Antifragile: Things That Gain from Disorder (73 page)

Accordingly if you were betting on the downfall of, say, a portfolio of financial institutions because of their fragilities, it would have cost you pennies over the years preceding their eventual demise in 2008, as Nero and Tony did. (Note again that taking the other side of fragility makes you antifragile.) You were wrong for years, right for a moment, losing small, winning big, so vastly more successful than the other way (actually the other way would be bust). So you would have made the Thekels like Thales because betting against the fragile is antifragile. But someone who had merely “predicted” the event with just words would have been called by the journalists “wrong for years,” “wrong most of the time,” etc.

Should we keep tally of opinion makers’ “right” and “wrong,” the proportion does not matter, as we need to include consequences. And given that this is impossible, we are now in a quandary.

Look at it again, the way we looked at entrepreneurs. They are usually wrong and make “mistakes”—plenty of mistakes. They are convex. So what counts is the payoff from success.

Let me rephrase again. Decision making in the real world, that is, deeds, are Thalesian, while forecasting
in words
is Aristotelian. As we saw in the discussion in
Chapter 12
, one side of a decision has larger consequences than the other—we don’t have evidence that people are terrorists but we check them for weapons; we don’t believe the water is poisonous but we avoid drinking it; something that would be absurd for someone narrowly applying Aristotelian logic. To put in Fat Tony terms: suckers try to be right, nonsuckers try to make the buck, or:

To put it again in other words: it is rather a good thing to lose arguments.

More generally, for Mother Nature, opinions and predictions don’t count; surviving is what matters.

There is an evolutionary argument here. It appears to be the most underestimated argument in favor of free enterprise and a society driven by individual doers, what Adam Smith called “adventurers,” not central planners and bureaucratic apparatuses. We saw that bureaucrats (whether in government or large corporations) live in a system of rewards based on narratives, “tawk,” and the opinion of others, with job evaluation and peer reviews—in other words, what we call marketing. Aristotelian, that is. Yet the biological world evolves by survival, not opinions and “I predicted” and “I told you so.” Evolution dislikes the confirmation fallacy, endemic in society.

The economic world should, too, but institutions mess things up, as suckers may get bigger—institutions block evolution with bailouts and statism. Note that, in the long term, social and economic evolution nastily takes place by surprises, discontinuities, and jumps.
³

We mentioned earlier Karl Popper’s ideas on evolutionary epistemology; not being a decision maker, he was under the illusion that ideas compete with each other, with the least wrong surviving at any point in time. He missed the point that it is not ideas that survive, but people who have the right ones, or societies that have the correct heuristics, or the ones, right or wrong, that lead them to do the good thing. He missed the Thalesian effect, the fact that a wrong idea that is harmless can survive. Those who have wrong heuristics—but with a small harm in the event of error—will survive. Behavior called “irrational” can be good if it is harmless.

Let me give an example of a type of false belief that is helpful for survival. In your opinion, which is more dangerous, to mistake a bear for a stone, or mistake a stone for a bear? It is hard for humans to make the first mistake; our intuitions make us overreact at the smallest probability of harm and fall for a certain class of false patterns—those who
overreact upon seeing what may look like a bear have had a survival advantage, those who made the opposite mistake left the gene pool.

Our mission is to make talk less cheap.

We saw how the ancients understood the Stiglitz syndrome—and associated ones—rather well. In fact they had quite sophisticated mechanisms to counter most aspects of agency problems, whether individual or collective (the circular effect of hiding behind the collective). Earlier, I mentioned the Romans forcing engineers to spend time under the bridge they built. They would have had Stiglitz and Orszag sleep under the bridge of Fannie Mae and exit the gene pool (so they wouldn’t harm us again).

The Romans had even more powerful heuristics for situations few today have thought about, solving potent game-theoretic problems. Roman soldiers were forced to sign a
sacramentum
accepting punishment in the event of failure—a kind of pact between the soldier and the army spelling out commitment for upside and downside.

Assume that you and I are facing a small leopard or a wild animal in the jungle. The two of us can possibly overcome it by joining forces—but each one of us is individually weak. Now, if you run away, all you need to be is just faster than me, not faster than the animal. So it would be optimal for the one who can run away the fastest, that is, the most cowardly, to just be a coward and let the other one perish.

The Romans removed the soldiers’ incentive to be a coward and hurt others thanks to a process called
decimation
. If a legion loses a battle and there is suspicion of cowardice, 10 percent of the soldiers and commanders are put to death, usually by random lottery. Decimation—meaning eliminating one in ten—has been corrupted by modern language. The magic number is one in ten (or something equivalent): putting more than 10 per cent to death would lead to weakening of the army; too little, and cowardice would be a dominant strategy.

And the mechanism must have worked well as a deterrent against cowardice, since it was not commonly applied.

The English applied a version of it. Admiral John Byng was court-martialed and sentenced to death as he was found guilty of failing to “do his utmost” to prevent Minorca from falling to the French following the Battle of Minorca in 1757.

Playing on one’s inner agency problem can go beyond symmetry: give soldiers no options and see how antifragile they can get.

On April 29, 711, the armies of the Arab commander Tarek crossed the Strait of Gibraltar from Morocco into Spain with a small army (the name Gibraltar is derived from the Arabic
Jabal Tarek,
meaning “mount of Tarek”). Upon landing, Tarek had his ships put to the fire. He then made a famous speech every schoolchild memorized during my school days that I translate loosely: “Behind you is the sea, before you, the enemy. You are vastly outnumbered. All you have is sword and courage.”

And Tarek and his small army took control of Spain. The same heuristic seems to have played out throughout history, from Cortés in Mexico, eight hundred years later, to Agathocles of Syracuse, eight hundred years earlier—ironically, Agathocles was heading southward, in the opposite direction as Tarek, as he was fighting the Carthaginians and landed in Africa.

Never put your enemy’s back to the wall.

Ask a polyglot who knows Arabic who he considers the best poet—in any language—and odds are that he would answer Almutanabbi, who lived about a thousand years ago; his poetry in the original has a hypnotic effect on the reader (listener), rivaled only by the grip of Pushkin on Russian speakers. The problem is that Almutanabbi knew it; his name was literally “He who thinks of himself as a prophet,” on account of his perceived oversized ego. For a taste of his bombast, one of his poems informs us that his poetry is so potent “that blind people can read it” and “deaf people can listen to it.” Well, Almutanabbi was that rare case of a poet with skin in the game, dying for his poetry.

For in the same egotistical poem, Almutanabbi boasts, in a breathtaking display of linguistic magic, that he walks the walk, in addition to being the most imaginably potent poet—which I insist he was—he knew “the horse, the night, the desert, the pen, the book”—and thanks to his courage he got respect from the lion.

Well, the poem cost him his life. For Almutanabbi had—characteristically—vilified a desert tribe in one of his poems and they
were out to get him. They reached him as he was traveling. As he was outnumbered, he started to do the rational thing and run away, nothing shameful, except that one of his companions started reciting “the horse, the night …” back at him. He turned around and confronted the tribe to his certain death. Thus Almutanabbi remains, a thousand years later, the poet who died simply to avoid the dishonor of running away, and when we recite his verses we know they are genuine.

My childhood role model was the French adventurer and writer André Malraux. He imbued his writings with his own risk taking: Malraux was a school dropout—while extremely well read—who became an adventurer in Asia in his twenties. He was an active pilot during the Spanish Civil War and later an active member of the French underground resistance during the Second World War. He turned out to be a bit of a mythomaniac, unnecessarily glorifying his meetings with great men and statesmen. He just could not bear the idea of a writer being an intellectual. But unlike Hemingway, who was mostly into image building, he was the real thing. And he never engaged in small talk—his biographer reports that while other writers were discussing copyrights and royalties, he would steer the conversation to theology (he supposedly said
the twenty-first century will be religious or will not be
). One of my saddest days was when he died.

The system does not give researchers the incentive to be a Malraux. The great skeptic Hume was said to leave his skeptical angst in the philosophical cabinet, then go party with his friends in Edinburgh (though his idea of partying was rather too … Edinburgh). The philosopher Myles Burnyeat called this the “problem of insulation,” particularly with skeptics who are skeptics in one domain but not another. He provides the example of a philosopher who puzzles about the reality of time, but who nonetheless applies for a research grant to work on the philosophical problem of time during next year’s sabbatical—without doubting the reality of next year’s arrival. For Burnyeat, the philosopher “insulates his ordinary first order judgments from the effects of his philosophizing.” Sorry, Professor Doctor Burnyeat; I agree that philosophy is the only field (and its sibling, pure mathematics) that does not need to connect to reality. But then make it a parlor game and give it another name …

Likewise, Gerd Gigerenzer reports a more serious violation on the part of Harry Markowitz, who started a method called “portfolio selection” and received the same iatrogenic Swedish Riskbank prize (called “Nobel” in economics) for it, like other fragilistas such as Fragilista Merton and Fragilista Stiglitz. I spent part of my adult life calling it charlatanism, as it has no validity outside of academic endorsements and causes blowups (as explained in the Appendix). Well, Doctor Professor Fragilista Markowitz does not use his method for his own portfolio; he has recourse to more sophisticated (and simpler to implement) cabdrivers’ methodologies, closer to the one Mandelbrot and I have proposed.

I believe that forcing researchers to eat their own cooking whenever possible solves a serious problem in science. Take this simple heuristic—does the scientific researcher whose ideas are applicable to the real world apply his ideas to his daily life? If so, take him seriously. Otherwise, ignore him. (If the fellow is doing pure mathematics or theology, or teaching poetry, then there is no problem. But if he is doing something applicable, then: red flag.)

This brings us to Triffat-type fakeness compared to Seneca, the talker versus the doer. I applied this method of ignoring what an academic writes and focusing on what he does when I met a researcher on happiness who held that
anything one makes beyond $50,000 does not bring any additional happiness
—he was then earning more than twice that at a university, so according to his metric he was safe. The argument seen through his “experiments” published in “highly cited papers” (that is, by other academics) seemed convincing on paper—although I am not particularly crazy about the notion of “happiness” or the vulgarity of the modern interpretation of “seeking happiness.” So, like an idiot, I believed him. But a year or so later, I heard that he was particularly avid for dollars and spent his time on the road speaking for fees. That, to me, was more sufficient evidence than thousands of citations.

Another blatant case of insulation. Sometimes the divorce between one’s “tawk” and one’s life can be overtly and convincingly visible: take people who want others to live a certain way but don’t really like it for themselves.

Never listen to a leftist who does not give away his fortune or does
not live the exact lifestyle he wants others to follow. What the French call “the caviar left,”
la gauche caviar,
or what Anglo-Saxons call champagne socialists, are people who advocate socialism, sometimes even communism, or some political system with sumptuary limitations, while overtly leading a lavish lifestyle, often financed by inheritance—not realizing the contradiction that they want others to avoid just such a lifestyle. It is not too different from the womanizing popes, such as John XII, or the Borgias. The contradiction can exceed the ludicrous as with French president François Mitterrand of France who, coming in on a socialist platform, emulated the pomp of French monarchs. Even more ironic, his traditional archenemy, the conservative General de Gaulle, led a life of old-style austerity and had his wife sew his socks.