Antifragile: Things That Gain from Disorder

There is some great theory here. However, the delivery gets annoying. He has an axe to grind against many people institution that he deems to be hurting society. Alas, it would be better if he spent more time focussing on his ideas than making up juvenile names (such as Harvard-Stalanist) than the others.

The principle thought is that there are three categories: fragile, robust and anti-fragile. Fragile things are hurt by random change. Robust things can withstand randomness. Anti-fragile things benefit from randomness. Many of the problems we encounter are due to the failure to acknowledge the anti-fragile.

His background is in the financial industry and he devotes some time to the discussion of the issues there. The system is extremely complex with many big players, thus making it fragile. The late 2000s crisis was caused by a lot of this. The consolidation and the fragility made a big fall likely. If the system was more fragmented, individual institutions may have failed, but there would have been little harm to the entire financial system. (An example was given of restaurants. Individual restaurants are very fragile. They get started and fail all the time. However, the overall system is anti-fragile. The randomness of the rise and fall of restaurants benefits eaters with more variety and innovation. If we had a government-mandated restaurant system, it may provide food, but in a very bland way. And if the system failed, all would be without food.) He suggests the best investment strategy would be to invest in some "anti-fragile" areas that would be achieve huge benefit by random events, while keeping other funds in areas that would be extremely safe in random or non-random situations.

He spread his argument to other areas of society. Academia and medicine receive scathing indictments. Academic research is seen as being of minimal value. The researches are more concerned about their position in their narrow field and doing derivative research. Most innovations come from simple random innovations of entrepreneurs. (The wheeled suitcase is given as an example of innovation combining two well-established items that nobody had thought to put together.) Research can also find correlations that may not be generally applicable.

Medicine is criticized for the harm it does. The tendency is to over-medicate and seek solutions for small problems. However, the human body is built to handle the many random things that are thrown at it. Stopping some of the minor ailments may harm the body's natural healing ability. Medicine is still useful in treating extreme conditions (such as emergency care). All medical intervention has a risk of harm. For minor medical care (such as blood pressure drugs for not-so-high blood pressure), the risk is likely greater than the benefit received. (Do to the statistical analysis the benefits in the low cases may be very small, while the side effects high.) Diet may also be misleading. The body may benefit from randomness, such as mixing the types of foods and periodic fasting. The medical system's need to provide "theories" often leads to harmful things (such as trans-fats) while ignoring benefits that may be available through traditional practices.

The overall argument stresses the wisdom of elders. Modern science attempts to quantify everything into regular patterns. However, most of these models break down when randomness is thrown in. Traditional cultural and religious practices don't have "theory" attached to them. However, they are built on centuries of human experience. Often, these can give us better answers. If a practice has lasted thousands of years, there may be something to it. (This can be seen in other fields - the longer a book has been in print, the longer it is likely to remain in print.) Much of the "new" today will be discovered later to be harmful or bad. Some of the new may end up sticking around for hundreds of years. However, it is easier to find wisdom in that which has already lasted for hundreds of years. (There is some irony here. His book is new. Should we disregard it in favor of the older financial works that he criticizes?)

He also stresses improvement by "negation" rather than "addition". It tends to be easier to improve things by removing the bad. However, the economic system encourages money making by adding. For example, removing cigarettes causes increases in health. However, it hurts tobacco company and other health companies that rely on it. Big Data is also seen as falling here. It can be used to negate ideas, but is not good with finding positive ideas.

Another key concern is the agency problem. People that make predictions can often influence activities without any harm to themselves. Corporate executives are especially prone to this problem. If the company makes money, they get a big fat bonus. Even if the bonus later causes the collapse of the company, they don't lose money. The executives are also seen as enslaved, because they have ceded control of their thoughts and belief from the company.

The BlackSwan: The Impact of the Highly Improbably

Black Swans are unexpected occurrences that disrupt predicted outcomes. Though seeing one-thousand white swans does not disprove the existence of black swans, a single black swan can prove their existence.

This book is filled with examples of the human tendency to think they know more than they do and fail to expect the unexpected. People tend to look at data and events that confirm their expectations rather than seeking for ones that disprove it. This is exacerbated when the losers drop out. (Thus gamblers seem to have "beginners' luck" because lucky beginners are most likely to continue.) While "rules" may provide insight, breaking the rules is required for success. In hindsight, we can often create "rules" to predict improbably events (like the rise of the internet or Microsoft.) However, rarely can we accurately predict them in the future. (And when we do, it tends to be due to dumb luck.)

The arguments are good. However, they seem to bounce around, often arguing opposite points from different angles. (I guess this is par for the course for a book on highly impactful improbabilities.) The author does tend to ramble on, making this a good target for a "condensed book." His tone also appears very condescending. While he stresses the importance of not getting too involved with minutia and our own knowledge, he comes across as perhaps too confident in his own knowledge. He tends to go too overboard in defense of randomness. While the random events may be the most influential, without some degree of predictability, there would be little chance for the serendipitous events to occur. (If we knew we would know something in the future, then we would already "know" the event happened.)

He spends some time criticizing the European/French elite intellectual establishment, then proceeds to quote various obscure intellectuals. (Perhaps he does not realize that he is more closely associated with the establishment than he thinks.)

The strongest attacks, however, are saved for economists and statisticians and their Gaussian normal distributions. While normal distributions may model many theoretical natural conditions, it has significant problems in the real world. He has much more respect for Mandelbrot's fractal analysis. Modern "portfolio theory" is heavily dependent on the Gaussian statistics and thus susceptible to uncertainties. His attacks are strong and convincing. However, he appears to go overboard. While he acknowledges that statistics can be used to managed the "closed" situations of Casinos, he doesn't acknowledge that financial markets may have some aspects of the controlled casinos. Just as a casino can hit unexpected events (such as a tiger mauling or a disgruntled former employee), the financial markets can have unexpected events occur. Does this justify throwing out the whole statistical world?

However, even this refutation comes with a caveat. Trying to assume a belief set as a package is a dangerous proposition. Why do philosophers doubt their mere existence, but trust their retirement money to portfolio theorists. Why do some doubt religion, but put faith in financial hocus pocus? In the end, he provides his own refutation. Everybody is their own black swan. They do wild unexpected things that make them who they are. Perhaps one of these crazy things is to trust economists.