Antifragile

Definition

Antifragile can be defined as ”a thing improving from volatility, randomness, uncertainty, disorder, errors, and stressors.”

Fragile, robust, and antifragile

Fragile is pretty simple. Anything that brakes from volatility, randomness, uncertainty, disorder, and stressors. When you think about the inverse of fragile, you think about robustness, or resilient. Robust and resilient things do not break from the aforementioned things, but they won´t get any better. Antifragile gets better. There are many antifragile systems, like evolution, capitalism to some extent when it is left alone, technological innovation, good recipes, and even your own existence. These things change with time. You can see antifragile things everywhere, in your body, and in the nature, etc. There is a simple way of thinking about antifragility of things: Anything that can have bigger gains from upside than downside from random events, volatility, etc.

Antifragile systems become fragile if volatility, stressors, uncertainty, and disorder are denied from them. They weaken and die. Just watching what happens is a better solution for problems in antifragile systems. They will get stronger. These things thrive with right amount of stressors, and disorder. You have to remember that many stressors and too much disorder will break even antifragile systems. For example, your bones like small jumps, but jumping from ten meters will break them. Bureaucrats, central bankers, and academics want to change antifragile systems, but they cause more harm. This top-down approach only make these systems worse. Bottom-up approach would be much better.

How to spot fragile/antifragile things

Fragile things have one interesting mathematical property. Their damage accelerates, when it is measured. For example, you have a highway in which there are 20,000 cars moving every day on average. The travel time through this road is 30 minutes. When there are 25,000 cars moving, travel times increases to 40 minutes. If the amount of cars is 30,000, then your travel time gets to 60 minutes. This is a sign of fragility of the highway. These kind of nonlinearities are signs of either fragility or antifragility. You have to find a way to limit the downside and maximize the upside. For example, you want to try make some small changes to get big outcomes. These small errors do not have less cost than the possible upside. You don´t have to be right so often. Power laws have positive effects on antifragile things and negative for the fragile.

Antifragile things have also stood the test of time. It is actually the most important sign of antifragility. Things or ideas that have been working for thousands or hundreds of years are antifragile with a high probability. It doesn´t mean that they won´t eventually break or become useless. Considering this phenomenon, there is a Lindy effect. It says that it is probable that an idea that has survived x amount of years will probably survive another x amount of years. For example, tablets have been in use for thousands of years. First they were made from stone, and now they are made from many other materials. The idea is still pretty much the same, only different ways of using a tablet have grown. It is probable that they will be here much longer.

Life on earth is one of the best examples of antifragile systems

This planet has had life even for billions of years. It is not depended on the bureaucrats or academics, or other humans. It will probably have life after humans have disappeared on earth. It is not dependent on people. It has never been and never will. Life on earth aggressively destroys, replaces, selects, and changes. It is hard to prove that antifragility is a characteristic of mother nature, but you should have no suspicions about it. It has survived different catastrophes like earthquakes, asteroids, etc. It has also evolved to more intellectual life forms like humans. In the long run, life gets better on earth, even though it will have its ups and downs.

Mother nature is not fully efficient. There is some slack or redundancy in its systems. For example, humans have two kidneys instead of one that is necessary, etc. When a system´s efficiency is fully tuned up, it becomes fragile. It will eventually break. Many man-made systems are fragile. Mother nature is the opposite. Systems become antifragile also, when some of the components can break. And when the opposite is true, systems are fragile. For example, a restaurant business is antifragile, because when some restaurant goes bankrupt, another better one comes along. Banking systems is fragile, because some of the banks are too big to fail. And then the whole system goes bust. Life on earth also gets better, when some genes are not recreated.

How to become less fragile

You cannot really become antifragile. You will eventually break and die. You can only become less fragile, however, your genes are another thing. Let´s forget the genes and focus on think how you become less fragile. I have to remind that most of the things mentioned below come with opportunity costs of becoming less efficient. Here are some things you can do:

• Decrease the amount of your long term stressors and increase the amount of short-term stressors. Do the latter in random moments if possible.
• Believe in ideas that have survived centuries or millennia like the most important mental models I have introduced. Do not believe the new ideas unless you are completely sure they are better.
• Favor the natural over man-made
• Keep things simple. Do not add complexity, unless it is unavoidable.
• Listen to your grandmother´s advice instead of younger people. There is a proof that she has survived many bad events. 
• Have many sources of income
• Have some extra cash
• Invest most of your money in fool-proof securities like U.S. Bonds and the small part of your money for a diversified portfolio of asymmetric expected payoffs.

Sources:

Antifragile, Nassim Taleb
Skin in the Game, Nassim Taleb

-TT

Scarcity/Abundance

Definitions

Scarcity principle can be defined as ”You put more value to the things that are limited.” Abundance principle is basically the inverse of scarcity and can be defined as ”You put less value to the things that are in excess.”

Basics of scarcity and abundance

When the availability of something is limited, it becomes more valuable. When things are the least available, they are the most desirable. If a thing is scarce or it becomes scarcer, it has more value to people. For example, sometimes a mild defect makes some collectibles more valuable compared to original ones. Large amounts of similar collectibles make all of them a lot less valuable or desired. Scarcity principle is not just about material things. It relates to information, knowledge, and communication. Same works with abundance too. They also relate to each other. When things are abundant and they become scarce the reaction to scarcity is even stronger than scarcity working by itself. People who have nothing are not likely to revolt against the government. People who have something that is taken away, because of the government, are more likely to revolt.

The power of the scarcity principle comes from the two major sources. First, people have a tendency to try to find short-cuts. Saving energy is the most important task of your brains and body. You know that things are typically better when they are harder to acquire. You associate scarcity with quality. And you are most likely to be right, but not always. The other main source of power within the principle is that when a thing becomes less available, your lose freedom to make choices. The power of this source is the strongest, when you have lost your freedom to choose. Then, you start finding a way to get your freedom to choose back. Banning something or censorship both increases a desire to have something. When something is prohibited, its desirability increases via losing a freedom to choose. When it comes to the abundance, the first source is the same, the desire for short-cuts and the second source, is a bit different. It is too easy to choose.

Combination of rarity and competition drives our desires for something to new levels. Lots of people and scarce items create unwanted consequences. Advertisers can sell their products by showing how many other people are interested in their items. If you really want to sell something, try to sell it by having all the people who are interested in it at the sample place at the same time. You definitely do not want to create an image that you have plentiful of those items to sell and no competition.

How to use/avoid effects of scarcity and abundance

It is better to have scarce resources up to some point, when you want to achieve something. Whether it is about time, money, physical labor or some other type of resource. Putting a deadline that is tight is better than having unlimited amount of time to do something. The most probable thing that happens is that you start doing things later. You should put enough time that it is possible to do something rather than waiting for a very likely failure. When it comes to money or physical labor, most solutions are focused on adding resources, instead of doing things better. This is especially typical for politicians. Coping with scarcity do not belong to their vocabularies. It is easy to use other people´s money as a leverage to get what you or your financier want and think they are abundant.

According to Robert Cialdini, a typical reaction to scarcity is a physical agitation. When you see something become less available, your ability to think diminishes. Physical agitation is a sign that you need to think why you want to have it. Most often you just want to own it. You want to use it. If this is the reason, you should remember that limited availability does not really make it better. You should always be reflecting on how you feel about things. There should be an emotional arousal as a first sign. You should calm yourself and pursue a rational state of mind. After calming down, you should ask yourself why do you want to have it? In case of an abundance, you will feel indifference. You do not really care if you use some item or lose it. The speed of getting rid of things increases. For example, you will use toilet paper faster, when you have bought a large amount of it.

All in all, optimizing the amount of resources is hard. Having enough scarcity, but not too much is not easy. There has to be some slack. Everything cannot have maximum efficiency, because whe things go wrong at that point, shit hits the fan and big failures happen.

Sources:

Influence, Robert B. Cialdini
Pre-Suasion, Robert B. Cialdini

-TT

Authority misinfluence tendency

Definitions

An authority can be defined as ”The power or right to give orders, make decisions, and enforce obedience.” or as ”A person or organization having political or administrative power and control.”

Titles, appearances and status symbols

Authorities and their appearance can be divided into three different groups: titles, outer appearance, and status items. One person can be an authority through all the combinations of these groups or with just one of them. Would you believe someone with a bachelor of science in some discipline or a PhD of the same subject? It is harder to dispute someone with a big and fancy title even though he can be wrong as well. Clothes, looks, and other aspects of appearance are effective too. Uniforms, expensive clothes, and handsome or beautiful people look more like authorities than ugly people with old and torn clothes have more authorative power. The latter people are actually more likely to be the ones who are not listened to. Some items can be associated for authoritative items. For example, expensive watches, cars, and other luxury items help people to deliver their messages. There is no guarantee that any of the three characteristics mean that a person is a believable authority.

Real authorities and pseudoexperts

It is not easy to distinguish all the pseudoexperts from the real authorities you should listen to. You can simplify things by putting experts to two different categories. Things that move and require knowledge and are uncertain normally do not have experts. And things that do not move tend to have some experts. You can put the next professions into category in which there are no experts according to psychologist James Shanteau: stockbrokers, clinical psychologists, college admission officers, personnel, court judges, counsilors, intelligence analysts, financial forecasters, finance professors, etc. You can put the next professions into category in which there are some experts: livestock judges, astronomers, test pilots, soil judges, chess masters, physicists, mathematicians who do not work with empirical problems, accountants, and insurance analysts.

The best way to separate real authorities and fools with fancy titles is to check their personal track record. You should find out that these real authorities have managed to deliver better results than others for decades. They are not one hit wonders. All this personal success should be measurable with concrete terms. For example, investors who have managed to beat indices cumulatively for a clear margin for decades or venture capitalists who have helped many companies to achieve huge successes. You also have to remember that these people are experts only in their prospective domains. They are not experts in other things.

There are many pseudoexperts that disguise themselves as experts. They have many usual characteristics. They focus more on appearance than substance, they use professional jargon to explain things instead of using the language everybody can understand, they do not only talk jargon, but they complicate things too much or they explain big results with a single factor, they transfer risks to their clients and take big part of the results for themselves without having any skin in the game, and they are cherished or rewarded by the fools like themselves.

Being an authority figure

Most adults are some kind of authority figures to some kids. If you are a teacher, a parent, a police, or a priest you are likely to be an authority figure to some child. And there is a responsibility to act like one. Actions speak lot louder than words. All people have mirror neurons in their brains. They fire when a person acts and when the same person observes the action performed by another. They are constantly working. When you do something, child´s mirror neurons observe your behavior and can learn from it. When you decide to give an order your child to do something or stop doing something, the frequency is not enough to teach him/her so much. You shouldn´t tell them anything without showing an example. If you want to teach your child to use their smartphones less, you should use less yourself. It is the most effective way of doing it. Giving an order to stop doing something is not that effective. Your child wants to be like you, you should behave they you want them to behave. If you want your children to be better persons, you should be a better person too.

Sources:

The Black Swan, Nassim Taleb
Influence The Psychology of Persuasion, Robert Cialdini
Poor Charlie´s Almanack, Peter Kaufman

Next text will be published abou 19th of June,

-TT