Antifragile: Things That Gain from Disorder (34 page)

As to growth in GDP (gross domestic product), it can be obtained very easily by loading future generations with debt—and the future economy may collapse upon the need to repay such debt. GDP growth, like cholesterol, seems to be a Procrustean bed reduction that has been used to game systems. So just as, for a plane that has a high risk of crashing, the notion of “speed” is irrelevant, since we know it may not get to
its destination, economic growth with fragilities is not to be called growth, something that has not yet been understood by governments. Indeed, growth was very modest, less than 1 percent per head, throughout the golden years surrounding the Industrial Revolution, the period that propelled Europe into domination. But as low as it was, it was robust growth—unlike the current fools’ race of states shooting for growth like teenage drivers infatuated with speed.

This brings us to the solution in the form of a barbell—about all solutions to uncertainty are in the form of barbells.

What do we mean by barbell? The barbell (a bar with weights on both ends that weight lifters use) is meant to illustrate the idea of a combination of extremes kept separate, with avoidance of the middle. In our context it is not necessarily symmetric: it is just composed of two extremes, with nothing in the center. One can also call it, more technically, a bimodal strategy, as it has two distinct modes rather than a single, central one.

I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas (robust to negative Black Swans) and taking a lot of small risks in others (open to positive Black Swans), hence achieving antifragility. That is extreme risk aversion on one side and extreme risk loving on the other, rather than just the “medium” or the beastly “moderate” risk attitude that in fact is a sucker game (because medium risks can be subjected to huge measurement errors). But the barbell also results, because of its construction, in the reduction of downside risk—the elimination of the risk of ruin.

Let us use an example from vulgar finance, where it is easiest to explain, but misunderstood the most. If you put 90 percent of your funds in boring cash (assuming you are protected from inflation) or something called a “numeraire repository of value,” and 10 percent in very risky, maximally risky, securities, you cannot possibly lose more than 10 percent, while you are exposed to massive upside. Someone with 100 percent in so-called “medium” risk securities has a risk of total ruin from the miscomputation of risks. This barbell technique remedies the problem that risks of rare events are incomputable and fragile to estimation error; here the financial barbell has a maximum known loss.

For antifragility is the combination
aggressiveness plus paranoia
—clip
your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself. We saw Seneca’s asymmetry: more upside than downside can come simply from the reduction of extreme downside (emotional harm) rather than improving things in the middle.

A barbell can be any dual strategy composed of extremes, without the corruption of the middle—somehow they all result in favorable asymmetries.

Again, to see the difference between barbells and nonbarbells, consider that restaurants present the main course, say, grass-fed minute steak cooked rare and salad (with Malbec wine), then, separately, after you are done with the meat, bring you the goat cheese cake (with Muscat wine). Restaurants do not take your order, then cut the cake and the steak in small pieces and mix the whole thing together with those machines that produce a lot of noise. Activities “in the middle” are like such mashing. Recall Nero in
Chapter 9
hanging around with janitors and scholars, rarely with middlebrows.

In risky matters, instead of having all members of the staff on an airplane be “cautiously optimistic,” or something in the middle, I prefer the flight attendants to be maximally optimistic and the pilot to be maximally pessimistic or, better, paranoid.

Biological systems are replete with barbell strategies. Take the following mating approach, which we call the 90 percent accountant, 10 percent rock star. (I am just reporting, not condoning.) Females in the animal kingdom, in some monogamous species (which include humans), tend to marry the equivalent of the accountant, or, even more colorless, the economist, someone stable who can provide, and once in a while they cheat with the aggressive alpha, the rock star, as part of a dual strategy. They limit their downside while using extrapair copulation to get the genetic upside, or some great fun, or both. Even the timing of the cheating seems nonrandom, as it corresponds to periods with high likelihood of pregnancy. We see evidence of such a strategy with the so-called monogamous birds: they enjoy cheating, with more than a tenth of the broods coming from males other than the putative father. The phenomenon is real, but the theories around it vary. Evolutionary theorists claim
that females want both economic-social stability and good genes for their children. Both cannot be always obtained from someone in the middle with all these virtues (though good gene providers, those alpha males aren’t likely to be stable, and vice versa). Why not have the pie and eat it too? Stable life and good genes. But an alternative theory may be that they just want to have pleasure—or stable life and good fun.
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Also recall from
Chapter 2
that overcompensation, to work, requires some harm and stressors as tools of discovery. It means letting children play a little bit, not much more than a little bit, with fire and learn from injuries, for the sake of their own future safety.

It also means letting people experience some, not too much, stress, to wake them up a bit. But, at the same time, they need to be protected from high danger—ignore small dangers, invest your energy in protecting them from consequential harm. And only consequential harm. This can visibly be translated into social policy, health care, and many more matters.

One finds similar ideas in ancestral lore: it is explained in a Yiddish proverb that says “Provide for the worst; the best can take care of itself.” This may sound like a platitude, but it is not: just observe how people tend to provide for the best and hope that the worst will take care of itself. We have ample evidence that people are averse to small losses, but not so much toward very large Black Swan risks (which they underestimate), since they tend to insure for small probable losses, but not large infrequent ones. Exactly backwards.

Now let us continue our exploration of barbells. There are so many fields in which the middle is no “golden middle” and where the bimodal strategy (maximally safe plus maximally speculative) applies.

Take literature, that most uncompromising, most speculative, most demanding, and riskiest of all careers. There is a tradition with French and other European literary writers to look for a sinecure, say, the
anxiety-free profession of civil servant, with few intellectual demands and high job security, the kind of low-risk job that ceases to exist when you leave the office, then spend their spare time writing, free to write whatever they want, under their own standards. There is a shockingly small number of academics among French authors. American writers, on the other hand, tend to become members of the media or academics, which makes them prisoners of a system and corrupts their writing, and, in the case of research academics, makes them live under continuous anxiety, pressures, and indeed, severe bastardization of the soul. Every line you write under someone else’s standards, like prostitution, kills a corresponding segment deep inside. On the other hand, sinecure-cum-writing is a quite soothing model, next best to having financial independence, or perhaps even better than financial independence. For instance, the great French poets Paul Claudel and Saint-John Perse and the novelist Stendhal were diplomats; a large segment of English writers were civil servants (Trollope was a post office worker); Kafka was employed by an insurance company. Best of all, Spinoza worked as a lens maker, which left his philosophy completely immune to any form of academic corruption. As a teenager, I thought that the natural way to have a real literary or philosophical career was to enter the lazy, pleasant, and undemanding profession of diplomat, like many members of my family. There was an Ottoman tradition of using Orthodox Christians as emissaries and ambassadors, even ministers of foreign affairs, which was retained by the states of the Levant (my grandfather and great-grandfather had been ministers of foreign affairs). Except that I worried about the wind turning against the Christian minority, and was proved right. But I became a trader and did my writing on my own time, and, as the reader can see, on my own terms. The barbell businessman-scholar situation was ideal; after three or four in the afternoon, when I left the office, my day job ceased to exist until the next day and I was completely free to pursue what I found most valuable and interesting. When I tried to become an academic I felt like a prisoner, forced to follow others’ less rigorous, self-promotional programs.

And professions can be serial: something very safe, then something speculative. A friend of mine built himself a very secure profession as a book editor, in which he was known to be very good. Then, after a decade or so, he left completely for something speculative and highly risky. This is a true barbell in every sense of the word: he can fall back on his previous profession should the speculation fail, or fail to bring the expected
satisfaction. This is what Seneca elected to do: he initially had a very active, adventurous life, followed by a philosophical withdrawal to write and meditate, rather than a “middle” combination of both. Many of the “doers” turned “thinkers” like Montaigne have done a serial barbell: pure action, then pure reflection.

Or, if I have to work, I find it preferable (and less painful) to work intensely for very short hours, then do nothing for the rest of the time (assuming doing nothing is really doing nothing), until I recover completely and look forward to a repetition, rather than being subjected to the tedium of Japanese style low-intensity interminable office hours with sleep deprivation. Main course and dessert are separate.

Indeed, Georges Simenon, one of the most prolific writers of the twentieth century, only wrote sixty days a year, with three hundred days spent “doing nothing.” He published more than two hundred novels.

We will see many barbells in the rest of this book that share exactly the same asymmetry and somehow, when it comes to risk, produce the same type of protection and help in the harnessing of antifragility. They all look remarkably similar.

Let us take a peek at a few domains. With personal risks, you can easily barbell yourself by removing the chances of ruin in any area. I am personally completely paranoid about certain risks, then very aggressive with others. The rules are: no smoking, no sugar (particularly fructose), no motorcycles, no bicycles in town or more generally outside a traffic-free area such as the Sahara desert, no mixing with the Eastern European mafias, and no getting on a plane not flown by a professional pilot (unless there is a co-pilot). Outside of these I can take all manner of professional and personal risks, particularly those in which there is no risk of terminal injury.

In social policy, it consists in protecting the very weak and letting the strong do their job, rather than helping the middle class to consolidate its privileges, thus blocking evolution and bringing all manner of economic problems that tend to hurt the poor the most.

Before the United Kingdom became a bureaucratic state, it was barbelled into adventurers (both economically and physically) and an aristocracy. The aristocracy didn’t really have a major role except to help keep some sense of caution while the adventurers roamed the planet in
search of trading opportunities, or stayed home and tinkered with machinery. Now the City of London is composed of bourgeois bohemian bonus earners.

My writing approach is as follows: on one hand a literary essay that can be grasped by anyone and on the other technical papers, nothing in between—such as interviews with journalists or newspaper articles or op-ed pieces, outside of the requirements of publishers.

The reader may remember the exercise regimen of
Chapter 2
, which consists in going for the maximum weight one can lift, then nothing, compared to other alternatives that entail less intense but very long hours in the gym. This, supplemented with effortless long walks, constitutes an exercise barbell.

More barbells. Do crazy things (break furniture once in a while), like the Greeks during the later stages of a drinking symposium, and stay “rational” in larger decisions. Trashy gossip magazines and classics or sophisticated works; never middlebrow stuff. Talk to either undergraduate students, cab drivers, and gardeners or the highest caliber scholars; never to middling-but-career-conscious academics. If you dislike someone, leave him alone or eliminate him; don’t attack him verbally.
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So take for now that a barbell strategy with respect to randomness results in achieving antifragility thanks to the mitigation of fragility, the clipping of downside risks of harm—reduced pain from adverse events, while keeping the benefits of potential gains.

To return to finance, the barbell does not need to be in the form of investment in inflation-protected cash and the rest in speculative securities. Anything that removes the risk of ruin will get us to such a barbell. The legendary investor Ray Dalio has a rule for someone making speculative bets: “Make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil.” Such a rule gets one straight to the barbell.
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