Antifragile: Things That Gain from Disorder

Key takeaways:

I didn't finish this book. It was strange. I didn't know what to do with a lot of his ideas, but there were a few pieces of gold that I took away. I didn't finish this book because the last 25% felt like he wrote this book just so he would have a platform to spread his rules for living. I disagreed with many of them, which I'm fine with, but the tone he used felt very abrasive–maybe I was in a bad mood while reading this book–but the last part was hard to get through, and eventually I stopped trying.

- When preparing for a disaster, we often use models based on the last disaster. The problem is, the last disaster was a surprise when it happened. The same will be true of the next one.
- When one person stands and rails against everyone and everything, I try to be cautious. They probably have some good in their views, but the odds that they have found the only way and everyone else is dead wrong seems unlikely. Presenting your ideas that way certainly makes it hard to take them seriously.
- Two brothers: One is a business man with a 9-5 job, the other is a cab driver. In a 9-5 job, your pay cheque is the same every week, you know how many hours you will work. As a cab driver, your pay will be different every week, and you could work 10 hours or 80. Which one is more fragile? The cab driver. They will learn to live with the instability and go for a stretch with reduced pay. They can sense changes and trends based on how many fares they have. The 9-5 may feel more stable, but if something goes wrong, you go from a steady job to nothing.
- A small forest fire burns up the deadwood. If you never allow small forest fires, eventually there will be a big one, with lots of deadfall to burn. It will likely be more catastrophic. In ancient civilizations, there was regularly small battles between neighboring cities and regions. Now, we don't experience those small battles, but the pressure builds until there is a large scale conflict, with more devastating results–like the world wars. Similarly, when we try to prevent the business cycle, fewer businesses go bust, times are good, until they aren't. Propping up the system without allowing deadfall to burn off leads to big market crashes and large scale recessions. Is it real stability or manufactured?
- We tend to over intervene when we shouldn't, and under intervene when we should intervene.
- Access to too much information and data makes it difficult to discern ‘noise' from ‘signal'.
- It's all about options. Most intelligent people are not necessarily making better decisions, they just have put themselves into a situation where they have more options to choose from.
- Order matters. Trying to earn 20% return if there is a chance you could return -100%, you're doing it wrong. Rather, focus on eliminating the risk of a black swan, then focus on earning returns. We often think success is the main concern of a business, with risk management being an afterthought. Success doesn't mean anything if you go bust. Make it so you can't go bust, then work on earning your returns.
- Wisdom when making decisions is more important that knowledge.
- I really enjoyed the section addressing ‘lecturing birds how to fly'. Birds knew how to fly, but a professor could go out and lecture them on how to fly. The professor is writing books, the bird is not. After a generation, people might be convinced birds know how to fly because we tell them how. This example is absurd, of course, but Mr. Taleb makes the case that this happens in business schools and other higher education. Instead, he proposes that many of the solutions we have today were discovered because some business person had a problem and tinkered with some solutions. When it worked, scholars started to teach lessons about it, and no one remembers that the problem wasn't solved by academics. ‘Science doesn't lead to inventions, tinkering does.'
- Barbell balance: If you keep 90% of your portfolio in cash and 10% in investments with a huge upside, the most you can lose is 90%. The amount you can gain is nearly limitless. If, instead, you invest 100% of your portfolio in moderate risk investments, your whole portfolio is at risk for limited upside. You might nicely make 7% per year, but when the black swan hits, all bets are off. In the reverse situation, you might lose every year, but when the black swan occurs–and it will–you have huge gains.
- Beware of over optimizing. If you optimize an airport so it functions smoothly everyday under normal load with no redundancy or waste, you will be in big trouble when under a significant loan. No one cares if there plane is 20 minutes early, but they will certainly care if their flight is 2 hours delayed.
- Bet on the jockey, not the horse. In venture capital, investors usually chose to invest in a person, not a specific product. Why? A person can change course. Their objectives change. When they are working on an invention, they might uncover something completely different. Tiffany's started as a stationary store. Dupont started as an explosives company. Raytheon started as a refrigerator maker. Nokia began as a paper mill, then moved into rubber shoes. Avon started in door-to-door book sales.