Magazine article Times Higher Education

Antifragile: How to Live in a World We Don't Understand

Magazine article Times Higher Education

Antifragile: How to Live in a World We Don't Understand

Article excerpt

Antifragile: How to Live in a World We Don't Understand. By Nassim Nicholas Taleb Allen Lane. 544pp, Pounds 25.00 and Pounds 14.99. ISBN 9781846141560 and 9780718197902 (e-book). Published 27 November 2012

Nassim Nicholas Taleb is a heavyweight thinker. He affirms that reality rules, that the role of theoreticians is to provide the gods with endless amusement, and that prediction is by mugs, for mugs. The evidence is strongly in his favour, so dump all soothsayers. Start with your stockbroker.

His best-selling 2008 book The Black Swan: The Impact of the Highly Improbable advanced a concept that brought Taleb international renown. Antifragile is a similar book: engrossing ideas, infuriating exposition. It propounds the concept of a scale of vulnerability to impact or stress: fragile - robust - resilient - antifragile. Fragile is hard but liable to shatter (porcelain). Robust is solid but cracks (cast iron). Resilient is absorbent but bends (tempered steel). Antifragile absorbs, learns and strengthens; it evolves, hormesis in action.

Taleb's investment strategy is to identify fragilities and bet on their failure. A good investment requires a convexity bias, a small downside and a big upside. The former is achieved by buying options that are cheap, and the latter by betting against long odds. Odds are long when the market does not believe, or does not wish to believe, that a particular event can occur. The recent travails in the banking system made Taleb tens of millions of dollars. He recommends a risk barbell: a large weight of the lowest investment risks against a small weight of high risks, where one mistake is insignificant but where one success brings riches. He uses reward/risk graphs to explain the difference between linear and non-linear relationships. He explains the difference between a variable and a function of a variable: an old A level (before they were handed out with the rations) and a strong espresso will help you with the maths.

We are slaves to nature's immutable laws. If you share my view that improving one's understanding of them is one of life's greatest pleasures, you will enjoy Taleb. He is a large and pugnacious individual with a large and pugnacious mind. He punches his weight for ethics and thunders against fraud, and against anyone who is aware of fraud and fails to oppose it. He applies the test of reality to everything. By this test, Sir Thomas More has much to answer for. His feeling that there must be a better place than Oxford is understandable. (Of course there is. It is called Cambridge.) But More's Utopia is a false premise, a fairyland. Idealism always fails the reality test and does immeasurable harm. All tellers of fairy tales, all snake-oil solutions and purveyors thereof are in Taleb's sights. He names and shames world-famous names, particularly detesting those who "have no skin in the game". Would that he had turned his fire on the previous two British prime ministers and their acolytes. Many economists have become hugely rich, not from following their own splendidly bad advice but from consultancy fees and the revolving door between lucrative appointments at Ivy League universities, the US government and big banks.

Taleb dislikes overly large organisations: they are vulnerable to the unexpected, to a Big Bad Black Swan. When they fail, they do great damage; when they are too large to be allowed to fail, they bring national catastrophe. A big unit is fragile, a large number of small units is antifragile. …

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