Nassim Nicholas Taleb wrote these 5 books as a non-overlapping series that all talk about 1 main idea but from many different angles. The main topic is a term he created called Antifragility and while the 5 books cover different topics, they all revolve around this idea in a brilliant manner.
The books are not technical, but they are complex ideas. Nassim has a very particular style and it shows quickly. He’s brash and opinionated, but charming and his brilliance is hard to deny. He comes across as sort of grumpy, he’s a complete contrarian (which I love), he constantly references texts from ancient cultures (and writes in many languages throughout the book). This series isn’t just based on financial risk, it’s a book about lifestyle, wisdom, and humanity.
Around the main point of Antifragility are countless smaller points he makes that really stuck with me, here are a few:
What is fragility? Something that doesn’t stand up well to volatility. The opposite of fragility is not durability, but antifragility. Something that gets better with volatility. Think about your immune system, if you never get sick you’ll never build antibodies. Your immune system gets stronger when it’s stressed! Evolution is the same way, the species as a whole gets better as the survivors breed and the weak die out. Compare this to many of our economic systems we have today: giant banks that CAN’T fail, and then subsequently get bailed out at taxpayer expense. This isn’t a real fix because we still have all the debt, it’s just been shifted from private sector to public sector. Systems that are propped up to avoid volatility are fragile, and that’s the premise of the entire series.
Skin in the game
This is the title of the 5th book in the series but it was actually the first one I read. Everyone knows what skin in the game means right, it’s when you have a vested interest in both the up and downside of your decisions. For instance, if you start a business and you put your cash in it, you have money to lose: Skin in the game. If you’re the CEO of a corporation that you didn’t start and then it collapses a few years down the road you can move on without taking the pain of failure: no skin in the game. Nassim makes mention of a 3rd scenario he calls “Soul in the game” these people such as artisans or a person who invest themselves into an idea/business regardless of the money.
Consider a foreign policy advisor who is an academic, and never served in the military (there are lots of these people). They convince the American public to intervene in Afghanistan, for better or for worse. If things go bad, he has nothing to lose, and if things go well, he gets a fancy job at a big think tank later on. Now what’s worse is the young patriot (let’s call him Alex Felice) has to go to war for 2 years because the country decides this is a good idea. Now I have very little upside by spending time in the desert, but i carry a lot of downside risk. The politician only has upside because he has no skin in the game. This is asymmetric risk
Let’s consider lifelong economists who make monetary policy for the country, if they are right they make money, if they are wrong, nothing happens to them, but the country goes into shambles. Lastly, what about the politicians who have decided we need to have 20 Trillion in government debt and nearly 1 Trillion yearly in budget deficit, who pays that? We do, yet we have little say in the actual decisions. They are loading us up with asymmetric risk and they have little to no skin in the game.
Nassim is hardly the first one to describe this phenomenon, but it hit me harder than ever when he wrote about it. Survivorship bias is thinking you have some special insight to how the world works, because it worked for you. For instance, self development books all sell the same ideas: positivity, hard work, persistence, etc.They must work because look how successful the guy writing the book is, he applied all these traits and it worked. In reality though it only takes into account the person it worked for, it doesn’t account for the countless hardworking, positive attitude having, persistent people who failed. In fact, there are a lot more hardworking failures than successes. The premise of the first book in the series “Fooled by Randomness” is that success is mostly due to success. No one likes to hear this, but it’s quite true and Nassim explains it beautifully.
The lindy effect in its most basic says that the longer something has been around, the more likely it will stay around, and vice versa. Let’s look at some examples for clarity:
The bible has been around nearly 2000 years now, it’s likely to continue to be in print for a long time forward. This is Lindy. The acclaimed TV show that many people claim is life changing “Game of Thrones” will most likely fade from memory quite quickly. Not Lindy.
Airbnb is popular with real estate investors these days, but it’s really new compared to homes themselves. Homes are unlikely to go obsolete anytime soon, but Airbnb just might. In fact you can apply this to any business in the world. How many businesses today have been around for 100 years, not many! The ones that made it: JP Morgan Chase, Exxon, Merck, Pepsi and others are likely to stick around quite a bit longer. Lindy! Your friend who wants to open a local bar in town, probably not going to last. Not Lindy
Thinking about the Lindy effect is a great way to prevent getting caught up in the drunkenness of new technology. For instance Cryptocurrency is ever popular these days, but it’s new! It’s unlikely to replace the Federal Reserve anytime soon. The argument I also like is cell phones, because I think they are more Lindy than at first glance.. Sure the internet and cell phones are new, but writing on tablets is the oldest form of communication man has produced. Lindy! Netflix showed up one day and took out Blockbuster to dominate streaming video, but it’s still new and the market share for competition is high! Don’t assume it’ll be around forever. It’s not Lindy.
Beware of modernity
I never thought I would say this, but these books (and others I’ve been reading this year, but mainly this one) have me appreciating our past far more than I previously did. Modernity is fragile, it makes us too comfortable, and it makes us too entitled. I’ve never had to hunt for my own food, and I’m constantly running forward to “accomplish” something when the truth is the world moves slowly and most of humanity has been spent relaxing. Now I’m not giving my ambitions up completely, but I better understand the wisdom and value of our ancestors now. Our infrastructure, government, and systems these days are incredibly complex and they are run by people who most likely don’t understand them. In fact I think many of our large systems are not possible to truly fully understand (this is why 2008 GFC happened). We trust these systems completely, and many of them are not Lindy, so it’s cause for some apprehension. Modernity causes us to create psychologists which may or may not add benefit to the world. Nutritionists are the same, humans have been eating for thousands of years without nutritionists and yet these days we are more likely to die of overeating than anything else. Sorry if I’m skeptical that this modern invention is necessary. Television is the biggest problem of all (though I watch very little luckily), as it’s essentially outsourcing our intellectual stimulation to the easiest provider. Have you ever scrolled through the channels to find something to watch. This is not productive behaviour for anyone. The cell phone is a double edged sword because it contains all the world’s knowledge, but it also contains instagram, the most superficial time wasting app yet created.
I’m not giving up modernity, but I’m much more skeptical of it than previously, and I always think more skepticism is good.
Greek for “by way of denial” which means to create a better life, you take away. For instance, I have a friend who takes medicine far too much. Anytime she is remotely sick, she will go to the doctor and get LOTS of medicine, to include antibiotics. This is not healthy, not to mention antibiotics don’t help with the common cold (though they do add to a rising problem of antibacterial resistant superbugs). So not only is she not getting better, she is making the overall situation worse. Instead, she should let her immune system do it’s thing, and create the correct antibodies which will make her stronger in the long run: Antifragile.
What about luxuries? We live in this ridiculous consumer culture, but a lot of it isn’t anyone’s life better. What does seem to work is finding things that bring you purpose, or appreciating what we have, ancient religious texts express this aspect constantly.
Bed of Procrustes
This is an ancient story about an innkeeper named Procrustes who had a single bed. If a guest was too short for the bed, Procrustes would put them on a rack to stretch them out. If they were too tall for the bed he would cut the guests feet off. Everyone had to fit the size of the bed, no matter what their natural size.
We do this as humans a lot, we create an arbitrary system or rule and then we change the natural variation in humans to fit it. Sometimes it works, many times it does not. Nassim uses the education system as a great example. We design this educational system mostly arbitrarily (there is no reason in nature to say it should be designed as such) and it works for us on average, but it doesn’t allow much for human variation. Additionally, when people fit into the school system poorly we change them to fit it. For instance giving a child medicine (adderall, valium, xanax, Zoloft, Prozac, etc) to fit their natural behaviour so it fits an arbitrary system is a bed of Procrustes.
My favorite analogy he gives to describe this is in the gym. I’m a lifelong powerlifter, I rarely use machine equipment and prefer to stick to barbells and dumbells, so this example is something I’m quite bias towards, still it’s a good one. The gym machine is a perfect bed of procrustes as it makes the human fit the machine regardless of their physical uniqueness. Not everyone is the same size, obviously, but the bench press machine always works on the same range of motion. To top it off, what’s the point of weight machines anyway? Aesthetics? Strength? Certainly any machine in the gym is easier than putting weight on a squat rack and actually doing the difficult movement.
Protect your downside with super low risk investments first, and then invest in high risk high payoff endeavors on the other side. A good example would be treasury bonds on the low risk side and then crypto on the high risk side. The key here is to ensure your downside is protected then put excess into areas where you can capitalize on big upsides. This is called optionality and it’s different than the common strategy of trying to invest in a little bit of everything to reduce risk through diversification. Diversification isn’t a bad strategy but it prevents you from gaining massive upsides and it puts in you in harms way for big systemic risks (like the 2008 GFC). If you invest in low cost index funds, which are super popular right now, you’ll do good when the market does good and bad when the market does bad. You’ll never beat the market, and you may never get blown up this way, but you don’t have much optionality.
Besides loving deadlifts Nassim comes across as a strong contrarian. Probably why I enjoyed him so much as it’s a trait I’ve been trying to get better at for years. The first contrarian writer I fell in love with was Christopher Hitchens and I think Nassim is tied, though as grumpy as both writers come across Hitchens might be a tad more aggressive. Nassim’s ability to confidently reject widely agreed upon points of view is one I highly respect. He certainly does this with varying levels of elegance. Throughout his writings he calls out many famous nobel laureates, journalists, and economists for being frauds and idiots. I was a bit dismayed the first time I heard him call Paul Krugman an idiot, as this is quite the arrogant claim, but it doesn’t take long for Nassim’s points to start making real profound sense. He’s earned much praise from many of the people who he critiques in the books and I think this drives home my admiration for the guy even more.
Nassim also touches on this in the writing himself, knowing that he gets pushback for his non-conformist views. Speaking on something I have been trying to work through in my personal life: “How should I publicly express my unpopular opinions?” For many people they just don’t, as the social pain is too great, but that is no path forward for me personally. I know it takes pissing some people off to ensure that others will really connect with you. For instance in politics, the politician really needs 49% of the people to hate him, so the other 51% will love him. Nassim says it’s idea to piss 70% of people off so you can get massive admiration from the remaining 30%. I think this is my future goal
This review is a lousy sell I’m sure, but Nassim’s ideas are complex and hard to summarize. He mentions this often in fact. I wrote this not long review to sell anyone these idea, nor did I do it to create a “cliff notes” of sorts. I wrote it because this group of books pinged my brain in a way few other thinkers have and I felt compelled to get my thoughts about it on paper. I wrote this simply out of my excitement for the material and to hopefully get some other people to also find value in these complex and unorthodox ideas.