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AntiFragility How to Live in a World We Don't Understand
CONFIDENTIAL (v. preliminary) DRAFT
PROLOGUE in THREE CHAPTERS
Chapter 1. How to Mishandle a Package
Please cut my head — How to beat up an economist (but not too hard)—Where the philosophers' stone was Jensen's inequality —Combining stupidity with wisdom rather than the opposite —Can a philosopher be called nouveau riche?
In Chapter 1, introduce the concept of antifragility —as well as fragility, of course and provide the table of what is antifragile, robust and fragile. In Chapter 2, I discuss the magic property called Jensen's inequality which makes antifragile systems gain from disorder. In Chapter 3, I link antifragility with knowledge (or error) showing why it compensates, even transcends errors, and discuss the book's main purpose: how to live in a world we don't understand.
WHAT'S THE OPPOSITE OF FRAGILE?
Just as a package sent by mail can bear a stamp "fragile", "breakable" or "handle with care", consider the exact opposite: a package that has stamped on it "please mishandle" or "please handle carelessly". The contents of such package are not just unbreakable, but benefit from shocks. Let us coin the appellation "antifragile" for such a package; a neologisms is necessary for there is no simple, noncompound word in the Oxford English Dictionary that expresses the point of reverse fragility. For the idea of antifragility is not part of our consciousness —but, luckily, it is part of our ancestral behavior, and an ubiquitous property of every system that has survived. To see how alien the concept to our minds, ask around what's the antonym of fragile (and specify insistently that you mean the exact reverse). The likely answer will be: robust, unbreakable, solid, well-built, resilient, strong, something-proof (say waterproof, windproof, rustproof), etc — unless they've read this book. Wrong — and it is not just individuals, but branches of knowledge that are confused by it; this is a mistake made in every dictionary of synonyms and antonyms I've foundi. This error stems from a mental distortion, of the same category of the mistakes we make without any self-awareness of the reasoning process involved in them; ask the same person the opposite of cold, they will answer hot, not room temperature; the opposite of pain is
12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
Goods made in more ancient ways. Semitic (Arabic. This blind spot seems universal. Polish. But it only benefits up to some limit: it is not globally antifragile. Good wine improves with age. incassable (unbreakable) and. antifragilita. The difference between my robust. Alas. and even largely antifragile artisanal shoes hints at the central disease we are facing. or antifragile. such as books printed several hundred years ago. 12/22/10 © Copyright 2010 by N. in French. robuste are held by the learned classes and dictionaries to be the exact opposite of cassable (breakable) and fragile. on the occasion. usually robust. For instance. and Germanic (German. Hebrew. antifragile. rather than peace. Croatian). saddles for your horse or camel. This draft version cannot be disseminated or quoted. they do. The expression designating antifragility is absent from the vocabulary of the following lingusistic families: Romance (Italian. Breaking the bottle with a hammer would not help the drinking experience neither. I am not just talking about the Acropolis in Athens or the temple of Bacchus in Eastern Lebanon. therefore the opposite of unstable is not stable or sturdy. Clearly. upon severing one of its heads two spring back in return. classical furniture. likewise the opposite of brittle is not solid —but antibrittle. in Greek mythology. it benefits from the disorder. Spanish. just locally so. mostly in days preceding the abnormality known as the MBA security analyst. minted on the spot. so long as you do not spent too much time wading in sulfuric acid. sometimes. tended to be not fragile. the serpent of the underworld. Aryan (Hindi. Let's get closer to fragility. not neutral which would jut convey robustness. not neutral. the chemical disturbances caused by time (for a physicist. albeit in subtle forms. Urdu. in France.What's the Opposite of Fragile? 3 generally considered pleasure. not absence of pain. this good bottle of 1995 Bordeaux wine not too far away from my desk. Taleb. Portuguese). strength and unbreakability. I spot a gift I just received. time is increase in disorder. and I know of very few popular expressions other than persons who "make lemonade when life gives them a lemon". that the makers boast can last decades. Serbian. and ask for the opposite of destruction. Age Like Wine Just look around you to see how ubiquitous this antifragility. under the right conditions. equipped with a collection of heads. up to a point. Greek). N. they promptly said was infragibile. (unbreakable) so they convincingly accepted my new word. to thrive. These shoes do indeed benefits from use. I quizzed a scholarly audience at the beginning of one my lectures in Genoa. Like most things artisanal. French. Aramaic). country house near Pompeii. Africaans). linked to a wonderful concept called entropy that we will use to connect many dots). Dutch. they will answer construction. classical (Latin. Let me look around me some more: I am wearing this leather shoe made in the town of Limoges. Farsi). So obviously Hydra needs some hostility. Anything nonconsumable. Putting the bottle inside the crater of a volcano would not improve its quality too much. Turkic (Turkish). there is no name for such a property of vulnerability in reverse. . Another way to view it: since the opposite of positive is negative. but something that gains from unstability. the fragility of the modern version of stock-market capitalism —hence my allergy for almost everything heavily industrialized. these items have the identity of the maker invested in them which confers a certain measure of robustnessii. formerly known as The Most Serene Republic of Genoa: the opposite of fragile (or fragibile). In Italian. respectively —the very same persons who think that positif is opposite of negatif. Hydra Think of Hydra. Incidentally. the opposite of positive fragility should be negative fragility (hence my appellation antifragility). Slavic (Russian.
This is not really bad news —for those aware of it. These Black Swan events can be either beneficial or harmful —but human-designed top-down systems tend to be exposed to harm from Black Swans. of course (baring those extreme shocks that lead to extinction). makes us blind to antifragility. then the best will reproduce. and. If he environment is perfectly stable. stochatophilia — creates risk. firms. the more the effect of the survival of the fittest will play a role in defining the properties. N. systems. Thank You. and disorder —while individual organisms are relatively fragile. furthermore. uncertainty. It works precisely because it is antifragile.Evolution 4 EVOLUTION Beyond my shoes and the mundane. my antinerd character whom we will meet in Chapter 1. up to a point. while we worry about fine-tuning models made for the ordinary that cannot possible track them or measure their impact. in The Black Swan. the gene pool takes advantage of shocks to enhance its fitness. consider the phenomenon of antibiotic resistance. families of organisms like harm. They love disorder. Taleb. But except for a few comments here and there in the economics literature—such as the one informally described as "creative destruction" and such some notions on innovations and similar ideas —the idea of antifragility is absent from existing theories in social science. Likewise. etc. if there is variability among the offspring. ironically. but there is a bias against it —the foundation of modern economic sciences lie in creating fragility. So the reason we are here is precisely because most of what has survived has this antifragile property (the rest did not make it). But more interestingly. aversion to uncertainty —rather than loving it. all ten will possibly reproduce. the stronger the survivors will be —unless you can manage to eradicate them completely. They love doing. individuals. made the bold claim that most of history comes from these events. but because of them. The harder you try to harm bacteria. The same love of disorder applies to economic entities. almost all human theories (and I have a long list) that have emerged since the enlightenment fragilize. not thinking. They don't care about being right or wrong. The same with cancer therapy: quite often cancer cells that manage to survive the toxicity of chemotherapy and radiation reproduce faster and take over. It explains why humankind has managed to get here not just in spite of mistakes. of the next generation. BLACK SWANS I have named Black Swans events (capitalized) these large-scale unpredictable and irregular events of massive consequence. it loves randomness. making the gene undergo some improvement. But if there is instability. owing to both its importance and our lack of awareness of it: thinking fragilizes and. you are vulnerable to illusions of certainties. though not the organisms themselves. This draft version cannot be disseminated or quoted. like innovation and the theories of financial derivatives (which we will see discuss the notion options that can gain large but lose small) with no connection of the dots. increasing the fitness of the species. By refusing to accept randomness. Such blindness is called "suckerdom" by Fat Tony. You can even see ideas formulated in different branches. killing five (likely to be on average weaker than their surviving siblings). There is a Black Swan domain (also called the Fourth Quadrant) where these events tend play a monstrous role. Hydra-style. . they both bring this blindness to antifragility. then those evolution considers the better ones will reproduce. Not only that. Errors Why? Because. up to a point. looking bad in front of colleagues. there reigns a type of 12/22/10 © Copyright 2010 by N. The more noise and disturbances in the system. almost never any benefit. For an illustration of how. consider the larger notion of evolution. They love absence of knowledge. Let me restate the motto. Antifragile systems have the perfect antiacademic attribute: they love mistakes. Say an organism produces ten offspring.
a crisis. Tantalus. This is true —Black Swans will be out there to get you. You need Black Swan-loving units. . THE TRIAD I stop. and many more. This draft version cannot be disseminated or quoted. a dozen of articles in scientific journals (by this author). well. this feeling of insecurity —someone out there will be wishing for you to be toppled. it does not have to be so. we don't need to spend time predicting Black Swans with complicated models coming from chaos-complexity-catastrophe-fractal theory. so. sophistication brings fragility to Black Swans (as has been brilliantly adumbrated by the archeologist Charles Tainter). was punished by the Gods who made him attend a banquet. no matter how sophisticated science ever got. There is. Hume. a) Fragile -can mostly suffer from shocks. in other words for the system to regenerate itself continuously by using Black Swans. and that is clear. no matter how many PhDs with Russian and Indian names you put on it —or perhaps these contribute to make them even more unpredictable. b) Robust: in the sense of not fragile. What I did was not so much assert this impossibility to ever know anything about these matters —this was a problem raised throughout history by a long tradition of philosophers. It was to produce a mechanism for decisionmaking that would not suffer from these errors. there are three different layers: 1 This probabilistic limit has been shown several ways. then companies that grow are doomed since. In the long run everything fragile breaks given the ruthlessness of time —yet our planet has been around for three billion years and. in this zone (the Fourth Quadrant) this limit to knowledge that could never been reached. But it took about several million copies. the solution is of course to build a world that is robust to them. the more confident these "scientists" were about it1. I used the word "robust". "robust" might not be enough. disorder. When it comes to Black Swans. Further. Charles Tapiero and I later formalized the idea concerning company size: we figured out that if success generates size. ( The original Greek mythology was more ominous. robustness can't just be it: you need perfect robustness for a crack not to show up and crash the system. 12/22/10 © Copyright 2010 by N. the titan. and a great dose of it. convincingly. and hung a rock to a string above his head. can resist shocks. the less tractable and the less we know about how frequent its occurrence —yet the rarer the event. Algazel. and to model error. six smear campaigns. But. something mother nature has done admirably. including Sextus Empiricus. What is nonmeasurable and nonpredictable will remain nonpredictable.The Triad 5 intractable randomness. tied to the ceiling with a single hair from a horse's tail. the Sicilian tyrant Dionysius II has the fawning courtier Damocles enjoy the luxury of a fancy banquet. Between Hydra and Damocles In a Roman evolution of a Greek myth. several hundred more (by others). who immolated his own son Pelops and gave him as food to the godsiii. You need offsetting antifragility. N. etc. The problem is that the rarer the event. for now. Taleb. Then I realized that. unbreakable (or hard to break). but with a sword hanging over his head. The answer is simpler: given that we know what is fragile to them. several thousand pieces of hate mail by economists. empirically in my Fourth Quadrant paper (2008) —not a proof but an empirical argument — and philosophically-mathematically with the then-doctoral student in philosophy of science Avital Pilpel (2002) and the mathematician Raphael Douady (2010). effectively size brings disproportional fragility to Black Swans. ) The sword of Damocles was meant to illustrate the side-effect of power and success: you cannot get it without this continuous danger. mother nature was not just "safe". and a revamped second edition of The Black Swan for the message to go through without distortion —no.
This makes the analysis much simpler: as it makes it easier to identify the fragile and put it in the left column.e. Antifragile is desirable. some (not all) shocks. Taleb. Table 1. what is called a local. such as. extremely so. So antifragility here is associated with a specific source of disorder —and with a specific intensity. gains from shocks. conveying the central idea of this book presents the triplet of attributes. but it is not necessarily so. but are likely to suffer from a nuclear attack. Yevgenia Krasnova Ancient Mediterranean Convex Tacit with convexity SuckerNonsucker Flâneur with a large private library F** you money Degeneracy (functional redundancy) Aggressive Tinkering (convex bricolage) Loves mistakes Ways of Thinking Mathematics Knowledge Epistemology Life and Thinking Financial dependence Biological & Economic Systems Science/Technology Modernity Concave Explicit True-False Tourist Personal and intellectual Corporate employment Efficiency Directed Research Hates Medieval Europe Linear Tacit Niche worker. Further. generosity being the middle between profligacy and stinginess—it can be. mostly benefits from uncertainty and disorder. A very small dose of arsenic might benefit me. Rock of Tantalus Dr John ROBUST Phoenix ANTIFRAGILE Hydra MythologyYork New Nero Tulip Fat Tony. not all shocks. This draft version cannot be disseminated or quoted. but with a warning. The robust here in the middle column is not equivalent to Aristotle's "golden middle". then manage to fix itself. not global property. What matters is the route taken. one can die from being immortal. N. and break early. say. it is hard to consider fragility undesirable — as Nietzsche wrote. The items in the package on which we wrote "please mishandle". as an item will not be antifragile for every possible type of disorder. would certainly benefit from being brutalized by humans. a large one would prevent me from finishing this book. in general.. Robustness is not always good —you may want some things to break. not just the destination. but only for specific exposures. . A qualifier is in order. but not always as there are cases in which antifragility will be costly. the exact opposite of fragile.The Triad 6 c) Antifragile: I repeat. I said some. minimum wage earner Redundancy Opportunistic research Mistakes are Errors 2 There is this ratchet-like property of fragility (i. irreversibility from breaks) that is at the core of the nonlinearity: a package doesn't break. 12/22/10 © Copyright 2010 by N. Table 1 The Triad2 FRAGILE Mythology -Greek Sword of Damocles.
Wittgenstein. Mithridatism City-State. . Truck driver.) Skeptical. train conductor Minimum wage persons Erudition The Magnificent Convex heuristics Nobody comes to mind explicitly. old money Subtractive treatment (remove items from Reputation (class) Medicine Additive treatment (give medication) The book will navigate the triad in Table 1. pathemata mathemata Recovery ANTIFRAGILE FRAGILE ROBUST ANTIFRAGILE consumption.The Triad 7 FRAGILE mistakes Learning Classroom ROBUST just information Real life. etc. This draft version cannot be disseminated or quoted. aristocracy. say carbs. Hayek. Politician Middle Class Business Bohemian. Bishop. sarcopenia Nation-State. N. "aging". Popper. Of course the reader will gain some help with insights from the characters Nero Tulip. Aristotle. and Yevgenia Krasnova. Averroes Economic Life Finance Knowledge Decision Making Owner operated Short Option Positive Science Acts of commission Negative Science Art Acts of omission ("missed opportunity") Book Small Business Equity Private debt with no bailout Small but specialized Hedge (some) Funds Oral Tradition Artisan Restaurants Venture Capital Small but not specialized Barbell Hedge Funds (some) Principal Operated The strong Heuristic-based decision making Menodotus. straddling a variety of disciplines and human activities. Pope. Taleb. Hedge funds managed by economists. Centralized Postagricultural Modern Settlements Academia The weak Model-based probabilistic decision making Plato. perhaps Hegel's sublation Religion Artist. Fat Tony. Hormesis. But let me give one entertaining application for now. Decentralized Nomadic and huntergatherer tribes Philosophy/Science Rationalism Separable Empiricism Human Body Political Systems Knowledge Ethics (Aristotelian) Decision Making Mollification. Writer Literature Business Food Finance Finance General General Finance E-Reader Industry Food Companies Debt Public Debt Large Monomodal Banks. Agency Problem Thinkers Economic Life Reputation (profession) Economists Academic. 12/22/10 © Copyright 2010 by N. Corporate executive. atrophy. Nietzsche. John Gray Anthropologists Postal employee. subtractive empiricism Holistic Long Option Real life and library Hypertrophy.
So I will show —what the Greeks knew but collected in observations here and here from Xenophon to Aristotle without any repository for this central ethical claim —that the middle class can be corrupt.well. My downside is greater than my upside. They get pretty angry when I call it prostitution (though prostitutes are relatively the most robust persons in this planet and free in their opinion as they face no reputational downside). particularly when he is secure in his social status. enhanced his ideas because they were antifragile —information often is. partly for a convention in which the other main speaker was the economist xx. No scandal. to the opposite. bias to think that systems do not improve on their own. yet corrupt to the core — because of his dependence on the annual vacation in the Barbados. What would happen to me after my immediate termination? My termination and 3 arrest record would plague me forever.. This plagues academia. say a construction worker or a taxi driver. In the U. seemingly innate. In fact he would be completely prisoner of the value-system.K. it is not free with its opinions (and its time). This draft version cannot be disseminated or quoted. cause fragility. without our intervention or guidance —coupled with the Aristotelian notion that we ourselves know where things should be going. for instance I met so many economists who agree that their publication system is wrong. like many propagated by the economics establishment. that is ethically fragile or nonrobust. someone from an aristocratic background is generally less of a prisoner. Taleb. what would happen to me (other than an ethnological experience in a Milanese jail and a publicized trial causing great interest in antifragilita). It would be even better if I were put to death by the members of the economics establishment. not a single one (outside of disputes of authenticity) hurts an artist or writer3. Socrates. I was there partly for the Moscato desert wines. So I presented Luca with the following thought experiment: if I beat up the economist publicly. Each person understands the point in his own profession or domain. Nothing I can do as an author that makes it to the front page of Il Corriere della Sera would hurt my book. but also the defects leading to its absence from human vocabulary: we humans have a natural. it would be great for book sales. which is why it pays to multiply examples around the central idea. I hold that xx models (and ideas). 12/22/10 © Copyright 2010 by N. does not overly depend on his reputation and is free to have his own opinions. Someone earning close to minimum wage. and France. the writer Jean Genet. I was in Milan trying to explain antifragility to Luca Fromenton. Further. what I call the teleological fallacy. by proudly seeking death. their methods nonsensical. N. my Italian publisher. A midlevel bank employee with a mortgage who would be fragile to the extreme. Things have gotten much worse since then. Now let's say I were a middle executive employee of some corporation listed on the London Stock Exchange. but they need to publish within the system because of the requirements for their careers (and corner office). such spontaneous action would give my thinking the stamp of heroic authenticity.. But he would be just robust compared to the artist who is antifragile. forcing me to play by certain rules. You can therefore see that the topic of this book is not just antifragility. He thought for a second . The French have a long series of authors who owe part of their status to their criminal record —which includes the poet Ronsard.The Denigration of the Natural 8 A Word on Ethics We can illustrate both reputational fragility and ethics of the middle class with an example that is stretched to extreme —and linking both seemingly independent concepts. given that they build systems vulnerable to Black Swans. . THE DENIGRATION OF THE NATURAL The absence of such word and concept from main human vocabularies is quite alarming. They are trapped. And the physical workout regimen I follow (based on the ideas of antifragility discussed in Chapter x) would be also validated.
or change things so we felt justified to leave things to their own devices. the need for visible (and understandable) "reasons": we have a tendency to believe that we comprehend the logic of things just a bit more than warranted from our empirical record —and our epistemic arrogance. improve. these gamblers superstitions are benign. plain luck. Why is the scientific illusion of control worse than that of the pedestrian version? Because. like epistemology. from the antifragility of systems in love with randomness. socio-economic life. I will hope to convince you. grains. but a doctor tinkering with your system or an army playing with a complex system with opaque causal links. have caused massive instability. that difference between what we know and what we think we know is particularly large in what is called a complex domain. etc). until recent history. bosses. to kill more patients than it saved (and did not even get close to realizing it). fraught with massive nonlinearities. and finance ministers. medications. Now the irony is that while this bias was devised to expose patently nonscientific fields. . heroin. it largely affects many things you learn in college. 12/22/10 © Copyright 2010 by N. matters in which we have historically combined a degree of low competence with a high rate of intervention. nicotine. cars. This draft version cannot be disseminated or quoted. In the past we used to think that fate or the gods intervened to repair. not additive: you can cure so many diseases by removing elements from peoples' lives (say nonnatural foods. Taleb. or. that of rationalism. This. or throw it softly in order to get a low one. is far worse than nothing. dramatic fragility. such as throw the die with violence when they need a high number. Accordingly. computers. that so-lauded enlightenment. Many matters we deem scientific are just the emanation of that very illusion of control masquerading as science. antifragility (as the source of many things in life). New Jersey. spouses. tout simplement.The Denigration of the Natural 9 There is a mental defect psychologists call illusion of control that was meant to show how "irrational" (according to some norm of behavior) we humans can be by giving ourselves the illusion to manage the uncontrollable around us: for instance gamblers cannot resist the pressure to do something to improve the outcome. second. technologies). letting things run their own course. the theme of this book is first. and economists of the sophisticated equation-carrying variety. that we humans are badly needed. Aside from the illusion of control. Indeed we will catalogue the effects of rationalism in both social science and economic theory and pre-modern medicine— and this book will show evidence that much of what we are told was derived from rational top-down university driven or taxpayer funded discoveries were the result of either unrelated trial and error. rather. particularly in social science. and the human body. have been particularly harmful to the economic health of societies —central bankers . Since the enlightenment. similarly. leaving nature or the human body alone) as compared to doing something (such as operating on a patient or prescribing medication). But a switch took place close to two centuries ago. not much worse than doing nothing. and many such actions often put under the umbrella magical thinking. healing and therapy are largely subtractive. alternative medicine. and. In other words. or. For this illusion of control leads to the denigration of acts of omission (not doing something. what's worse. by tinkering with economic life. Traders wear the same "lucky" shirt (often unwashed) to improve their day This mental bias leads to all manner of patently "irrational" actions such as belief in paranormal. we have been prone to the bias of thinking we were needed to intervene. carbohydrates. we will see is the reason medicine used. which I do not use to imply "rationality" but. the denial of antifragility. not just by adding (medication. Three fields have been particularly infected with the destructive aspect of such university-imported rationalism: nature. N. finally. It has taken medicine 2500 years to realize that. how our top-down rationalism and intellectualization cause fragility. say by invading Iraq or intervening in the environment. there is another associated disease. while thinking it can "improve matters" and which areas are infected. rude secretaries.
But. white. and don't have a name for fragility.. it does not mean that our actions neglect it. Second. without being color blind. And a Certain Respect for the Natural 10 . squares. subsequently from people who claimed that he said nothing new.. nor does lightning travel in a straight line”. often subsumed as red. also had a reduced vocabulary of a small number of colors polarized around the dark and the light —Homer and his contemporaries were limited to about three colors in their expression: black. sadly. AND A CERTAIN RESPECT FOR THE NATURAL If our formal systems denigrate the natural. of course. Mandelbrot subsequently suffered quite a bit —initially from deniers. people were shown to be able to identify the nuances —unless physically color blind. before he connected the dots. he has written. but they do not express these in their vocabularies. consider the following remark by the great mathematician Benoit Mandelbrot who developed fractal geometry: “Clouds are not spheres. and circles seem to exist in our textbooks more than they do in reality—and before Mandelbrot we hadn’t noticed that. in Through the Language Glass. use only two or three colors in their communications. But they can match strings to their corresponding color. attributed our modern sensitization to the different nuances of color to a cross-generational training of the eye. it appears here and there when people resort to mathematical language. of which I will make a big deal in this book. so they can detect the differences between the various nuances of the rainbow. Ancient Mediterranean text. Next. Gladstone. mountains are not cones. . Greek and Semitic. Triangles. a property of academics to be unable to connect the dots. For. the linguist Guy Deutscher reports that many primitive populations. an erudite. The problem. Now the exact same intellectual blindness affects the property of antifragility. typically from the mathematician envious of his success. and bark is not smooth.. Do you realize that we spent 2000 years with the truth staring at us without realizing it?iv. This draft version cannot be disseminated or quoted. Taleb. nevertheless. who was first to make this discovery (and was reviled for it). contradicting more than 2000 years of misconceptions. I saw two applications of the problem. 12/22/10 © Copyright 2010 by N. some mathematicians and scientist pointed out here and there some of the properties of these "roughness" though nobody put them together as a general view of nature —it is. The British prime minister. and some indeterminate part of the rainbow.. but especially a human defense mechanism against thinking we were that stupid to miss on the point.. First. N. regardless of the presence of these variations of color in the culture of the time. but is not part of the expressed consciousness. is that few realized that they had not noticed it before him. let us turn to the closest thing I know to the philosopher's stone.
not the "très honorable" that was necessary to get a real academic position. in that very same doctoral thesis. V. The more formal discovery took place as follows. J. L. one Johann Ludwig Jensen. defended a doctoral thesis in mathematics at the University of Paris. along with an additional black ball when. The paper by the Dane was published the following year in French in the Swedish mathematical journal Acta Mathematica with the eloquent title "sur les fonctions convexes et les inégalités entre les valeurs moyennes" —and went unnoticed for a long time. but its first modern use (and application) was by a man who got quite a bit mishandling by history. was generalizing an earlier. Bachelier never managed to have a decent academic career as he was plagued with the stigma. Acta Mathematica 30 12/22/10 © Copyright 2010 by N. very simple property? The property had been heuristically known by practitioners for a long time. as. Neither he nor the audience realized how fundamental this result was for about everything —no more than the audience in the thesis committee of Monsieur Bachelier. a student at the Sorbonne who worked as a stockbroker in order to support himself. Jensen's Inequality. Many people later rediscovered his results in the pricing of derivatives. whom we will meet —again— in Chapter x): there are many cases in which average doesn't matter in the long run. Louis Bachelier. behind the reason things survive and flourish —and manage to survive and flourish against that inexorable debunker of fragility. N. a very long time. but not by the formal bodies of knowledge. as we will see. It is called Jensen's inequality. "Sur les fonctions convexes et les inégalités entre les valeurs moyennes". let's forget about options for now. Note that he was an option trader (who disliked his career) — and this book. time that smartest of all. (1906).11 Chapter 2. On March 29. said the following (translated into the New Jersey version of English of Fat Tony. these asymmetric contracts that give the right but not the obligation to buy a stock at a specified price. Louis Bachelier discovered properties of random processes that were rediscovered (and publicized) by Einstein five years later. 105 years later I can hardly find people who can assess its consequences. five years later. which has almost nothing to do with finance. Merton and Sholes had just put their name on someone else's equation. It was said to lack in rigor but there was also this unattractiveness of the financial topic for the committee. knew the import of that poor man's work. or The Intelligence of Time Grandmothers— How mathematicians can become bright — Scholes received the Bank of Sweden Prize in Economic Sciences (called the "Nobel" in economics) as the Swedish academy had the illusion that they discovered his equation —ignoring the hordes of predecessors who had more realistic equations. then known as the Sorbonne. including Bachelier. will be driven by similar intuitions by yours truly. . time. in other cases the average overestimates it. In addition. The idea was about how to value financial options. W. Taleb. Now that I got the Bachelier story off my chest. he was about to get his first real position of professor. 1900. and Bachelier received the grade euphemistically called "honorable". in fact. by one Jensen. a former option trader (who disliked his career). Now the secret of life.4 For in some instances the average underestimates the effect. The thesis was poorly received by the head of the committee. Jensen. in his fifties. and two people Robert Merton and Myron 4 Jensen. On 17 January 1905. almost a century old result by the French mathematician Augustin-Louis Cauchy. There is a hidden —and very simple mathematical property behind things. And what is this simple. This draft version cannot be disseminated or quoted.
will start looking like someone who will be more motivated in removing his shirt at the beach. I have used this argument to try to make central banks avoid printing money: you print and print with no effect. then at one hundred and forty degrees for another hour (around 60º C). the long run benefits or harm do not depend on the average but on the dispersion around such average. antifragility is the reverse. Your Grandmother at 70 Degrees First example. At that time. . Take two individuals. for a total of 1000 pounds. who go to the same gym. This draft version cannot be disseminated or quoted. much slower than if you had 100. you would most certainly end up with no grandmother. It is easy to see that the dispersion in possible thermal outcomes here matters much more than the average. When I take the day flight from New York to London. Traffic Traffic highly nonlinear. for all the boredom encountered counting to 1000. Then. for an average of the very desirable seventy degrees (21º C). for a total of 1000 times —making a total of 1000 pounds which we compute by multiplying the weight by the number of times lifted. We will see how so many economic results are completely cancelled. while person B. of. just chatting with the otherwise bored gym employees. More generally. an inheritance. Three Hours at the Gym Second example. over time. So the average here is of no significance when one is fragile to variations. In other words. for some systems. from the floor until he holds over his head for a few seconds close to 200 pounds of weights. N. then a jump in inflation. Let's consider two examples. which we will define. I know). When I leave my place for the later flight at 6 AM. much more than the average (in proportion to such linearity). but almost always lost whenever someone does too much mathematics (or perhaps people inclined to do mathematics have some mental blindness to these things): you do not cross a river that is on average four feet deep. then 110. for anything nonlinear. 5 12/22/10 © Copyright 2010 by N. possibly. Look at Jensens' inequality at work: the average number of cars does not matter at all. b) Person B spends three hours less five minutes lifting no weights at all. the fragile case.000 cars for another hour. and I leave my place around 5 AM (yes. say. a) Person A spends over three hours lifting up and down over his head a very small weight. persons A and B. You can add more and more cars on the highway. And my very definition of fragility here in this book is when the system does not like variability. he then puts it down on the floor. a situation that benefits from variation. New York is empty.12 Jensen's result describes the following. So both persons have lifted the exactly same total. Let me add a couple of additional applications. then goes home to drink tea with his brothers. a funeral and. variation can matter more. If you have 90. traffic would be much. Person A gets almost no benefit at all.000 cars for one hour. 1 pound. with no or minimal impact concerning time spent in traffic. you increase the number of cars by 10% and the travel time jumps up by 50% (I am using approximate numbers). it takes me around 26 minutes to reach the British Air terminal at JFK airport. mystery. there is almost no difference in travel time. then does an Olympic lift. If you put your grandmother at zero degrees Fahrenheit for an hour (around -18 Celsius).000 cars for two hours5. and the exactly same average over three hours. well understood by regular people. Taleb. Over the long run. He repeats the exercise five times.
not before. if Jensen's inequality works against you. from the days when luggage did not have wheels. and the opposite. cut the limbs of those who were tall. and stretched those who were short. Options benefit from Jensen's inequality. using it —from Darwin-Wallace theories of evolution to the very idea of epistemology. Anything nonlinear has local convexity or concavity. via of course risk management and modern economics6. How to be Stupid Now how does Jensen's inequality work? The details (and technical matters) will be relegated to Chapter x. N. then Jensen's inequality will benefit you in the long run. not to their total number. Jensen's inequality translates into. . for the same average. For you don't have to be right that often. but not everywhere. you don't have a need for much of what is commonly called intelligence. none. we can already see biases emerging. The hair holding the sword of Damocles will eventually break. in time. Procrustes was a brigand who in order to make the travelers fit in his bed. consider the following. There is no other principle. 12/22/10 © Copyright 2010 by N. This draft version cannot be disseminated or quoted. The class was on financial options. no matter how intelligent you are and how many PhDs from Harvard are on your staff—for there may be a small thing that will escape you and hurt you very badly. insights. and immediately realized that the professor did not understand it himself —he understood it in spots. It is a Procrustean bed —and these are often committed by economic modelers since a model by its very nature is a simplification. Why Planes Don't Arrive Early To see how Jensen's inequality works with estimation and model error. and we can re-express not most. evolution. I learned about Jensen's inequality in class at Wharton. And there are conditions under which the variability destroys things —like the grandmother. skills. I will relegate ample details to Chapter x. and these complicated things that take place in the brain cells. in one instance. Otherwise. I've used the Procrustean bed analogy to describe situations where the simplification is not a simplification. but. 6 This is a technical note for those who need it now. If you gain more than you lose. It hides where we don't want it to hide. the one who had more extremes. more two days to get home.Procrustean Beds and Jensen's Inequality 13 So travel time is fragile to the volatility of the number of cars on the highway. Taleb. But there have been instances in which I got there more than 2 hours late. PROCRUSTEAN BEDS AND JENSEN'S INEQUALITY Another way to deal with the notion of average is to look at it as a Procrustean bed. and stability. but all ideas on growth. All you need is wisdom to not do foolish things to hurt yourself (some acts of omission) and know if an outcome if fine (after its occurrence). but this inequality implies the following: that there are some conditions in which variability benefit. and development. knowledge. the average is the expectation of a random variable. and. I recall many instances in which I arrived early. the average of a convex function of a variable x is higher than the function of the average of a variable x. but you are doomed. But he had the bed fitting the visitor with total perfection. then you are convex. Accordingly. You just don't want the simplification to distort the situation to the point of being harmful. in the lecture on financial options that determined my career. no more. Given that in probabilistic terms. with certainty. about twenty minutes. sorry. I've taken the very same ParisNew York flight most of my life. The average temperature of 70º Fahrenheit does not simplify the situation for your grandmother. The flight is about 8 hours. take for now the following complete principle: If you gain more when you are right than you are hurt when you are equally wrong. otherwise concave.
12/22/10 © Copyright 2010 by N. So "for simplification". There is a difference between a manager running a company that is not his and the owner-operated business in which the manager does not need to report numbers to anyone but himself. the average is meaningless illustrate the type of errors stemming from a reduction: in situations of fragility. and become blind to these small nuances. Visibly Path 1 is more profitable to the managers who can cash in their stock options. the nerds. Taleb. . So the more jagged the route. Some Errors Go One Way These examples showing that under nonlinearities. and the information gotten from it may be irrelevant. And remarkably. those we deem intelligent. with managers having incentives without disincentives —which the general public doesn't quite get. then make it to. N. in which the market does the same thing on average but following different paths. And a model. At the time of writing the stock market is lower between 25% and 50% over the last decade. and increase by hours. since the very definition of intelligence we use is grounded on their ability to focus. is precisely what does simplifications. a mathematical model. in other words. as they tend to succeed in classes (particularly mathematics) and do well on SAT-style exams. It overestimates the benefits (underestimates the dangers) in the event of fragility. hence contract and simplify. We will see why modeling is doomed in many cases whenever you hear "optimal" owing to such sensitivity to error. They have the opposite of "don't cross the river if it is on average four feet deep": volatility benefits them since they only get one side of the payoffs. Yet this estimation —and use— of the average is what economists do for a living. Or to just decrease by minutes. are richer in the aggregate. Anything unexpected is likely to increase flying time. typically causing Procrustean bed-style the underestimation of randomness and fragilizes (or ignores antifragility). telling your grandmother that she can expect "70 degrees" will certainly kill her. Path 1: market goes up 50% then goes back down to erase all gains. so retirees are poorer in the aggregate (particularly that they were expecting the exact opposite outcome) while managers of the companies composing the stock market. I said that the average does not matter in some situations. This comes from the same effect of Jensen's inequality. with their managers being paid trillions in compensation. a simplification goes in one direction. This also explains the irreversibility of time. This draft version cannot be disseminated or quoted. Let me repeat. Simply whenever you are estimating something that depends on a nonlinear variable. Now let me use the sense of outrage of the reader to give a sense of how Jensen's inequality works: these managers get much more upside than downside. the more value to this asymmetry. not decrease. as I said earlier. are even more vulnerable to this mental distortion. the average does not matter. it overestimates it in the case of antifragility. the better it is for them. Consider two scenarios. Path 2: markets does not move. goes the adage. thanks to the asymmetry of the stock option. Even more outrageous is the fate of the banking industry: banks have lost more than they ever made in their histories. say. in a way. Do not cross a river if it is six feet deep. MIT. Social Fairness The same phenomena explains very vicious incentives by the pseudocapitalistic system we currently have in place. if you consider the passage of time as an increase in disorder.Procrustean Beds and Jensen's Inequality 14 So uncertainty causes flying time to increase. deal with the average instead of a richer set. They too benefit from variations —the more variations. And the core of things —of life— can reside in these nuances.
It is the center of both this entire idea of antifragility and its denigration. was characteristically poor. Retirees get less upside than downside. and that he chose to philosophize out of love and respect for the occupation. realizing large sums of money. enjoyed what he was doing. and others philosophize". as we said. And the remarkable aspect of this story is that Aristotle. arguably the most influential thinker of all times. Miletus was a trading post and had a mercantile spirit. perhaps not enough to become massively wealthy. and like some philosophers. not because he had no other option. And. but gets no bonuses from them. Thales' Secret THALES OF MILETUS v An anecdote appears in Aristotle's Politics concerning the story of the presocratic philosopher and mathematician Thales of Miletus. got the central point of his own anecdote backwards. Taleb. But Thales. all of which permeate this book. knowledge is less important than its payoff. Next. as a philosopher. But the central one is Aristotle's accountvi: "But from his knowledge 12/22/10 © Copyright 2010 by N. but enough to make the point that he could talk the talk and was truly above. you have a problem. If you don't see this as theft. not below. N. so he let the owners of olive presses on his own terms. The story has many morals. He did indeed collect very large. I am not saying that to denigrate Aristotle. do. . So he performed the following prowess: he put a down payment on every olive press in the vicinity of Miletus and Chios which he got at low rent. So he got tired of his buddies with more transactional lives telling him that "those who can. He set to prove that he could both “do” and philosophize. wealth. Society pays for the losses of the bankers. but to assert the main idea of this book: intelligence makes you denigrate antifragility. Chapter 3. The harvest turned out to be extremely bountiful and there was demand for olive presses.Thales of Miletus 15 And of course society —here the retirees —has the exact opposite payoff. This draft version cannot be disseminated or quoted. let us see how all of Jensen's inequality links with knowledge. Thales was a Greek-speaking Ionian-Phoenician philosopher from the coastal town of Miletus in Asia Minor.
like a financial option. I carry a large wheeled suitcase filled with books in all my travels. Can you imagine that it took close to six thousand years between the invention of the wheel ( by. or about the future coming from the stars. the Mesopotamians) and this brilliant implementation (by some luggage maker in a drab industrial suburb). I have been going through the same terminal for three decades. In March 200x. he had an asymmetric payoff. And visibly this is the very reason Aristotle missed the point. not from the nature of the bet. very often and still make a bundle in the long run. And billions of hours spent by travelers like myself lifting luggage through corridors full of rude custom officers (often French). and sense of helplessness in front of a long corridor. reason. This is the center of my ideas about knowledge.. they probably would not have gotten anywhere. pains in my lower back. And even if they did. We don't need to know what's going on when we buy cheap. It is heavy (books that interest me when I travel are always hardcover —I don't use eReaders for hedonic and intellectual reasons as I remember much better what I read in books). It struck me how lacking in imagination we are: we had been putting our suitcases on top of a cart with wheels. If we look at it with the eyes of antifragility. antifragile action. had to carry their suitcases through airport terminals. ON INNOVATION AND INTELLIGENCE To see how overvalued our notion of human intelligence as a director of human activities. This tells us something about our mapping of the future. This draft version cannot be disseminated or quoted. helps pulling it. and its totally negligible impact on my life. I would not have felt comfortable doing so. consider the story of the wheeled suitcase. Simply.. Thales was in a position to take advantage of Jensen's inequality. this took place three decades after we put a man on the Moon. but nobody thought of putting tiny wheels directly under the suitcase.vii Which brings me to how we got to be where we are today. the story is altogether different. You need action. . and compare it to this lactic acid in my arms. to the point of not even knowing where tomorrow’s important things look like. suitcase outside the JFK international terminal and. and the contrast was eerie. without thinking about applying their brain to such an insignificant transportation problem. So just by intelligence we cannot go very far. Indeed. the reason was Thales' superior knowledge.On Innovation and Intelligence 16 of astronomy he had observed while it was still winter that there was going to be a large crop of olives. The giant of rationalism. We humans lack imagination. Taleb. we assume. heavy. We use randomness to spoonfeed us with discoveries —which is why antifragility is necessary. All those brilliant minds you see at conferences who discuss Gödel." So for Aristotle. I suddenly remembered the days when I had to haul my book-stuffed luggage through the very same terminal. quarks. I could not afford a porter and. I was rolling that generic. But it is only trivial retrospectively –not prospectively. with and without wheels. which he bought cheap: there was no need to be right on average —so long as you pay a low price that allows you to have greater upside than downside. even if I did. And consider all this sophistication used in sending someone on the Moon. Riemann’s conjecture. Worse. because he overestimated human rationalism—the reason of Thales' success was imparted to knowledge about the stars. His payoff was so large that it afforded him to be wrong very. The key to this book is that he did not need to understand too much the messages from the stars. N. shmarks. the Medieval philosopher Averroes (Ibn Rushd) considered Aristotle the supreme expression of human intellect —rationalism. book filled. we are talking about something trivial: a very simple technology. though extremely consequential. Shmodel. looking at the small wheels at the bottom of the case and the metal handle that 12/22/10 © Copyright 2010 by N. with regular stops to rest and let the lactic acid flow out of my sore arms.
some level of robustness. But a reading of Schumpeter shows that both he and his detractors (the Harvard economists who thought that he did not know mathematics) missed both the notions of antifragility as convex. They did. they go to business school to learn how to survive while taking low risks —but the economy wants them to take a lot. or perhaps not even technologies but tools. and the opposition between tinkering and top-down planning. though we play down the role of chance. not even doing that as the toys might have been solely used for mortuary purposes). in which the property of the sum (the aggregate) varies from that of each one of the parts. It too requires luck and circumstances. bureaucrats. Meanwhile. Now what is the solution? There is none. Indeed there is a pattern: whenever you hear some economist accusing another for being not mathematical enough. individual transportation is limited to bicycles and cars. the consequences of Jensen's inequality. He most probably missed the central point of Jensen's inequality because of his simplification. This is where all you need is wisdom to realize what you have on your hand. Just taking something to market requires struggling against a collection of naysayers. exposed to breaking —evolution needs organisms (or their gene) to die when supplanted by others. But. They had wheels. and one’s own discouraged mood on the occasion. But I was shocked that it took me a lifetime to figure out the latter: implementation does not necessarily proceed from invention. empty-suits. especially when it comes to our own discoveries. Just consider that of all the means of transportations that have been designed in the past 3000 years since the attack weapons of Hyksos and the drawings of Philo of Alexandria. The history of medicine is littered with the strange sequence of discovery of a cure followed. and lactic acid to move these gigantic slabs of stone in the flat spaces ideal for pushcarts and chariots where they build their pyramids. . So there is a problem of aggregation. We need some randomness to help us out —with a double dose of antifragility. is antifragile when left on its own. Taleb. he is therefore necessarily interested in seeking antifragility or. Business life. People come to me for advice that is local to them. We are managed by small little (or large) accidental changes. that is the economy. their small children were rolling their toys on the stucco floors (or. But a businessman is not too interested in suicide. They even rolled them on logs of wood. except for a few visionaries. And randomness plays a role at two levels: the invention and the implementation.Creative and Uncreative Destructions 17 The story of the wheel is even more humbling than that of the suitcase: we keep being reminded that the Mesoamericans did not invent the wheel. but without understanding the nature of the process is the economist Joseph Schumpeter. with the implementation –as if the two were completely separate ventures. for that. a lot of risks themselves. He vaguely understood that some things need to break for the system to improve —what is labeled as creative destruction — a term coined by Karl Marx. This draft version cannot be disseminated or quoted. such as the wheel. much later. It was just like the story of the suitcase: the Mayans and Zapotecs did not make the leap to the application. a single business is necessarily fragile. at least. N. Something sneaky in the process of discovery and implementation –something people usually call evolution. perhaps. you can be sure of the sweet irony that he himself got into a Procrustean bed. mountains of details that invite you to drown. 12/22/10 © Copyright 2010 by N. are the ones that seem to run the world — what we call technologies have a very high mortality rate. They used vast quantities of human labor. But the wheels were on small toys for children. Another element to retain for now: the simplest "technologies". corn maize. The first point is not overly surprising. more accidental than we admit. CREATIVE AND UNCREATIVE DESTRUCTIONS Another one who got a version of the point. The Fallacy Of Aggregation Let me report a paradox. that is their own career. We talk big but hardly have any imagination.
So wonder they were bundled with the thieves. N. on a pedestal. socially. It is still not considered to be very “intelligent”. the Arabs loved everything philosophical and “scientific” and put Aristotle. They could perform surgery on the occasion while repeating incantations. about whom nobody seemed to have cared until then. or. antifragility and how to tame randomness is weaved into our institutions --though not consciously and explicitly. whenever we see them regulated. and that is about it --we do not have many names for them as they have not written a lot of books. The medical practitioners were the Other. Charlatan was held to be a synonym of empirick. Some were itinerant showmen. two opposite ways of doing things and attaining knowledge: those who rely on thinking and theorizing and those who rely on experience. Take the discovery of chemotherapy for the treatment of cancer. there is a solution: overconfidence on the part of individual economic agents. the Platonists. developed in the Hellenistic world of Asia Minor and later grown by the Arabic language school. the classicists. and intellectually. People do not realize that it came out of 12/22/10 © Copyright 2010 by N. for the Arabs. not the “progress of medicine”. whereby our London-empericks. the doers. But luckily for us. In other words. The word “empiric” designated someone who relied on experiment and experience to ascertain what was correct. Medicine. a bit of history to tie matters together. the Academic. trial and error and tinkering. THE ACADEMIC. The second one includes the empirics. seats-of-the-pants people tend to be practitioners who are often content to make the money and make discourses at the bar. the social planners. For a long time official medicine had to compete with the crowd of the flashy showmen. This category included doctors who did not subscribe to the dominant Graeco-Arabic school of rational medicine. Formal thinkers and theorizing theorizers tend to write books. worried about the empirics for economic reasons as competition made their incomes drop. and oft times to expugne their poore patients purses. the venerable members of the various academies of sciences. That was held to be inferior –professionally. Many of their works were destroyed or hidden from cultural consciousness. The Romans were anti-theoretical pragmatic bunch. haue bene obserued strongly to oppugne. the overestimation of their chances of success and underestimation of risks in their businesses. quacks.The Charlatan. You do not see their works in the THE CHARLATAN. AND THE SHOWMAN Our misunderstanding of tinkering. mountebanks. was a scholarly pursuit and founded on the logic of Aristotle and the methods by Galen. in which they carried out their curative acts in front of a large gathering. The medical establishment. There has been a conflict between two classes of people and methods. and their memories have been treated very badly by history. Their experiences are often formalized by the academics. the side effects of mustard gas. This draft version cannot be disseminated or quoted. sorcerers and sorceresses and all manner of unlicensed practitioners. The first category include those called the rationalists. The rationalists –all academics tend to be – want you to believe that reasoning has a monopoly on the production of knowledge. with or without thinking and theorizing –and use that option. or empirical skeptics. But wait. and the Showman 18 Government interventions to save companies fragilizes. Discouery of certaine stratagems. the orthodox economists. the empirics enjoyed immense popular support and could not be uprooted. So the final point here is about those called charlatans. the top-down social engineers. the Weberian rationalists and rationalo-bureaucratists. In other words. going from town to town. So surviving history has been written by the rationalists because of a mental disease –our search for order and thirst for theories-. foolish risk taking is healthy for the economy —provided people don't take the same risks —and foolish for the person involved. .that gives us the illusion of design. Now. etc. Taleb. to wit this long title for an Elizabethan treatise: A short discourse.
once again. then showing you "evidence" of their contribution to the welfare of the birds). academics contributions to knowledge might be grossly overhyped —as is the role of "intelligence" (though not what we call "wisdom"). which tears apart claims of use of taxpayer money and monies directed to the bureaucrats of the National Cancer Institute. . The great French biologist Francois Jacob who introduced the notion of tinkering (under a variant called bricolage) into science. You can do so individually (you have the option. and what you learn in the streets is underestimated. They were just organized quacks. The fight between the “legitimate” doctors and the Others is quite enlightening. Zeno. This closes the loop with the three stories: thinking. I hold that what has been done by academic life is rather dress up random discoveries with rationalizations. as nature does. But let’s hold off jumping to the wrong consequences. b) The Defects of Designed Systems. This. Nature understands options vastly better than humans. showmen. Seneca. we will see. tinkering. seen in the light of history. We said that nature likes randomness: it is because it sees various outcomes in the diversity among offspring. particularly when you note that doctors were silently (and reluctantly) copying some of the remedies and cures developed and promoted by the Other. c) Epistemology (theory of knowledge) is ancillary to decisiontheory (what we should do). then a) what you learn in the university lecture is less valuable than claimed. we will see). and claim credit for inventions of others. the Roman poets. or using a set criterion of survivability. stochastic search. and certainly better than Aristotle. I agree that most nonacademically vetted medical practitioners were scoundrels. Being wrong is not important if it is harmless —or if it benefits us by Jensen's inequality. the benefits. that was the ancient's positions (Cicero. It costs you so little to search. have always played on the logical fallacy that if quacks are found among nonacademics. This draft version cannot be disseminated or quoted. to protect their turf. The first thing to comes to mind is trial-and-error.Summing Up 19 literature because they were not academics. But they left a huge imprint on medicine. picks those it likes best and discards the rest by dispatching them into genetic oblivion. They keep doing it: all what is nonrigorous is nonacademic – yet it does not imply that all that is nonacademic is nonrigorous. formal academics. were not better than those they called charlatans –they just hid their fraud under a weight of more convincing rationalization. N. nonacademics are all quacks. mountebanks. In other words whether something is true of false is irrelevant and academic in the worst sense of the word. Taleb. This I've called the "lecturing birds on how to fly" effect (academics lecturing birds on flying. quacks. particularly formal thinking. I will show how academia and official sources are more of a public relations machine rather than a source of knowledge. but is fully aware of the incompleteness of his grasp of things. nature knows how to select: about half the embryos undergo a spontaneous abortion – easier to do so than dream of the perfect baby by design. They had to do so for economic reasons. Marcus Aurelius. a modicum of this thing called wisdom). what matters is the payoff. b) as we said earlier. Also. Ex cura nascitur teoria. no contra. that will be explored in the rest of the book a) The Importance of Trial and Error. If trial and error is superior to knowledge. an activity conducted by an agent who patently does not fully understand what is going on. Interestingly. Now. the Greek tragedians — SUMMING UP I have four implications here. is overly trivial to show and back-up with reverse evidence. Formalists. argued that even within the womb. what you found is acceptable to keep (hence. all you need to know is whether 12/22/10 © Copyright 2010 by N. In other words. has always been the archenemy of trial and error – hence a severe handicap for innovation and advancement.
disorder. and an expiration date. and the anti-nerd thinkers that have been reviled by history. Simply. they are rather chapters of a main corpus focused on uncertainty. They are designed to be accessed in any order. our inhibitions in accepting chance. so it does act on these tacit. even religious beliefs. by going to the very root of the problem. just as evolution operates on individuals. becomes more a subject of philosophy —what where it should go. in his most brilliant works. evolutionary epistemology. It is prevalent everywhere: languages. an end. that is. chips in California. foods on the table. unexplainable rules of thumb transmitted through generations (or preferences expressed in your genome) — what Karl Popper has called. ideas. this one is about a more central notion: how we should decide. I’ve been dying to vindicate the unreasonable mavericks. randomness. in which we are rather good –but in which we could be better. considerably cheaper) and what you learn from an old trader is vastly superior — scientifically— to scientific risk models. the antifragile process of trial and error. hence scientifically) and to what you get from a finance class in Business School (and. THIS BOOK This book is about the lack of explicit knowledge in real life. decision making under opacity. as a field —rather than a discourse on innovation. N. and the costs of rationalization –all in one theme: how to live in a world we don't understand. It is how everything in cultural life has developed –and will continue to develop. . The reader can see that this book. innovative artists. This book is about the difference between knowing. in which we are not good at all. but the courage to accept to live in a world they knew they did not understand. Some of them had great courage – not just courage for their ideas. and personal knowledge grow. and what to do in a world we don't understand. And they enjoyed it. My books are not standalone essays on specific topics. Tinkering and trial and error is not just the process by which the process of medical discoveries. Taleb. and doing. with a beginning. tinkering. wines from Chile. But my take is that this is not because the idea survived.This Book 20 almost all except those ancients we focus on today such as Aristotle which incidentally only penetrated the West through Arabic thought). 12/22/10 © Copyright 2010 by N. of course. freelance entrepreneurs. So while my previous work was mostly on uncertainty and the errors — and gains— that come from such an environment we don't understand. but because the person who has it has survived! I will show evidence that what finance you learn from your grandmother is vastly superior (empirically. d) Primacy of heuristic (rule of thumb) knowledge embedded in traditions. optionality and the role of cheap options. This draft version cannot be disseminated or quoted. technical innovation.
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