Monday, January 27, 2014

Antifragile: Build Open Resilient Systems

Nicholas Taleb Nassim’s latest book, Antifragile: Things that Gain from Disorder (2012) is a nice continuation and development of his oeuvre. The main point in his first mainstream book, Fooled by Randomness (2001), was that humans are not good at thinking statistically, and therefore to improve our lives and ability to act in the world, we need stories or heuristics that package accurate underlying statistical information. Black Swan (2007) made us aware that black swans (seemingly rare events (if you have never seen a black swan, you incorrectly think that they do not exist)) can happen much more frequently than we can estimate. Therefore, we should organize our lives to minimize exposure to negative black swans (events with unlimited downside risk like stock market crashes) and maximize our exposure to positive black swans (events with unlimited upside like investing in startups (with a small portion of total assets)). In the future, there could be a Black Swan App to help us respond to life’s events in real-time with bias correction, heightened rationality, and statistical accuracy.

In Antifragile, Taleb continues to articulate his unique world view and winds it into a proposal for how to better lead our lives as individuals and societies. Fragility is organic systems that aim for stability and avoid change, thereby becoming brittle, weak, and breakable as a result. Antifragility (like Derrida’s autoimmunity) on the other hand, describes systems that are open to mistakes and quickly learn from and incorporate errors, thus becoming resilient and vibrant with the ability to adapt and survive (like Silicon Valley’s mantra to ‘fail early and learn fast’). For better vigor and survival, organic systems (like living organisms, humans, and societies) should develop their antifragility.

Another way of understanding antifragility is that when you have a capability, it means that you are able to handle new situations that arise in the same domain, effectively handling situations that arise that are up to 10% outside the bounds of situations you have seen before in that domain. For Taleb, success is determined more by tinkering and harnessing the disorder and chaos in a system (the variance or antifragility) than applying pure intellect. This is how the industrial revolution happened, and how technologies develop that drive science. Antifragile systems are those that gain from randomness or uncertainty (statistically, pulling a probability distribution’s mean higher with more upside long-tail instances).

Fragility/antifragility applies only in the case of organic systems, not inorganic systems (like our computers (at present)). Organic systems need stressors to grow, thrive, and survive. Taleb’s colorful example distinguishes between a cat and a washing machine.

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