Friday, July 12, 2013

Antifragile

I've not done a book review in ages, believing that one should read a book in order to derive a personal experience that the book can only impart to he who reads it. Every reader will get something different. So, this is not a book review. This is my personal experience with this book by Nicholas Nassim Taleb, one of my favourite philosopher-finance writer. It's called Antifragile: Things that gain from disorder.


It's not the easiest book to read, but if you plough through it all, you'll recognise the kind of person that he is. I've read through all four books of his: Fooled by randomness, The Black swan and The Bed of Procrustes , and lastly Antifragile, with the last being his book of all books, his magnum opus, his unified string theory. The concept of antifragile springs from the fact that there is no suitable word for something that benefits from volatility. If you disturb something, there's only 3 ways that it can behave - it can stay more or less the same (robust), it can become worse (fragile) and it can benefit from it (antifragile). It ties in all the ideas from the other books and integrate it into this one. If Fooled by randomness is Star wars episode IV, Black swan is episode V (some say it's the best of the Star Wars episodes) and Bed of Procrustes is episode VI, then Antifragile is the Episode I. It's the book that brings you back to the beginning, so that you can see all the other episodes in its respective glory. Note: It does NOT have the suckiness of Episode I though, lol






A few key points that I take away from the book:

1. It's easy to tell whether something is antifragile, robust or fragile, but rather impossible to know when or even what kind of black swan event can stress it. As such, focus on the detection of the state of its antifragileness (or fragileness) rather than predicting the rare event or worse, the probability of it happening, that will rock it.

E.g. Antifragile is characterised by low downside risk, high upside rewards. If it looks like a sunny day and I'm about to leave the home in 10 minutes, do I hang my clothes out to dry till I come back? If it rains (black swan event), it's very bad. If it didn't, my clothes will benefit slightly only. So I don't hang it out, if not it'll fragilize the system.


2. For antifragile systems, the more volatility (read: shocks) it experiences, the more it will benefit, up to a certain point. Vice versa for fragile systems.

E.g. The human body is a great antifragile system (so are most things in nature). Small shocks to the system is ultimately good for the body. Short periods of fasting, short acute exercises, short acute stresses, short period of illness...all these will build the body up and it will benefit from these shocks, again, up to a certain point.


3. The antifragility of a system depends on the fragility of the components that make up the system. We need individuals to fail so that the whole system can benefit and become progressively more antifragile.

E.g. If individual shops don't fail, the next batch of shopkeepers won't learn from the mistakes, and the eventual failure will be worse and magnified beyond repair. We must learn not to intervene all the time, and trust in the antifragility of things to take care of itself. Small failures, if they are prevented from occurring, will lead to ultimately bigger failures.


4. If things had been around for a long time, you can bet that it'll be around in the future for a long time too. Only the antifragile survives the stress of time.

E.g. The author wrote that he only drinks beverage that had been around for many many years, like wine, coffee and water. No soft drinks, no aspartame diet drinks, no isotonic electrolytes drinks. Probably a good idea to look at the way you cook things. No microwave food for me, as far as I can help it. I'll rather eat it cold than have it blasted with electromagnetic waves.


There's a lot more, of course, but I leave it to the reader to find out. His books always sets me thinking. It should do to you too. Alvin from BFP blog did a book review on this. Probably writing it way more comprehensive than I can ever do. Do read his reviews.


You might be interested in what I've to say about the ideas postulated by Nichoals Nassim Taleb:

1. Black Swan book reflection
2. Black swan revisited
3. Fooled
4. Living life in an uncertain world


1 comments :

temperament said...

Hi BB,
i like this best; Because it is very practical but not easy to put into practice: But i always remember and try to put it into practice. It will temper or moderate our greed and blindside.

"Seek to remove rather than to add - For antifragility is the combination aggressiveness plus paranoia – clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself. We saw Seneca’s asymmetry: more upside than downside can come simply from the reduction of extreme downside rather than improving things in the middle.”
It is something like don't take extreme risk--"margin of safety"