‘Anti-Fragile’: How to Gain from Chaos
A review of ‘Anti-Fragile’, by Nassim Nicholas Taleb; Random House, 2012.
Some systems are weak. Some are robust. But others get stronger under stress, volatility and disorder. These systems are ‘anti-fragile’, the idea at the heart of this book. Anti-Fragile picks up where The Black Swan left off, exploring not just the unpredictable and extreme but how systems can survive and gain from events of that kind.
Certain things, writes Taleb, from economies to biological systems, benefit from chaos. These are the ones that survive in the long run. Evolution thrives on trial and error, using stress to select or de-select stronger and stronger organisms. Learning is improved by errors, which reveal gaps in our knowledge. Markets become more robust when individual businesses fail, conveying knowledge of what not to do. Against the common-sense view, the middle ground is the weakest place to be. For managing risk, it would be better to follow a barbell strategy’, avoiding ‘average’ risks and choosing both high-security and high-risk options.
Evolution thrives on trial and error.
Taleb’s theme is that centralised control is dangerous. Modern society, with its need to predict and shape outcomes, creates fragile systems that buckle under the weight of unexpected pressure. The global financial system is the key example. Interconnected through loans, derivatives and other financial products, and reliant on models, which use historical data and so assume the future will resemble the past, the system could not handle the 2008 housing market crash and collapsed. Decentralised, flexible systems whose participants have ‘skin in the game’ – something to lose from failure – can endure shocks. The ultimate system of this kind is the natural world. Ecosystems adapt to disruption and evolutionary processes rest on failure as much as success. For Taleb, we humans could learn from nature by embracing randomness and failure as essential parts of growth.
Taleb is fun to read. This is mainly because he likes a scrap. He writes in a hyper-critical, unfiltered tone, taking shots at the ‘I.Y.I.’ (‘intellectual-yet-idiot’) class of what he sees as expensively educated charlatans who lift theory about real-world experience. His style is meandering. He jumps around between ideas and anecdotes, citing thinkers from philosophy, economics and science. He is fond of the classical tradition, often quoting the Greeks and particularly the Romans to make a point.
He writes in a hyper-critical, unfiltered tone, taking shots at the ‘I.Y.I.’ (‘intellectual-yet-idiot’) class.
Taleb faces the challenge of persuading readers that common-sense ideas like ‘to fail to prepare is to prepare to fail’ are flawed. We are obsessed with minimising risk, but that does not protect us. The world is intrinsically unpredictable, writes Taleb and, given this, it would be wiser individually and collectively to make ourselves and our systems sufficiently flexible to adapt to change. That would entail a change of mindset to one that is at peace with error, failure and tinkering.
Anti-Fragile is highly original, which is not per se a good thing, but is in this case. It pushes us to rethink risk, unpredictability and what it means to be robust, and does so in a distinctively unvarnished, human voice and non-linear style. His call to welcome and even learn to love volatility seems well-suited to our mad world, which grows more dangerous almost in proportion to our avoidance of risk.
