Antifragility as an Operating Philosophy for HeF

Antifragility Or Becoming Laughing Lions

Why have a philosophy?

We want to survive We want to thrive Uncertainty is here to stay, certainly We need to be aware of things that can kill us so that we know how to protect ourselves We cannot foresee all things that can take us down, but we can take steps to be able to weather the storms, and even thrive in the storms (Lt Dan) We need to be as strong and healthy of a company as possible in order to survive and thrive We need a philosophy that gives us the best opportunity to achieve these things Otherwise, we are drifting blindly, and could be crushed by those things we dont see coming (Black Swans rare, unexpected events that have a major impact). Develop a common language

What is antifragility? In the face of uncertainty, some will tremble with fear, others will pretend that it doesnt exist or that they have conquered it Weather Channel Our goals are NOT predictions Antifragility is a philosophy not just about how to survive uncertainty, but how to thrive and dominate in it, to love it, and to laugh with it (Laughing Lions) Serves as a guide to non-predictive decision making under uncertainty (hidden Black Swans that we cant predict) Puts survival over success Puts preparedness over prediction Looks to mitigate downside first, then to increase upside Similar to Stoic Philosophy of Seneca limit downside, give yourself a chance for upside

What does antifragile mean? Fragile Breaks from shocks (handle with care) Robust Survives shocks Antifragile Gets stronger with shocks (Please mishandle)

Who is a fragilista and who is antifragile? Nerd someone who relies on Prediction without Preparing for what happens if the prediction is wrong. Fragile will eventually crumble under uncertainty. False guides. Laughing Lions are able to thrive despite uncertainty Santa Clause does not rely on prediction. Prepared for all circumstances in weather. Can deep belly laugh. Boy Scouts - Motto Be prepared! Doesnt care what the weather is. Boy Scouts dont rely on probability.

Who is a fragilista and who is antifragile?

How to Survive Under Uncertainty Assume we are always about to face a negative Black Swan, and prepare like a survivalist ie contingency plans, develop many skills to be adaptable, plenty of cash in the bank, limit debt Dont be a Smiling Sucker with a false sense of security Be Pessimistic Diversification several domains, services plus products, several applications Expose ourselves to stressors so we do not get too comfortable ie challenge ourselves by exposing ourselves to new types of projects/domains, new technologies, etc.. Realize that conflicts strengthen (competition, tough customers, tough decisions, etc) We grow through stressors, challenges, etc. What doesnt kill us makes us lions

How to Survive Under Uncertainty (cont) Overcompensate constantly in overshooting mode; going beyond what is required; finishing mentality; sprinting beyond the finish line; overprotection; redundancy Redundancy and overcompensation is aggressive and opportunistic, not just for protection We will have opportunity to utilize our extra strength and capacity for upside Build extra capacity and strength in anticipation of worst outcome Cash in the bank Resources available Flexibility

How to Survive Under Uncertainty (cont) Small is good Take a lot of small risks versus one big risk Have several small clients versus one big client Taxi driver, not Sears Employee Lots of PatientArchive versus one Carolinas

How to Survive Under Uncertainty (cont) Barbell Strategy Not exposing oneself to large losses Take many small risks (experimenting), only risking what is acceptable, that have potential for huge payoffs Maximum exposure to positive Black Swans, while remaining paranoid about negative ones

How to Thrive Under Uncertainty Take full advantage of opportunity when it arises (Positive Black Swans) Be foolish, but fail fast We can take chances, and we dont have to be right as long as we fail fast Bricolage tinkering with what youve got PatientArchive becomes EMRDowntime, PatientPrint Serendipity you search for what you know, and find something you did not know was there Questioner: Do you keep a notebook to write all your ideas down? I dont have any ideas Albert Einstein

How to Thrive Under Uncertainty (cont) Errors as information Loving errors, but never the same twice We can make mistakes, but keep them small Use errors as information; reflect on them Post-mortem; admit when we are wrong; seek feedback Learn from our own mistakes and mistakes of others ie Carolinas

How to Thrive Under Uncertainty (cont) Optionality

What makes a species (or company) prosper isnt peace, but freedom avoid contracts that lock us in to something that takes away our freedom We need to operate how WE want to operate Options are required in order to be antifragile allows for more upside

Being a Sucker Thinking One Can Escape Uncertainty Dont be fooled by relying too much on the past - Turkey problem Change favors a prepared mind Given uncertainty, prediction is hard. We dont need to predict exactly what will happen if we are antifragile Invest in preparedness over prediction Look at potential damage first, and mitigate consequences Example HeF not having a CCD generator utility Do not mistake randomness for causes Be fooled in small matters, not large. Know the large trends.

Antifragility Construct

Stressors Overcompensate Do not get too comfortabl Cash in e; assume bank; Branching out to neg black contingency new industries, swans planning; more around going beyond what Antifragile flexible applications corner is required;

Survivalist

Diversification

Redundancy

Extra Capacity

Smallness

Barbell

Pos Black Swans

Experiment

Errors

Optionality

Contingency planning; sharing of knowledge

Prepare to take on larger opportunities when they present themselves

Fragile

Debt; Limited Cash in bank; nonflexible;

Remains in one area; can be Gets too destroyed by one comfortabl black swan e does the minmal;

No contingency plans; hoarding of knowledge

Not overexpos several PA ed to Neg clients; Black making Swans; small bets small bets Overexpos ed to Neg Black Taking too Swans; many eggs Fully in Non-flexible; at in one Medium max capacity basket Risk

Taking full advantage of opportunities; PA; EMRDowntime 2X2X4 tool

Postmortem s; Avoid correcti contracts ve that tie our actions hands

Not giving oneself opportunity for upside; not recognizing opportunity

Jumps in with Makes both feed same without errors experimentin over g; Does not and experiment over Hands tied

Antifragility Construct

Survivalist

Diversification

Stressors

Overcompensate

Redundancy

Extra Capacity

Smallness

Barbell

Pos Black Swans

Experiment

Errors

Optionality

Survive Thrive/ Growth