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Bubbles are not confined to the bizarro realm of tulip bulbs, Beanie Babies, and bitcoins.
On one side of the barbell, a basket of risky speculative plays. On the other side, a basket of conservative investments. The weight is distributed between two extremes, with nothing in the middle: instead of taking a somewhat conservative or aggressive investment strategy, you’re hyper-conservative and hyper-aggressive at the same time. This puts a fixed cap on your downside, while still giving you exposure to unbounded upside.
The same pattern repeats in financial markets, companies, and life in general: stamping out the small stressors that act as natural fire breaks only makes us more vulnerable when the Big One comes along. We would be better off letting banks fail early, refusing to protect the feelings of the over-sensitive, and taking small shocks at regular intervals. Instead, we put sticking plasters over festering wounds, and suppress volatility with a patchwork of kludges that create bigger problems down the track.
Like it or not, we’re all ‘entrepreneurs’ now, even if we never start a company. The old model of stable employment for life with a government pension in retirement is no longer a safe bet. Instead, we have to increasingly think in terms of non-linear returns, protecting the downside, finding ways to profit from volatility, and creating diverse income streams.
THE BARBELL STRATEGY FOR CAREERS Nassim Taleb suggests targeting the two extremes of the career spectrum at once. On one end of the barbell, you play it safe with a secure, staid job. On the other end, you take highly speculative risks. In the middle, as little as possible. This allow you to explore and exploit in parallel, giving you two separate paths for maximising career capital over time (Fig. 5.10). The exploration pathway starts out at rock bottom, with the hope being that it might one day climb high enough to overtake the line representing steady exploitation.
Sivers says this is the lifestyle followed by the happiest people he knows: “How nice to not expect your job to fulfil all your emotional needs. How nice to not taint something you love with the need to make money from it.”
We live in an increasingly anxious and depressed society, subject to unprecedented psychic misery at a time of unprecedented prosperity. The psychologist Martin Seligman explains this paradox with two parallel forces, which he calls 'the waxing of the individual and the waning of the commons'. On the one hand, we have the breakdown of traditional family structures, of belief in God, and of nationalism—the things in which we have historically found a sense of purpose that transcends the self. As these collective myths break down, the void has been filled by the rise of extreme individualism.
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We've seen that autonomy is a necessary condition for human flourishing, but so are binding constraints. This apparent contradiction is pithily reconciled in an adage attributed to the Enlightenment philosopher Jean-Jacques Rousseau: “Freedom is the power to choose our own chains.”
Generosity seems to be especially important as you move from exploring to exploiting. Another longitudinal study found that volunteer work boosted every measure of wellbeing including health and longevity, with the elderly benefiting the most.
It's only in the last century that the signal began to weaken, and ultimately reverse direction. As food became cheaper relative to income, love handles were no longer so impressive. Now we're awash in a sea of cheap calories, and most people will spend their entire lives in a permanently 'fed' state, without ever experiencing true hunger.
The bigger problem—and what a problem!—is that we're getting too rich. The middle classes of the developed world are already running up against the point of diminishing returns. We have personal chariots, our own dwellings, an unlimited array of delicious foodstuffs from around the world, and a bounty of entertainment on demand. More money only provides marginal improvements on these wonders: the fact that you have a dedicated bathing room in your house with a constant source of running hot water provides 99.9 per cent of the value, as compared to the gold plating on the shower head. Money is
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We can already see the first stages of this transition taking place. Why does wearing a chunky gold chain look rich to poor people, and poor to rich people? The signal is simple: "I have enough resources that I can waste $500 on this shiny metal ornament." But rich people are not worried about being confused with people who don't have $500. They have to distinguish themselves from the insecure middle classes, and the way they do so is through countersignalling: by refraining from obvious displays of wealth, they demonstrate that they're so secure in their position that they don't need to
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The problem with shallow clicktivism is that it's not a costly signal. There is nothing brave about adding the 100th dunk to the pile-on, or parroting whatever line will earn you back-slaps from your ingroup. Talk is cheap. What matters is taking action that actually requires you to sacrifice something: preferably money, but also time, or reputation.
If you agree with the case I have made—that optionality is the best proxy for human flourishing, and that many people today are still massively constrained by debt, by poverty, by disease, by lack of opportunity, by regressive cultural or social norms, by bad legislation, by 'sticky' negative-sum games—then perhaps you will use your options to help break them free of their chains, and unlock their full range of capabilities.
Optionality becomes more valuable under conditions of uncertainty As our world gets weirder, the problem of decision-making under uncertainty gets harder, which makes it more important to maintain optionality. This is partly a defensive play: optionality acts as a stand-in for intelligence, and means we don't have to rely on flawed models and detailed forecasts. But it is also opportunistic: it positions us to benefit from violent swings in future states of the world. If you have optionality, volatility is your friend.
Generating better options is much more important than trying to make perfect decisions Consumer capitalism gives the illusion of great choice, even while it traps us within one small sector of the total space of possibilities, squandering our time and attention on a narrow range of standardised options. When information costs more than it's worth, the only winning move is to carefully steward your ignorance—to strike at the root of the possibility tree, and refuse to engage with its branching confusopolies. Rationality is not about making perfect decisions, but choosing what to choose.
The Siren song only gets harder to resist The smartest minds of a generation are employed in trying to exploit us at the level of our DNA, distorting the sensations we're hardwired to pursue into powerful superstimuli. It’s increasingly difficult to escape the allure of short-term rewards, and make decisions that maximise our long-term capabilities. The result is t...
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Spectacular success is a matter of putting irons in the fire Big wins are always mediated by some element of randomness, which means there is no guarantee of a spectacular success. The best strategy for getting lucky is collecting open-ended options with potential for massive upside. We can never be sure if these will pay off, but by systematically putting irons in the fire, we maximise our chances of hitting the big one.
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