Incerto 4-Book Bundle: Fooled by Randomness, The Black Swan, The Bed of Procrustes, Antifragile

by Nassim Nicholas Taleb

The problem is that what I wrote above looks ridiculous, but a change of domain makes it look reasonable. Clearly, we never think that it is thanks to ornithologists that birds learn to fly—and if some people do hold such a belief, it would be hard for them to convince the birds. But why is it that when we anthropomorphize and replace “birds” with “men,” the idea that people learn to do things thanks to lectures becomes plausible? When it comes to human agency, matters suddenly become confusing to us.

Random Tinkering (antifragile) → Heuristics (technology) → Practice and Apprenticeship → Random Tinkering (antifragile) → Heuristics

The lecturing-birds-how-to-fly effect is an example of epiphenomenal belief: we see a high degree of academic research in countries that are wealthy and developed, leading us to think uncritically that research is the generator of wealth.

People from Amioun only do well when shaken.” That’s antifragility.

but I wonder why people don’t realize the simple truism, that is, the fooled by randomness effect: mistaking the merely associative for the causal, that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking.

in ancient times, learning was for learning’s sake, to make someone a good person, worth talking to, not to increase the stock of gold in the city’s heavily guarded coffers. Entrepreneurs,

Clearly, it is unrigorous to equate skills at doing with skills at talking. My

Bureaucrats, on the other hand, because of the lack of an objective metric of success and the absence of market forces, are selected on the “halo effects” of shallow looks and elegance.

So I saw the less is more in action: the more studies, the less obvious elementary but fundamental things become; activity, on the other hand, strips things to their simplest possible model.

And my argument is that you don’t go to school to learn optionality, but the reverse: to become blind to it.

You cannot look at the future by naive projection of the past.

As Yogi Berra said, “In theory there is no difference between theory and practice; in practice there is.”

tinkering and trial and error are devoid of narrative: they are just not overly dependent on the narrative being true—the narrative is not epistemological but instrumental.

An idea does not survive because it is better than the competition, but rather because the person who holds it has survived! Accordingly, wisdom you learn from your grandmother should be vastly superior (empirically, hence scientifically) to what you get from a class in business school (and, of course, considerably cheaper). My sadness is that we have been moving farther and farther away from grandmothers.

Traders trade → traders figure out techniques and products → academic economists find formulas and claim traders are using them → new traders believe academics → blowups (from theory-induced fragility)

Great idea, but add the personal computer plus Internet and 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.

Because in Extremistan, it is more important to be in something in a small amount than to miss it.

Coca-Cola began as a pharmaceutical product. Tiffany & Co., the fancy jewelry store company, started life as a stationery store.

Imagine going to Mexico with a notebook and trying to figure out the average wealth of the population from talking to people you randomly encounter. Odds are that, without Carlos Slim in your sample, you have little information. For out of the hundred or so million Mexicans, Slim would (I estimate) be richer than the bottom seventy to ninety million all taken together. So you may sample fifty million persons and unless you include that “rare event,” you may have nothing in your sample and underestimate the total wealth.

(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.

history has been written by those who want you to believe that reasoning has a monopoly or near monopoly on the production of knowledge.

Even their leisure is subjected to a clock, squash between four and five, as their life is sandwiched between appointments. It is as if the mission of modernity was to squeeze every drop of variability and randomness out of life—with (as we saw in Chapter 5) the ironic result of making the world a lot more unpredictable, as if the goddesses of chance wanted to have the last word.

(Just like corporate executives are selected for their ability to put up with the boredom of meetings, many of these people were selected for their ability to concentrate on boring material.)

But there is something central in following one’s own direction in the selection of readings: what I was given to study in school I have forgotten; what I decided to read on my own, I still remember.

the most severe mistake made in life is to mistake the unintelligible for the unintelligent—something

FAT TONY: “My dear Socrates … you know why they are putting you to death? It is because you make people feel stupid for blindly following habits, instincts, and traditions. You may be occasionally right. But you may confuse them about things they’ve been doing just fine without getting in trouble. You are destroying people’s illusions about themselves. You are taking the joy of ignorance out of the things we don’t understand. And you have no answer; you have no answer to offer them.”

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.

The Apollonian without the Dionysian is, as the Chinese would say, yang without yin.

that growth in knowledge—or in anything—cannot proceed without the Dionysian.

In his attack on Averroes, he expressed the famous idea that logic excludes—by definition—nuances, and since truth resides exclusively in the nuances, it is “a useless instrument for finding Truth in the moral and political sciences.”

The payoff, what happens to you (the benefits or harm from it), is always the most important thing, not the event itself.

We check people for weapons before they board the plane. Do we believe that they are terrorists: True or False? False, as they are not likely to be terrorists (a tiny probability). But we check them nevertheless because we are fragile to terrorism. There is an asymmetry.

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.

had not realized that it is hard for members of the media and the public to accept that the job of a scholar is to ignore insignificant current affairs, to write books, not emails, and not to give lectures dancing on a stage; that he has other things to do, like read in bed in the morning, write at a desk in front of a window, take long walks (slowly), drink espressos (mornings), chamomile tea (afternoons), Lebanese wine (evenings), and Muscat wines (after dinner), take more long walks (slowly), argue with friends and family members (but never in the morning), and read (again) in bed before sleeping, not keep rewriting one’s book and ideas for the benefit of strangers and members of the local chapter of Networking International who haven’t read it.

fragility was simply vulnerability to the volatility of the things that affect it was

For the fragile, shocks bring higher harm as their intensity increases (up to a certain level).

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.

The answer has to do with the structure of survival probabilities: conditional on something being unharmed (or having survived), then it is more harmed by a single rock than a thousand pebbles, that is, by a single large infrequent event than by the cumulative effect of smaller shocks.

we are necessarily immune to the cumulative effect of small deviations, or shocks of very small magnitude, which implies that these affect us disproportionally less (that is, nonlinearly less) than larger ones.

For the fragile, the cumulative effect of small shocks is smaller than the single effect of an equivalent single large shock.

This leaves me with the principle that the fragile is what is hurt a lot more by extreme events than by a succession of intermediate ones. Finito—and there is no other way to be fragile.

For the antifragile, shocks bring more benefits (equivalently, less harm) as their intensity increases (up to a point).

Smile! A better way to understand convexity and concavity. What curves outward looks like a smile—what curves inward makes a sad face. The convex (left) is antifragile, the concave (right) is fragile (has negative convexity effects).

So travel cost is fragile to the volatility of the number of cars on the highway; it does not depend so much on their average number. Every additional car increases travel time more than the previous one.

This is the central problem of efficiency: these types of errors compound, multiply, swell, with an effect that only goes in one direction—the wrong direction.

Another intuitive way to look at convexity effects: consider the scaling property. If you double the exposure to something, do you more than double the harm it will cause? If so, then this is a situation of fragility. Otherwise, you are robust.

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.

Always keep in mind the difference between a stone and its weight in pebbles. The Kerviel story is illustrative, so we can generalize and look at evidence across domains.

Someone unfamiliar with the business who naively optimizes the size of the place (Heathrow airport, for example) might miss the idea that smooth functioning at regular times is different from the rough functioning at times of stress.