Antifragile: Things that Gain from Disorder

by Nassim Nicholas Taleb

This is the central illusion in life: that randomness is risky, that it is a bad thing—and that eliminating randomness is done by eliminating randomness.

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. The media make things worse as they play on our infatuation with anecdotes, our thirst for the sensational, and they cause a great deal of unfairness that way. 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.

Note another element of Switzerland: it is perhaps the most successful country in history, yet it has traditionally had a very low level of university education compared to the rest of the rich nations. Its system, even in banking during my days, was based on apprenticeship models, nearly vocational rather than the theoretical ones. In other words, on techne (crafts and know how), not episteme (book knowledge, know what).

“It seemed, wrote Machiavelli, that in the midst of murders and civil wars, our republic became stronger [and] its citizens infused with virtues. … A little bit of agitation gives resources to souls and what makes the species prosper isn’t peace, but freedom.”

And here is something comforting about statelings at war: mediocrity cannot handle more than one enemy, so war here turns into an alliance there.

When we look at risks in Extremistan, we don’t look at evidence (evidence comes too late), we look at potential damage: never has the world been more prone to more damage; never.* It is hard to explain to naive data-driven people that risk is in the future, not in the past.

When a currency never varies, a slight, very slight move makes people believe that the world is ending. Injecting some confusion stabilizes the system.

By a mechanism called stochastic resonance, adding random noise to the background makes you hear the sounds (say, music) with more accuracy.

Time for American policy makers to understand that the more they intervene in other countries for the sake of stability, the more they bring instability (except for emergency-room-style cases). Or perhaps time to reduce the role of policy makers in policy affairs. One of life’s packages: no stability without volatility.

Modernity corresponds to the systematic extraction of humans from their randomness-laden ecology—physical and social, even epistemological. Modernity is not just the postmedieval, postagrarian, and postfeudal historical period as defined in sociology textbooks. It is rather the spirit of an age marked by rationalization (naive rationalism), the idea that society is understandable, hence must be designed, by humans. With it was born statistical theory, hence the beastly bell curve. So was linear science. So was the notion of “efficiency”—or optimization.

Modernity starts with the state monopoly on violence, and ends with the state’s monopoly on fiscal irresponsibility.

The name for such net loss, the (usually hidden or delayed) damage from treatment in excess of the benefits, is iatrogenics, literally, “caused by the healer,” iatros being a healer in Greek.

Medicine is comparatively the good news, perhaps the only good news, in the field of iatrogenics. We see the problem there because things are starting to be brought under control today; it is now just what we call the cost of doing business, although medical error still currently kills between three times (as accepted by doctors) and ten times as many people as car accidents in the United States. It is generally accepted that harm from doctors—not including risks from hospital germs—accounts for more deaths than any single cancer.

Iatrogenics is compounded by the “agency problem” or “principal-agent problem,” which emerges when one party (the agent) has personal interests that are divorced from those of the one using his services (the principal). An agency problem, for instance, is present with the stockbroker and medical doctor, whose ultimate interest is their own checking account, not your financial and medical health, respectively, and who give you advice that is geared to benefit themselves. Or with politicians working on their career.

anything in which there is naive interventionism, nay, even just intervention, will have 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.

Greenspan’s actions were harmful, but even if he knew that, it would have taken a bit of heroic courage to justify inaction in a democracy where the incentive is to always promise a better outcome than the other guy, regardless of the actual, delayed cost.

interventionism depletes mental and economic resources; it is rarely available when it is needed the most. (Beware what you wish for: small government might in the end be more effective at whatever it needs to do. Reduction in size and scope may make it even more intrusive than large government.)

Rory Sutherland signaled to me that someone with a personal doctor on staff should be particularly vulnerable to naive interventionism, hence iatrogenics; doctors need to justify their salaries and prove to themselves that they have a modicum of work ethic, something that “doing nothing” doesn’t satisfy.

To conclude, the best way to mitigate interventionism is to ration the supply of information, as naturalistically as possible. This is hard to accept in the age of the Internet. It has been very hard for me to explain that the more data you get, the less you know what’s going on, and the more iatrogenics you will cause. People are still under the illusion that “science” means more data.

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.

the empty suit, which we speculate is someone who has a command of all the superfluous and administrative details of things but misses the essential (and isn’t even aware of it), so his conversation becomes mere chitchat around the point, never getting to the central idea.

A man is honorable in proportion to the personal risks he takes for his opinion—in other words, the amount of downside he is exposed to. To sum him up, Nero believed in erudition, aesthetics, and risk taking—little else.

As to the funds, to avoid the charity trap, Nero followed Fat Tony’s rule of systematically making donations, but not to those who directly asked for gifts. And he never, never gave a penny to any charitable organization, with the possible exception of those in which not a single person earned a salary.

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.

Success brings an asymmetry: you now have a lot more to lose than to gain. You are hence fragile.

“Men feel the good less intensely than the bad”

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

invest in good actions. Things can be taken away from us—not good deeds and acts of virtue.

For antifragility is the combination aggressiveness plus paranoia—clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself.

Before the United Kingdom became a bureaucratic state, it was barbelled into adventurers (both economically and physically) and an aristocracy. The aristocracy

didn’t really have a major role except to help keep some sense of caution while the adventurers roamed the planet in search of trading opportunities, or stayed home and tinkered with machinery. Now the City of London is composed of bourgeois bohemian bonus earners.

The story of Thales has many morals, all of them linked to asymmetry (and the construction of an antifragile payoff). The central one is related to the following account by Aristotle: “But from his knowledge of astronomy he had observed while it was still winter that there was going to be a large crop of

olives …” So for Aristotle, clearly, the stated reason was Thales’ superior knowledge.

The “tails” of the distribution on the higher end of the income brackets, the extreme, are much more determined by changes in inequality than changes in the average. It gains from dispersion, hence is antifragile. This explains the bubble in real estate prices in Central London, determined by inequality in Russia and the Arabian Gulf and totally independent of the real estate dynamics in Britain. Some apartments, those for the very rich, sell for twenty times the average per square foot of a building a few blocks away.

Life Is Long Gamma

This tells us something about the way we map the future. We humans lack imagination, to the point of not even knowing what tomorrow’s important things look like. We use randomness to spoon-feed us with discoveries—which is why antifragility is necessary.

The Soviet-Harvard illusion (lecturing birds

on flying and believing that the lecture is the cause of these wonderful skills) belongs to a class of causal illusions called epiphenomena. What are these illusions? When you spend time on the bridge of a ship or in the coxswain’s station with a large compass in front, you can easily develop the impression that the compass is directing the ship rather than merely reflecting its direction.

And one can easily see the trap of having these epiphenomena fuel action, then justify it retrospectively. A dictator—just like a government—will feel indispensable because the alternative is not easily visible, or is hidden by special interest groups. The Federal Reserve Bank of the United States, for instance, can wreak havoc on the economy yet feel convinced of its effectiveness. People are scared of the alternative.

Someone standing today looking at events without having lived them would be inclined to develop illusions of causality, mostly from being mixed-up by the sequence of events. In real life, in spite of all the biases, we do not have the same number of asynchronies that appear to the student of history. Nasty history, full of lies, full of biases!

We are suckers for the sophisticated.

The real world relies on the intelligence of antifragility, but no university would swallow that—just as interventionists don’t accept that things can improve without their intervention. Let us return to the idea that universities generate wealth and the growth of useful knowledge in society. There is a causal illusion here; time to bust it.

am not saying that knowledge is not important; the skepticism in this discussion applies to the brand of commoditized, prepackaged, and pink-coated knowledge, stuff one can buy in the open market and use for self-promotion. Further, let me remind the reader that scholarship and organized education are not the same.

Entrepreneurs, particularly those in technical jobs, are not necessarily the best people to have dinner with. I recall a heuristic I used in my previous profession when hiring people (called “separate those who, when they go to a museum, look at the Cézanne on the wall from those who focus on the contents of the trash can”): the more interesting their conversation, the more cultured they are, the more they will be trapped into thinking that they are effective at what they are doing in real business (something psychologists call 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).*

The difference between a narrative and practice—the important things that cannot be easily narrated—lies mainly in optionality, the missed optionality of things. The “right thing” here is typically an antifragile payoff. And my argument is that you don’t go to school to learn optionality, but the reverse: to become blind to it.

Expert problems (in which the expert knows a lot but less than he thinks he does) often bring fragilities, and acceptance of ignorance the reverse.* Expert problems put you on the wrong side of asymmetry. Let us examine the point with respect to risk. When you are fragile you need to know a lot more than when you are antifragile. Conversely, when you think you know more than you do, you are fragile (to error).

The theory is the child of the cure, not the opposite—ex cura theoria nascitur.

evidence of absence is not absence of evidence, 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.

In the antifragile case (of positive asymmetries, positive Black Swan businesses), such as trial and error, the sample track record will tend to underestimate the long-term average; it will hide the qualities, not the defects.