Nassim Taleb's Antifragile: a book review

Nassim Nichloas Taleb is an incredible thinker and writer. His book "Antifragile" is a delightful blend of ecomomics, philosophy, and life advice.

I read his first major work "Fooled by Randomness" (also the title of his website) in 2009, and his second "The Black Swan" shortly after. But his magnum opus to date is "Antifragile." 

First, the title refers to his thesis that the best systems or organisms (or economies) thrive on stressors. Antifragile things are not merely robust or resilient: the stress/shock makes them better and stronger, hence the term Taleb coined to describe the opposite of fragile. Most everything in the book riffs off of that premise. Below I discuss a few lessons from the book which have influenced me. 

Wu-wei (wait and see)

Wu-wei translates to "without action, without effort, or without control." I think of it as "actively doing nothing." 

"Hell, you don't need a million dollars to do nothing," said the neighbor from Office Space. Not that kind of nothing. 

Wu-wei is a conscious decision to not act, to wait, see what plays out. I do this all the time, and not always because I'm procrastinating. Some problems work themselves out without any intervention on my part. One would think this doesn't apply to plumbing, and it usually doesn't when you have a major leak. But even minor leaks fix themselves sometimes: rust or corrosion forms, and the pinhole in your pipe closes. Just this week I recommended a friend buy Ford stock: it's got a great dividend and Wall Street hates it for irrational and temporary reasons. The friend has hesitated, and Ford's stock has continued to drop. By not following my advice, my friend has saved money. Hmm...

Medical iatrogenics versus "via negativa" 

To solve a medical problem, rather than add a pill (intervention or iatrogenics), the right approach might be to remove something (via negativa). Remove a food from your diet, remove a stressor from your life. There is really something to removing or reducing food (salt, caffeine, or sugar).

Taleb is not anti-intervention, he just wants people to recognize that everything in life has trade-offs. The medical word for these is "side effects." I had knee surgery in 2014 and the doctor prescribed me hydrocodone, an opioid of the sort that is highly addictive. The warnings label included constipation, dizziness...I could have sworn it even said something about paranoia! (But maybe I'm just being paranoid). With Taleb's philosophy fresh in my mind, I decided that the known - "my knee hurts" - was a better side effect than whatever would come from taking hydrocodone, so I flushed them all (sorry, fish!) and ate Motrin every four hours (sorry, stomach lining!).

The writer and economist Thomas Sowell said, "There are no solutions in life, only trade-offs." These are words I live by. Usually it is a politician telling you he can solve a problem. "Tax the rich a little more and everyone can have free college."

My aforementioned knee surgery didn't help me at all. My knee still hurts and swells and I can't run. I went through a few months of pain and physical therapy. I consider the physical therapy a positive in that my leg got stronger and I lost weight doing it. But essentially I chose medical intervention and it didn't help a whit. 

Oh, well! A knee is fairly minor, and so are the risks of knee surgery. But what if it's your brain, or your reproductive system? (These are separate organs in females, generally not so much for males). Always remember that the dentist or surgeon is not necessarily an uninterested party. Your months of pain may be a 50/50 proposition in which the only guarantee is that it will help buy the surgeon a nice boat.

The Paleo diet (shocking the body)

My experience with weight control is that it's 90% diet and 10% exercise. In other words, removing something- extra sugar and calories- is nine times more effective than adding something- exercise. But--there''s always a "but"-- adding even a little exercise is some sort of key that unlocks your body's ability to lose weight. Shortly after my knee surgery, I decided I was tired of my weight- 210 at the time. In about six weeks of eating (almost) no sugar or bread, I lost 15-20 pounds and bought new pants. The only exercise I did was physical therapy 2-3 days a week, which consisted of 15 minutes on a bike or rower followed by various leg weightlifting tortures.

Epilogue: I'm now 215 and in my third year of fixing to start a new diet any day now.

Placing many small bets 

Any Army officer knows that risk is a function of the following:

(probability of event occurring) x (impact)

In your investing life, Taleb advocates placing small, low-probability, high-payoff bets to give you more opportunities to win and also minimize your downside (risk). Ask yourself, what's something that's possible but unlikely, but if it happened would have a huge impact? Taleb did this himself by betting against the banks in the mid-2000s when the housing bubble was in full ridiculousness. He didn't go all-in, and you don't have to either: he just made small bets, some of which paid off in 2008-09 when banks that had been built on garbage mortgages collapsed, requiring taxpayer bailouts.

If you think things like this don't happen, imagine if November 2016, you placed a bet that Donald Trump would beat Hillary Clinton in the presidential election. Or the Patriots would come back from a 25-point deficit to win last year's Super Bowl. Both propositions had 20:1 odds or better, but they happened!

My good friend did this a few years ago by putting $5,000 in each of five "penny stocks" his cousin had recommended. Each company had a share price of ~$5. Since he bought them, four of the five stocks have stagnated or drifted toward zero. One, however, is now worth  $60/share. Let's do that math:

               $25,000 invested in 5 stocks (1000 shares each at $5)

               Current value of the 4 bad ones: $10,000 (4000 shares total at $2.50)

               Current value of the good one: 100 shares at $60 = $60,000

Looking at it holistically, he placed 5 low-probability, high-payoff bets. One of them paid off bigly. So he turned $25,000 into $70,000. Had he put all 25,000 into one of the five companies' stocks, he would have had a 20% chance of having $325,000. Sounds good! But-- he would have had an 80% chance of losing all or most of his money. That's more math than any of us care to do, so I'll leave it there.

It's about time I re-read Antifragile. I don't claim to understand it all- and I especially don't claim to have the courage to follow his every proscription. But I find Taleb witty and absolutely original. He calls charlatans what they are. I just learned writing this piece that Taleb's next work is due February 27: yay! It's called "Skin in the Game" and explores his belief that "If you see fraud and don't shout fraud, you are a fraud."

My favorite Taleb observation is that if economists, with their love of efficiency, designed the human body, people would have one lung and one kidney. If that makes you chuckle and think at the same time, you'll understand why I like this guy.