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Antifragility

Antifragility is fundamentally different from the concepts of resiliency (i.e. the ability to recover from failure) and robustness (that is, the ability to resist failure)

Antifragility is the property of all those natural and complex systems that have survived. Depriving them of volatility, randomness, and stressors will harm them.

  • Consider that being overprotective of a child effectively reduces volatility. This is harmful to them

Antifragility determines the boundary of what is living and organic (like the human body) and what is inert (like a stapler on your desk)

Antifragility is measured on a spectrum

An antifragile thing benefits from stressors only up until a degree

  • ex. Your body benefits from some degree of mishandling (e.g. exercising), but not too much.

The amount of debt a company has increases fragility

By focusing on something’s degree of fragility, we can determine what the impact would be if a shock were to occur. This is far more useful than trying to predict the shock itself

Anything that has more upside than downside from random events (or certain shocks) is antifragile

Everything that has life in it is to some extent anti-fragile, but not the reverse.

  • A human body can benefit from stressors, but only to a point. But a dish, a car, an inanimate object will not. Sure, this may be robust, but cannot be anti-fragile
  • Many things such as society, economic activities and markets, and cultural behaviour are man-made, but grow on their own to reach some kind of self organization. They are not biological, but they resemble the biological in such a way that they multiply and replicate (e.g. rumors, ideas, technologies, and businesses).

Systems where those in power have no skin in the game tend to fragilize society

  • ex. Consider that bankers, academics and bureaucrats have very little downside to their decisions.
  • It is a relatively recent phenomenon that non-risk takers are able to exert so much influence on society. Normally, those who had real power had also taken large risks to get to where they were.

Antifragility is the antidote to the black swan.

  • Fragile things are exposed to negative black swans, while antifragile things are exposed to positive black swans.

Fragility is measurable; risk is not (particularly risk associated with rare events).

Degree of fragility/Antifragility mean potential harm/gain from exposure to something related to volatility. That something can be...

  • uncertainty
  • Variability
  • Imperfect and incomplete knowledge
  • chance
  • Chaos
  • Volatility
  • Disorder
  • Entropy
  • Time - time is functionally similar to volatility: the more time, the more events, the more disorder
  • The unknown
  • Randomness
  • Turmoil
  • Stressor
  • Error
  • Dispersion of outcomes
  • Unknowledge

Antifragility of information

Consider that information is naturally antifragile. The more we try to burn books and silence thought, the more it comes back with a vengeance.

The banker, the cab driver and the artist

  • The banker is fragile. He dresses the same conservative way every day and is concerned about his reputation. The more info that gets out about him, the more harm is done to his reputation.
  • On the other hand, the cab driver doesn't have much in the way of status, so he doesn't really care as much about his reputation. He isn't fragile like the banker, but isn't antifragile either.
  • The artist is the most antifragile. He could go out on the street and punch his biggest rival in the mouth, and it wouldn't do much to harm his book sales. In fact, it will make him more infamous, thereby helping his booksales. He can dress in increasingly outlandish ways, and it still won't hurt his reputation.

The Antifragility of some comes necessarily at the expense of the fragility of others

  • In other words, it is a zero sum game

In a system, the sacrifices of some units, i.e. the fragile ones, are often necessary for the well-being of other units or the whole

  • For us to end up at an anti-fragile economy, we must have many fragile start ups. This is what enables entrepreneurship to work in the first place
  • The collective of restaurants is anti-fragile, but it is made up of fragile restaurants. Consider that if each restaurant was not fragile, the concept would never have evolved past a simple sandwich at a table. That business model failed because of the fragility of restaurants. That is, better ideas came around and replaced them for the betterment of the whole restaurant landscape.

Antifragile systems benefit from randomness (think Evolution and random mutations)

  • up to a limit. A meteor crashing into earth is beyond the limit of what nature can handle
  • consider The phenomenon of antibiotic resistance. The harder you try to harm bacteria, the stronger the survivors will be, unless you can manage to eradicate them completely. This is why you have to finish antibiotics when you are prescribed them

Biology works because of layers

The cell has a population of intracellular molecules. In turn, the organism has a population of cells, and the species has a population of organisms.

  • A strengthening mechanism for the cell comes at the expense of some intracellular molecules. Likewise, a strengthening mechanism of an organism comes at the expense of cells, and the strengthening mechanism of the species comes at the expense of individual organisms.

The economy is not anti-fragile in the way that is currently implemented. Consider that every plane crash makes flying overall more safe, because we are able to learn from it. Furthermore, the negative impact of a single plane crash is confined and not able to bring down the whole system (ie. all planes). On the other hand, the economy is linked in such a way that errors spread and compound

  • The economy is relatively fragile because of the presence of government bailouts. The whole concept of bailouts is transferring fragility from the collective to the unfit.

An adaptive system is one that changes its behavior based on information available at time of utilization (as opposed to having the behavior defined during system design). This characteristic is sometimes referred to as cognitive. While adaptive systems allow for robustness under a variety of scenarios (often unknown during system design), they are not necessarily antifragile. In other words, the difference between antifragile and adaptive is the difference between a system that is robust under volatile environments/conditions, and one that is robust in a previously unknown environment.

is similar to hormesis in biology or creative destruction in economics

  • Hormesis is defined by the dose-response relationship. Something at a high dose or concentration may be dangerous, but at a lower dose that same “something” can be beneficial.
  • ex. vaccinations

Robustness is enduring to stress with no harm nor gain. Resilience involves adapting to stress and staying the same.

There is some Antifragility built into variable careers like taxi drivers, prostitutes, carpenters, and dentists. They don’t get a consistent pay check every week, which puts them continuously under pressure to be fit to be able to absorb and pivot in the face of any kind of financial threat

  • this is why it is illogical to think of salaried employees as being the more conservative position to take. If they get laid off, they instantly go to $0 income and are normally unprepared to get another job right away
  • this it can be said that the salaried employee is more vulnerable to black swan events
  • Stressors are information. The salaried employee doesn’t get any stressors, and thus cannot continually adjust the same way someone in a more antifragile profession can. The person in the antifragile profession sees their income slowly change, rather than all at once, giving them ample time to respond to that information

Avoidance of mistakes leads to a fragile system. It makes the large ones more severe

The more variability you observe in a system, the less black swan-prone it is

Fragmented systems with little interdependence are antifragile because randomness is distributed rather than concentrated.

  • ex. there will never be a generalized restaurant crisis (unlike banks), since each unit is independent and competes with others.
  • ex. back when city-states dominated (e.g. Venice, Genoa), the threat of war was small-scale. Compare that to a massive country like U.S going to war (WWI + WWII), which has much larger impacts. City-states had regular, but small skirmishes. Empires have (sometimes) irregular, but massive wars.

Communism is fragile, because humans are naturally greedy, and when humans are greedy in a communist society, things collapse. Capitalism on the other hand is at the very least robust, and maybe even antifragile. That is, it more greed proof, since it uses a natural human tendency to be greedy to benefit the whole.

Time is the ultimate exposing mechanism of fragility. Consider that it is not impressive for a person to pick a single well-performing stock. It is more impressive that a person picks many well-performing stocks. But most impressive is when a person picks many well-performing stocks over a long period of time.

To make money off fragility you just need to identify fragile systems and bet on their collapse

Stoicism is Antifragility in its purest form: there is an upside-downside asymmetry

Fragility-robustness-Antifragility as a replacement for predictive methods

Rather than trying to predict the occurrence of an event, it’s more useful to understand how fragile a system is

  • ex. When Arab spring happened in 2011, Obama blamed It on bad intelligence. In fact, what happened was just the hair that broke the camels back. Such events are completely unpredictable. It is the system that lies underneath that is worth examining. The system was a fragile one, making it inevitable to have happened at some point.
  • anal: It would be useless when building a bridge to try and predict which truck would cause the bridge to fall down. That is missing the point entirely.
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