Random, extreme events: What are our options when we confront events we don’t understand? Is it possible to develop characteristics to emulate strengths in nature in becoming antifragile as described by former wall street trader, now academic, Nassim Nicholas Taleb?
“When you are fragile, you depend on things following the exact planned course, with as little deviation as possible.”Nassim Nicholas Taleb
Here are some insights into Taleb’s approach, especially relevant today:
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 this presentation:
To better understand the context of these concepts including Taleb’s description of fragility, Black Swan events described below:
Becoming antifragile 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.”
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
- the stock market crash of 1929
- the invention of the computer and the Internet
- World War I
- terrorist attacks of 9/11
What would we add today? Polarization of politics? The attack on the US Capitol in January of 2021?
“…if about everything top-down fragilizes and blocks antifragility and growth, everything bottom-up thrives under the right amount of stress and disorder.”Nassim Nicholas Taleb
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 continues to be ahead of his time. He 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 AntiFragile technology, he cites the bicycle, the car, and the bookshelf. He says e-books are too unstable of a technology.
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 “antifragility” 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.The idea of it is similar to the octopus:
John Hagel, a blogger suggests that it is important to resist the temptation to respond to complexity with complex rules.
He writes that our 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.”
I’ve notice that our 2020 model Subaru has a built in redundancy and overcompensation, having to do with some of its computer “black box” artificial technology (AI). For example, the seat adjust function. If the AI facial recognition software doesn’t work, the buttons on the driver-side door, a mechanical system, do.
Redundancy in systems is a key to antifragility. This would have been very helpful to avert the tsunami nuclear power plant tragedy in Japan, in retrospective, as well as averting big bank collapse by diversifying risk in more, smaller, unconnected banks.
Taleb concludes his talk with an illustration of 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. This is true in military systems, but to what degree there are critical failsafe systems could be a scary vulnerability. More to come on this subject soon.
This post was updated in 2021. Taleb writes about random event, Black Swans in his books:
- by Randomness: The Hidden Role of Chance in Life and in the Markets,
- The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility”, and now,
- Antifragile: Things That Gain from Disorder
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 (…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. (Article: The Usefulness of Useless Things)
What do you think of the concepts of Anti-Fragility and how might these affect your views of your work and business systems in 2021? Your comments are most welcome!
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- Receive Best of the Best news, taken from Deb’s NINE multi-gold award winning curation streams @Deb Nystrom, REVELN, sent once a month via email, available for free here, via REVELN Tools.
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