Random, extreme events: What to do in a world we don’t understand. Is it possible to develop characteristics to emulate strengths in nature in becoming anti-fragile as described by former wall street trader, now academic, Nassim Nicholas Taleb? Since I wrote this post, I also followed it up with a SlideShare and presentation on Anti-Fragile here.
It’s rare that I share a biography intact, yet Taleb’s bio makes his perspective clear:
Bio: Nassim N. Taleb is a former derivatives trader who became a scholar and philosophical essayist in 2006. Although he is currently Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute, he self-funds his research and operates in the manner of independent scholars. Taleb is the author of The Black Swan: (2007–2010) and Antifragile: Things That Gain from Disorder (2012).
His works focuses on decision making under uncertainty, as well as technical and philosophical problems with probability and metaprobability, in other words “what to do in a world we don’t understand”.
Since I wrote this post, I also followed it up with a SlideShare and presentation:
It also helps to understand the context of these concepts including Taleb’s description of fragility Black Swan events described below:
Taleb predicted what was going to fail in the stock market based on fragility. He profited mightily during the stock market crash of 1987, and is energized in his research because of it. He used the example of technology as fragile, useful in predicting the future. He also describes those who profit without having “skin in the game,” that is those who become wealthy with low or no risk at the expense of others.
Black Swans, as described by Taleb are, “large-scale unpredictable and irregular events of massive consequence.” They are non-linear.
Taleb uses his approach as a replacement for forecasting. There is no mathematical probability for rare events. There is NOT enough data. Positive and negative examples of Black Swan events include:
- the invention of the computer and the Internet
- World War I
- the stock market crash of 1929
- terrorist attacks of 9/11
“When you are fragile, you depend on things following the exact planned course, with as little deviation as possible.”
Anti-fragile focuses on approaches that enable us to survive or even thrive from choosing a strengthening response to high levels of volatility, and particularly those unexpected extreme events. He also clarifies the dilemma of most modern, large institutions. “When you are fragile, you depend on things following the exact planned course, with as little deviation as possible.”
In his worldview, great success is only achieved by heuristic trial-and-error, not stability. At the Brooklyn launch of his book..Taleb declared that, “The only anti-fragile systems now are Silicon Valley and the New York restaurant industry.”
Both entities are extremely innovative, and prone to high levels of failure and reward. The ability for individual disasters to benefit the overall quality of the collective qualifies them as anti-fragile.
Taleb cites, in his 2007 book, The Black Swan: The Impact of the Highly Improbable, that large banking systems, are oversized and unaccountable. He writes that they use flawed investment models could bring on a financial crisis. His criticism includes housing funds, like Fannie Mae, as well as the Federal Reserve of the United States, all listed as as fragile. Conversely, as for Anti-Fragile technology, he cites the bicycle, the car, and the bookshelf. He says e-books are too unstable of a technology.
“…if about everything top-down fragilizes and blocks antifragility and growth, everything bottom-up thrives under the right amount of stress and disorder.”
Taleb uses metaphors for anti-fragile to explain his concepts in common language. For example, he uses a story of shipping a package to Antartica with a “please mishandle” label to describe the effect of an “anti-fragile” state.
Culturally, he discusses that “anti-fragility” is similar to the ancients not having a name for the color blue. The color was seen, existed, there was no color-blindness to explain it, yet it had no name.
In mythology, his example for being anti-fragile is the hydra.
Concepts and interpretations that rings true in my following of organic and adaptive systems over the years include these by blogger, John Hagel:
- In …system design, it’s important to avoid the temptation to develop detailed top down blueprints for systems. Taleb observes that “if about everything top-down fragilizes and blocks antifragility and growth, everything bottom-up thrives under the right amount of stress and disorder.”
Hagel offers suggestions such as:
- Resist the temptation to respond to complexity with complex rules. DN: Bureacracy is rarely associated with simplicity, more often with “red tape. Food for thought is Mary Lippitt’s Model for Complex Change, a simple diagram, here.
- Contemporary institutions …have been designed as push systems. While these systems tend to prosper in highly stable times, they do very poorly in times of rapid change and growing uncertainty. They become highly vulnerable to Black Swans.
- Build in redundancy and overcompensation. Redundancy in systems is a key to antifragility. DN: This would have been very helpful to avert the tsunami nuclear power plant tragedy in Japan, as well as averting big bank collapse by diversifying risk in more, smaller, unconnected banks.
Taleb also concludes his talk about how architects who create financial systems set it up for themselves to profit, even as others are affected by big losses, shareholders and tax payers. The risks are also hidden, with incentives for the architect financiers.
These concepts, and Taleb’s own successful personal financial example, his calling out of traditional economics and probability have caught the attention of many who follow developing change thought leadership.
Finding way to not just survive, but thrive during random, extreme events seems to tailor a match to open systems change planning and bottom up, hands-on responsiveness.
My own experiences working with those in facilities management, who tend to be agile in crises verifies this. Bottom up success stories include those who’ve taken the long view for safety planning, including redundant systems and fail-safe options.
It’s the bureaucratic, fragile systems including outmoded performance management, punitive communication vs. developmental and strength-based systems, that get in the way and increase our vulnerability.
- The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility”, and now,
The New York Times describes Taleb’s 2007 Black Swan book as one of the twelve most influential books since World War II.
For a contrasting view of Taleb’s work, I’ve “scooped” a piece in Forbes entitled, “What Nassim Taleb Misses About Technology and Innovation” here, highlighting:
…technologists are supremely aware that most of their efforts will come to nothing
…They are, in fact, searching out black swans (to use Mr. Taleb’s own parlance), in full knowledge that they will spend most of their time rushing up blind alleys.
What, I wonder, would Mr. Taleb make of Edison’s 9,999th try? ….The truth is that useless things often end up very useful indeed.
What do you think of the concepts of Anti-Fragility and how might these affect your views of your work and business systems?
Your comments are most welcome! - D
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