175
Further, you will never get to know yourself - your real preferences - unless you face options and choices 175
Options like dispersion of outcomes and don't care about the average too much 179
growth in society may not come from raising the average the asian way, but from increasing the number of people in the "tails" that small, very small number of risk takers crazy enough to have ideas of their own, those endowed with that very rare ability called imagination, that rarer quality called courage, and who make things happen 180
All you need is the wisdom to not do unintelligent things to hurt yourself 180 (is that all)
but take for now that evolution can produce astonishingly sophisticated objects without intelligence, simply thanks to a combination of optionality and some type of a selection filter, plus some randomness 181 (particle filter?)
Steve Jobs - Stay hungry, stay foolish 181
The rationality part lies in keeping what is good and ditching the bad, knowing to take the profits 183
explicit options tend to be expensive to purchase 183
we don't recognize it in other places, where these options tend to remain underpriced or not priced at all 183
He did not think of trial and error as options. He did not think of model error as negative options 183
these are only techniques, portable techniques 183
Risk taking ain't gambling, and optionality ain't lottery tickets. 185
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 186

Chapter 13 - Lecturing Birds on How to Fly

Gap between wheel and it's use - "translational gap", formal discover and first implementation, lengthening in modern times 191
One needs to be intelligent in recognizing favorable outcome and knowing what to discard 192
and nobody has any incentive to look at the number of birds that fly without such help from the great scientific establishment 195
Yiddish saying: "if the student is smart, the teacher takes all the credit" 196
Another reason one should trust the disconfirmatory more than the confirmatory 200
just as interventionists don't accept that things con improve without intervention 201

Chapter 14 - When two things are not the "Same Thing"

"effect that sophistication is born of need, and success of difficulties" 203
People from Amioun only do well when shaken 203
But we know the opposite is true, that wealth leads to the rise of education, not the opposite 203
Mistaking the merely associative for the causal 204
and the doers do, they don't talk 206
What I learned losing a Million Dollars - Green lumber and the trader that had theories and narratives and subsequently went bust 207
Evolution does not rely on narratives, humans do 207
People with too much smoke and complicated tricks and methods in their brains start missing elementary, very elementary things 210
There is something and the function of something, the conflation problem is to mistake one for the other, don't forget the function has different properties 211
Jim Simons - Quant Renaissance Fund http://en.wikipedia.org/wiki/James_Harris_Simons 211
Economics is not a science and should not be there to advise policy 212
And my argument is that you don't go to school to learn optionality, but the reverse: to become blind to it 212
In theory there is no difference between theory and practice, in practice there is (Yogi Berra) 213
Overconfidence leads to reliance on forecasts, which causes borrowing, then to the fragility of leverage. 215
Long Term Capital Management employed Merton, Scholes, Huang 215

Chapter 15 - History is Written by the Losers

Look up Thorp 218
The theory is the child of the cure, not the opposite 221
Experimentation can make people much more careful than theories 222
as a patent side effect of mathematics is making people over-optimize and cut corners, causing fragility 223 (reducing redundancy)
we get social networks, broken marriages, a rise in nerdiness, the ability for a post-Soviet person with social difficulties to find a matching spouse. All that thanks to initial tax dollars (or rather budget deficit) during Reagan's anti-Soviet crusade. 225
The process remained self-directed and unpredictable at every step (on the evolution of computers) 225
Chinese did not have, or, rather, no longer had, what he called the "European mania for tinkering and improving" 226
another example of knowledge hampering optionality 226
it is precisely this type of uninhibited doer who made the industrial revolution happen 226
two main sources of technical knowledge and inovation in the 19th & 20th centuries: hobbyist and english rector 226
An extrodinary proportion of work came out of the rector, the english parish priest with no worries, erudition, a large or at least comfortable house, domestic help, a reliable supply of tea and scones with clotted cream, and an abundance of free time 226
Self directed scholarship has an aesthetic dimension 227
the indifference to beauty in collective workplaces 227
Jensen, was an amateur mathematician who never held any academic position 227
He showed that in countries in which the government intervened by funding research with tax money, private investment decreased and moved away 228
The industrial revolution, came from "technologists building technology" or what he calls "hobby science" 228
they were empirical developments based on the trial, error, and experimentation of skilled craftsmen who were trying to improve the productivity, and so the profits, of their factories 228
In fact academics were mostly just teachers, not researchers, until well into the 20th century 229
it is always best to consider what his detractors say 229
Much of all of this is a religious belief in the unconditional power of organized science, one that has replaced unconditional religious belief in organized religion 229
reports that investors tend to back entrepreneurs, not ideas. Decisions are largely a matter of opinion strengthened with "who you know" and "who said what" you bet on the jockey not the horse 229
Visibly the money should go to the tinkerers, the aggressive tinkerers who you trust will milk the option 230
Small amounts per trial, lots of trials, broader than you want 230
The payoff can be so large that you can't afford not to be in everything 230
he does not exercise his option in spite of its value, a strict violation of rationality 231
knowledge, or what is called "knowledge" in complex domains inhibits research 232
The logic of things stands outside of us 233
Not a single individual has a clue about the general process, and that is central 233
argument for black swans: since you can not forecast collaborations and cannot direct them, you can not see where the world is going 233
And no, you can not centralize innovations, we tried that in russia 234
Yet there is no evidence that strategic planning works 234
it makes the corporate option-blind 234
to see business drift, look at how major corps started and what they ended up doing 235
evidence of absence is not absence of evidence 235
for the antifragile, good news tends to be absent from past data, for the fragile it is the bad news that is absent from the past data 235
In the antifragile case, trial and error, the sample track record will tend to underestimate the long term average, it will hide the qualities, not the defects 236
simply, rare events are rare, and tend not to show up in the past samples, and given that the rare is almost always negative, we get a rosier picture than reality 236
In the fragile case (turkey problem) the sample track record will tend to underestimate the long term average, it will hide the defects and display the qualities 236
First, "most companies" in extremistan make no profit - the rare event dominates, and a small number of companies generate all the shekels 237
And it would fragilize by favoring matters that are "sure bets" 237
with "bounded left" (limited losses, like Thales bet) and "bounded right" (limited gains, like insurance or banking) The distinction is crucial, as most payoffs in life fall in either one or the other category 237
(i) Look for optionality, in fact, rank things according to their optionality (ii) preferably with open-ended, not closed-ended payoffs (iii) Do not invest in business plans but in people (iv) Make sure you are bar-belled 238
indeed, history has been written by those who want you to believe that reasoning has a monopoly or near monopoly on the production of knowledge 238
"Charlatan" was held to be a synonym for empirick. The word "empiric" designated someone who relied on experiment and experience to ascertain what was correct. In other words, trial and error and tinkering. That was held to be inferior - professionally, socially, and intellectually. It is still not considered to be very "intelligent" 239
They were just organized quacks (academics) 239
Formalists, to protect their turf, have always played on the logical fallacy that if quacks are found among nonacademics, nonacademics are all quacks, they keep doing it "all that is non-rigorous is nonacademic" 239

Chapter 16 - A lesson in disorder

It is not well advertised that there is not evidence that abilities in chess lead to better reasoning off the chess board 241
The biologist and intellectual E.O. Wilson was once asked what represented the most hinderance to the development of children, his answer was the soccer mom 242
We do not study for life, but only for the lecture room (Seneca's quote related to the problem with education) 243
autodidact - self taught person 243
I figured out how to select people on their ability to integrate socially with others while sitting around doing nothing and enjoying fuzziness. You select people on their ability to hang around, as a filter and studious people were not good at hanging around: they needed to have a clear task 244
Their strength is extremely domain specific and their domain doesn't exist outside of ludic (misuse of games to model real world situations) - extremely organized - constructs 245
And you find gold, so to speak, effortlessly, just as in rational but undirected trial and error based research 245
Trial and error is freedom 246
find a problem first, and figure out the math the works for it 247
Much of what other people know isn't worth knowing 248

Chapter 17 - Fat Tony Debates 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 252
only suckers wait for answers; questions are not made for answers 253
You have no answer to offer them (re Socrates questioning) 253
What is not intelligible to me is not necessarily unintelligent 255
He sees two forces, the Apollonian and the Dionysian. One is measured, balanced, rational, imbued with reason and self restraint; the other is dark, visceral, wild, untamed, hard to understand, emerging from the inner layers of our selves 255
The Apollonian without the Dionysian is, as Chinese would say, yang without yin 255
Dionysus, whom he called "creatively destructive" and "destructively creative" (Nietzsche) 256
that growth in knowledge - or in anything - cannot proceed without the Dionysian 256
famous idea that logic exclude - by definition - nuances, and since truth resides exclusively in nuances, it is "a useless instrument for finding Truth in the moral and political sciences." 256
They knew that incompleteness - half knowledge - is always dangerous 257
traditions provide an aggregation of filtered collective knowledge 258
something as mundane as replacing our currency holdings with precious metals, as these are not owned by governments 259
exposure is more important than knowledge; decisions supersede logic 259
the need to focus on the payoff from your actions 259
The payoff, what happens to you, is always the most important thing, not the event itself 259
People in life talk about payoff, exposure, and consequences (risk and rewards) … those who study conflate Truth with risk and rewards 259
it is the payoff from the True and False that dominates 259
you would realize that almost all of them have had asymmetric payoff 260
you decide principally based on fragility, not probability 260
it is the payoff that matters 260
instead of the vastly more effective "modify your exposure" and learn to get out of trouble 261
note that doing is wiser than you are prone to believe - and more rational 261
It is a huge drag on the middle class parents who have been plowing an increased share of their savings into these institutions 261

Book V

The Nonlinear and the Nonlinear

The procrustean bead in life consists precisely in simplifying the non-linear and making it linear - the simplification that distorts 264

Chapter 18 - On the difference between a large stone and a thousand pebbles

For the fragile, shocks bring higher harm as their intensity increases (up to a certain level) 268
that is, by a single large infrequent event than by the cumulative effect of smaller shocks (pebbles vs. large stone) 270
then, "unexpectedly" the printing causes a jump in inflation 274
ideas on redundancy in systems 275
typically, appointments are neither useful nor pleasant 276
there is another sloppiness in the edict: an insistence in the discourse on the regularity (on a balanced meal) 277
This is a denial of hormesis 277
Health benefits are convex to speed (up to a point) 278
The very idea of exercise is to gain from antifragility to workout stressors 278
A squeeze occurs when people have no choice but to do something, and do it right away, regardless of costs 278
size hurts you at times of stress 279
The gains from size are visible but the risks are hidden 279
It is completely wrong to use the calculus of benefits without including the probability of failure 282
Bottlenecks are the mother of all squeezes 283
are studying a "law of convexity" that makes commodities, particularly vital ones, even dearer than previously thought 283
Because travel time cannot really be negative, uncertainty tends to cause delays, making arrival time increase, almost never decrease 284
This also explains the irreversibility of time, in a way, if you consider the passage of time as an increase in disorder 284
The agency problem (which we defined as the divergence between the interest of the agent and that of his client) was not significant (re crystal palace project) 285
and the beastly thing called "efficiency" that makes people now sail too close to the wind 285
And the information economy is the culprit 285
There is an asymmetry in the way errors hit you - the same as with travel 285
and why they should not be trusted with finances or any large-scale decisions (governments) 286
we o not realize that model error may hit one side more than the other 287

Chapter 19 - The Philosopher's Stone and its Inverse

Convexity is about acceleration 292
Should sales increase 10 percent, then profits would increase less than they would decrease should sales drop 10 percent 293
The only problem is that mathematics is addictive 293
Now what I believe is my true specialty: error in models 293
things that, in the long run, like disturbances (or errors), things that are neutral to them, and those that dislike them (we can classify by these) 294
in fact all small probabilities tend to be very fragile to errors
As you see, the second piece of information, the variability, turned out to be more important than the first 295
If the function is convex (antifragile), then the average of the function of something is going to be higher than the function of the average of something. And the reverse when the function is concave (fragile).
There are two biases: one elementary convexity effect, leading to mistaking the properties f the average of something (here 3.5) and those of a convex function of something (here 15.17), and the second, more involved, in mistaking an average of a function for the function of an average, here 15.17 for 12.25. The latter represents optionality 298 (probably need to see book for this one)
The hidden benefits of antifragility is that you can guess worse than random and still end up outperforming 299
This hidden "convexity bias" comes from a mathematical property called Jensen's inequality 299
The difference is called "negative convexity bias" (or, if you are a stickler, "concavity bias"). The hidden harm of fragility is that you need to be much, much better than random in your prediction and knowing where you are going, just to offset the negative effect. 299
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. 300

Book VI

Via Negativa

the indirect rather than the direct expression (express about what it is not) 301
repeat the metaphor that statues are carved by subtraction 302
the learning of life is about what to avoid 302
since one small observation can disprove a statement, while millions can hardly confirm it, disconfirmation is more rigorous than confirmation. 303
keeping ones distance from an ignorant person is equivalent to keeping company with a wise man 305
What is wrong is quite robust, what you don't know is fragile and speculative 305
heuristic "fast and frugal" to make good decisions despite limited time, knowledge, and computing power 305
When you cross the street, you remove data, anything but the essential threat 307
Paul Valery once wrote - how many things one should disregard in order to act 307
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 308
A philosopher should be known for one single idea, not more 308

Chapter 20 - Time and Fragility

Time has sharp teeth that destroy everything (Simonides of Ceos) 310
time devours everything - time burns but leaves no ashes 310
neomania, the love of the modern for it's own sake 312
Techno-thinkers tend to have an "engineering mind" to put it less politely, they have autistic tendencies 314
They love precision at the expense of applicability 314
be forced to give weight to things that have been around, things that have survived 315
it is the direct result of "winner-take-all" effects in longevity 319
the older the technology, not only the longer it is expect to last, but the more certainty I can attach to such a statement 319
but since failures are buried and we don't hear about them, investors are led to overestimate their chances of success 321
comes from the fact that we notice change, not statics 321
Our brains have a predilection for shortcuts, and the variation is easier to notice (and store) than the entire record 321
the error of variation in place of total is quite pervasive event with matters that are visual 321
But switching cars is a small cost compared to switching computers (recovery value of a computer being so small) 322
These impulses to buy new things that will eventually lose their novelty, particularly when compared to newer things, are called treadmill effects 322
I heard somewhere that the new version had a longer lasting battery and I plan to upgrade soon, during my next impulse buying episode 323
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 324
So I follow the lindy effect as a guide in selecting what to read: books that have been around for 10 years will be around for 10 more, for 2k another 2k, etc. 329
contribution of one Jules Regnault, who discovered optionality and mapped it mathematically 330
Amateurs in any discipline are the best, if you can connect with them 331
He told me that after his detoxification, he realized that all his peers do is read timely material that becomes instantly obsolete 331
Corporations that are large today should be gone 332
truth brings hatred 333
There are secrets to our world that only practice can reveal 335

Chapter 21 - Medicine, Convexity, and Opacity

for those of us who distrust those who talk without doing 336
non-natural needs to prove its benefits, not the natural 337
as mistaking absence of evidence for evidence of absence 337
It seemed to me that it was an insult to mother nature to override her programmed reactions unless we had a good reason to do so 338
I was able to confirm that there is no compelling empirical evidence in favor of the reduction of swelling 338
along with, of course, many other fields of practice (this confabulation, the need to do something) 338
Researchers Paul Meehl and Robin Davis catalog the tension between "clinical" and actuarial (that is, statistical) 338
it may not be just medicine - what we call diseases of civilization result from the attempt by humans to make life comfortable for ourselves against our own interests 339
and what appears as a free lunch has hidden risks 341
it was called a "sucker's trade" 341
nature would have been likely to find this magic pill by itself 341
pharma plays on the interventionism of doctors 342
if the patient is near healthy then mother nature should be the doctor 342
because the legal system favors interventionism 345
speaking of wich, high fructose corn syrup was the result of neomania 347
simply, humans should not be given explosive toys (like atomic bombs, financial derivatives, or tools to create life) 348
overriding her requires some very convincing justification on our part, rather than the reverse 349
So when the (present) inhabitants of mother earth want to do something counter to nature, they are the ones that need to produce the evidence, if they can 349
things break on a small scale all the time, in order to avoid large scale generalized catastrophes 350
An attribution problem arises when the person imputes his positive results to his own skills and his failures to luck 352
"ignoring medicine" (Montaigne's answer to why he lived a long life) 353
This random variability is often mistaken for information, hence leading to interventionism 353
all these biases lead to action, almost never inaction 355
to be sophisticated you need to accept that you are not so 356

Chapter 22 - To Live Long, but not Too Long

The harmful effects of smoking are roughly equivalent to the combined good ones of every medical intervention developed since the war 360
The good is mostly in the absence of the bad (Ennius) 360
joyful mood, rest, and scant nourishment 361
We know we can cure many cases of diabetes by putting people on a very strict starvation style diet, shocking their system 361
I derived the rule that what is called "healthy" is generally unhealthy, just as "social" networks are antisocial, and the "knowledge based" economy is typically ignorant 362
removing offensive irritants: the morning newspaper, the boss, the daily commute, ac, tv, emails, economic forecasts, news about stock market, gym machines 362
The best test of empirical wisdom in someone is in where he puts the burden of evidence 363
If true, wealth consists in worriless sleeping, clear conscience, reciprocal gratitude, absence of envy, good appetite, muscle strength, physical energy, frequent laughs, no meals alone, no gym class, some physical labor (or hobby), good bowel movements, no meeting rooms, and periodic surprises, then it is largely subtractive (elimination of iatrogenics) 364
specialization is the response to a very stable habitat free of abrupt changes
The principle disease of abundance can be seen in habituation and jadedness (dulling receptors) Seneca "To a sick person, honey tastes better" 367
either children or books, both information that carries through the centuries 370

Book VII

The Ethics of Fragility and Antifragility

skin in the game is the only true mitigator of fragility 373

Chapter 23 - Skin in the Game: Antifragility and Optionality at the expense of others

a person is only as respectable and worthy as the downside he is willing to face for the sake of others 376
if we are here today, it is because someone, at some stage, took some risks for us 378
A half-man is not someone who does not have an opinion, just someone who does not take risks for it 379
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 380
people voting for ware need to have at least one descendant exposed to combat (Ralph Nader) 381
No opinion without risk 382
he who does not stop a crime is an accomplice 384
I want predictors to have visible scars on their body from prediction error, not distribute the errors to society 386
an intangible victory has no value 386
America's strength was risk taking and harboring risk takers 386
An academic is not designed to remember his opinions because he doesn't have anything at risk from them 387
Peter Orszag, chairmain of citibank, which is why it will blow up agaain 388
with people who do not incur harm is that they can cherry-pick from statements they've made in the past, many of them contradictory, and end up convincing themselves of their intellectual lucidity on the way to the world economic forum in davos 389
Never ask anyone for their opinion, forecast, or recommendations. Just ask them what they have - or don't have - in their portfolios 389
Ask him what he would do if he were in your place 389
Suckers try to win arguments, nonsuckers try to win 390
surviving is what matters 391
decimation, if a legion loses a battle 10 percent are executed, by random lottery 392
Never put your enemy's back to the wall 393
Markowitz does not use his method for his own portfolio 395
Take this simple heuristic - does the scientific researcher whose ideas are applicable to the real world apply his ideas to daily life? If so, take him seriously 395
The caviar left 396
I am concerned here with managers of businesses that are not owner operated 397
There is upside and no downside, no disincentive at all 398
don't read original sources, but each other, largely because they need to figure out the consensus before making a pronouncement (journalists) 399
this is a form of redundancy, one with an aesthetic and ethical payoff 402
word of mouth is a potent naturalistic filter 402
they are structurally designed and extremely expert at delivering the cheapest possible product that meets their specification (corporations) 403
It is clearly much better if others (preferably someone other than his mother) are the ones saying good things about him 403
And marketing beyond conveying information is insecurity 403
never trust the words of a man who is not free 405
Only a sense of honor can lead to commerce. Any commerce. 405

Chapter 24 - Fitting Ethics to a Profession

for the ancients someone in debt was not free, he was in bondage 408
you can not possibly trust someone on a treadmill 409
he is free who owns his own opinion 411
free person: someone who cannot be squeezed into doing something he would otherwise never do 411
Sissies are born, note made. They stay sissies no matter how much independence you give them, no matter how rich they get. 411
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 s like a voluntary cap (it would prevent people from using public office as a credential building temporary accommodation 412
in large data sets, large deviations are vastly more attributable to noise (or variance) than to information (or signal) 417
The more variables , the more correlations that can show significance in the hands of a skilled researcher 417
The fooled by data effect is accelerating - Big Data 418
as noise is convex and information is concave 418
increasingly data can only truly deliver via negativa - style knowledge - it can be effectively to debunk, not confirm 418
knowledge must not have an agency problem 419
But the good news is that I am convinced that a single person with courage can bring down a collective composed of wimps 420
The scriptures were quite aware of the problem of the diffusion of responsibility 420

Chapter 25 - Conclusion

It is hard to find people knowledgable and confident enough to like to extract the essence of things, instead of nitpicking 421
Don't do unto others what you don't want them to do to you 421
Everything gains or loses from volatility. Fragility is what loses from volatility and uncertainty 421
people sit around waiting for uncertainty and using it as raw material, just like our ancestral hunters 422
convex transformation, the fancier name for the barbell 423

Appendix II

Where most economic models fragilize and blow people up

probability matching, betting based on the odds, instead of what is assumed to be the optimal strategy given a static variance 450
systems make small errors, design makes large ones 450
the detection heuristic is a perturbation in the tails to probe fragility, by checking the function w'b(x) at any level X 451
I noticed as a trader - and obsessed over the idea - that correlations were never the same in different measurements 453
one is only safe shorting a correlation at 1, and buying it at -1 - which seems to correspond to what the 1/n heuristic does 453
in practice one needs the ratio of expected profit to worst-case return - dynamically adjusted to avoid ruin. In the case of barbell transformations, the worst case is guaranteed. And model error is much, much milder under Kelly criterion. Thorp(1971, 1998)
We can use the argument to show how smaller and smaller probabilities require more precision in computation 454
This in a way is the argument I've used to show that small probabilities are incomputable, even if one has the right model - which we of course don't 454
So those who use these models while admitting parameters uncertainty are necessarily committing a severe inconsistency 455
Really, fat tails mean incompatibility of tail events, little else 455
estimation implies error 455
In all cases mere error is not a good thing for small probabilities 455

Keys	Action
`?`	Open this help
`n`	Next page
`p`	Previous page
`s`	Search