Probably every book authored by Nassim Taleb should include
a warning label. It should state something like the following:
Warning: The following book may be hazardous to your health. Exposure to this material may cause irritation, anger, outrage, or other severe emotional disturbances. In addition, it may change your mind.
To those who aren’t acquainted with the Taleb, you should
know that he is a native of Lebanon, where he grew up in a prominent and Christian
family during the civil war. He came to the US and attended Wharton business
school. After completion of his MBA, he went to work in the banking and
investment industry. After having made sufficient money (“f--- you” money, as
he terms it), he became an independent scholar and writer. He is at once innovative
and very cantankerous. While at times I can find I find his style abrasive, as
he liberally hands out insults and putdowns, he nevertheless always seems to
provide mind (and practice) altering insights. So, if you read this latest of
his books, Antifragile, you stand
forewarned of this risk.
Taleb started his career as a popular writer talking about
probability, and he made a very big splash when he published his book, The Black Swan, which discusses the
impact of the highly improbable in markets and in life. Philosophically, he’s
dealing with the problem of induction, the kind of thinking that says all we
ever see are white swans, therefore, all swans are white. For Europeans, that
was true until they went to Australia and discovered black swans. Induction has
its flaws.
In Antifragile, Taleb
builds on his previous work and argues that while some things are fragile (e.g.,
a china cup) and some things are robust (e.g. the Timex watch that “can take a
lickin’ and keep on tickin’”), other things are antifragile. Antifragile things
actually gain from volatility (shocks or disturbance). The outstanding example
that Taleb identifies is evolution, where a certain amount of volatility allows
for change. Taleb is quick to point out that things that are antifragile can
only withstand a certain degree of volatility. In other words, there can be too
much of a good thing. In fact, this is one of the intriguing issues left open
by the book: even for systems that could benefit from increased volatility,
such as an economy, how do we determine the amount of volatility that we should
condone (assuming we can control volatility)? Taleb seems to support (although
he does not address the issue directly in the book that I recall), allowing the
economy its ups and downs. This hands-off approach makes a certain amount of
sense—up to a point. However, in a situation such as we have experienced since
2008, should we really allow market mechanisms to run willy-nilly without any
intentional interference on our part? This is something that I don’t think he
addresses, yet he suggests, following up laissez-faire economic line of
thinking, that this would be correct. He does not directly address the argument
of Keynes. Taleb, I think, knows that Keynes had keen insights into issues of
probability and uncertainty and humility about our lack of knowledge about the
economy. Taleb doesn’t provide or even address the issue of how to provide us
with a heuristic or principle by which to judge the amount of volatility we
should actively tolerate.
I find his thinking persuasive in the field of medicine, for
instance, where a little bit of volatility or exposure to negative influences,
such as germs, actually enhances our immune system and makes it stronger. Taleb
mentions that he puts it drop of tap water on his tongue when he comes to visit
India, which makes a fair amount of sense. Again, the challenge seems to be
engaging the right amount of disturbance to tolerate or promote. The same goes
for physical training, when we subject ourselves to a stressor, such as weights,
and our body reacts by stronger. Our body exhibits antifragility by adapting to
the insults of a heavy (beyond normal) weight. Too much weight, however, or an insufficient
recovery time, will actually harm the body, causing injury or a failure to
thrive. Again, the question is how much is enough or how much is too much.
Taleb also understands the potential ethical problems with
his perspective. He is not suggesting that we through the less fortunate over
board in order to allow untrammeled volatility in society or the economy
(essentially the idea of Social Darwinism). Furthermore, he makes a very
persuasive ethical argument that decision-makers should have “skin in the game”.
In other words, “banksters” should suffer losses as well as gains when their
bets go wrong, as they did so terribly in 2008. Under the existing system, Wall
Street was in a “heads we win, tails you lose” mode. The situation was made worse
by government bailouts that created moral hazard (although to my mind, the
bailouts, while odious, were necessary). Again, I think Taleb skirts some of
the bigger issues, but his overall perspective adds an important element of
consideration as to how we should run economy and society.
Following are couple of quotes that are worthwhile:
The Italian political and legal philosopher Bruno Leoni has argued in favor of the robustness of judge-based law (owing to its diversity) as compared to explicit and rigid codifications. True, the choice of a court could be a lottery – but it helps prevent large-scale mistakes. (90)
For those readers who wonder about the difference between Buddhism and stoicism, I have a simple answer. A stoic is a Buddhist with attitude, one who says “f*** you” to fate. (153)
As to the first quote about the common law, I
think there is a good deal of truth in that. The argument between the English
(and American, Indian, etc.) legal systems and those of the Continent have been
over the use of codes versus judge-made law. While the U.S. has moved to
greater use of codes, we still have a benefit in judge-made law that should improve
the flexibility of our legal system.
As to the second quote, about Buddhism and
Stoicism, I’m still looking for a good comparison, because I think that there
is a close relationship, in attitude, if not in genealogy. His passing comments
fails to say enough, buy it is tantalizing.
Overall, it’s a very worthwhile and important
book. Laugh and snicker when he rails against those whom you also dislike, and
ignore him when he offends you, and you’ll gain all the benefits without
suffering the warned-against side effects.
