There are incredible rare situations that can completely realign an idea, or company, or financial market. Traditionally, we do not focus on them, declaring that they are anomalous due to their probability of occurrence. Instead, we must account from them because they cause all of our great gains and great losses. How can we build ideas/companies/societies that plan for these insane and rare events (i.e. a financial recession, a freak storm, winning the lottery). Taleb uses a constant flow of awesome stories (some true, some made up) to effectively convey his thoughts. (And always great fun to learn from a brilliant man who know longer cares what people think of him).
Quotes: [brackets are my words]
[a made up epistemological conversation] FAT TONY: “Then, my good Socrates, why do you think that we need to fix the meaning of things?” SOCRATES: “My dear Mega-Tony, we need to know what we are talking about when we talk about things. The entire idea of philosophy is to be able to reflect and understand what we are doing, examine our lives. An unexamined life is not worth living.” FAT TONY: “The problem, my poor old Greek, is that you are killing the things we can know but not express. And if I asked someone riding a bicycle just fine to give me the theory behind his bicycle riding, he would fall from it. By bullying and questioning people you confuse them and hurt them.” Then, looking at him patronizingly, with a smirk, very calmly: FAT TONY: “My dear Socrates … you know why they are putting you to death? It is because you make people feel stupid for blindly following habits, instincts, and traditions. You may be occasionally right. But you may confuse them about things they’ve been doing just fine without getting in trouble. You are destroying people’s illusions about themselves. You are taking the joy of ignorance out of the things we don’t understand. And you have no answer; you have no answer to offer them.” PRIMACY OF DEFINITIONAL KNOWLEDGE You can see that what Fat Tony is hitting here is the very core of philosophy: it is indeed with Socrates that the main questions that became philosophy today were first raised, questions such as “what is existence?,” “what are morals?,” “what is a proof?,” “what is science?,” “what is this?” and “what is that?” The question we saw in Euthyphro pervades the various dialogues written by Plato. What Socrates is seeking relentlessly are definitions of the essential nature of the thing concerned rather than descriptions
Yet in spite of the visibility of the counterevidence, and the wisdom you can pick up free of charge from the ancients (or grandmothers), moderns try today to create inventions from situations of comfort, safety, and predictability instead of accepting the notion that “necessity really is the mother of invention.”
“My son, I am very disappointed in you,” he said. “I never hear anything wrong said about you. You have proven yourself incapable of generating envy.”
A related idea is expressed in a (perhaps apocryphal) statement by the financier Warren Buffett that he tries to invest in businesses that are “so wonderful that an idiot can run them. Because sooner or later, one will.”
At first I thought that economic theories were not necessary to understand short-term movements in exchange rates, but it turned out that the same limitation applied to long-term movements as well. Many economists toying with foreign exchange have used the notion of “purchasing power parity” to try to predict exchange rates on the basis that in the long run “equilibrium” prices cannot diverge too much and currency rates need to adjust so a pound of ham will eventually need to carry a similar price in London and Newark, New Jersey. Put under scrutiny, there seems to be no operational validity to this theory—currencies that get expensive tend to get even more expensive, and most Fat Tonys in fact made fortunes following the inverse rule. But theoreticians would tell you that “in the long run” it should work. Which long run? It is impossible to make a decision based on such a theory, yet they still teach it to students, because being academics, lacking heuristics, and needing something complicated, they never found anything better to teach.
I disbelieve in structured learning—actually I believe that one can be an intellectual without being a nerd, provided one has a private library instead of a classroom, and spends time as an aimless (but rational) flâneur benefiting from what randomness can give us inside and outside the library. Provided we have the right type of rigor, we need randomness, mess, adventures, uncertainty, self-discovery, near-traumatic episodes, all these things that make life worth living, compared to the structured, fake, and ineffective life of an empty-suit CEO with a preset schedule and an alarm clock.
I confess I still use that method at the time of this writing. Avoidance of boredom is the only worthy mode of action. Life otherwise is not worth living.
“He muttered the hyperbole that hit home: “much of what other people know isn’t worth knowing.”
To this day I still have the instinct that the treasure, what one needs to know for a profession, is necessarily what lies outside the corpus, as far away from the center as possible. But there is something central in following one’s own direction in the selection of readings: what I was given to study in school I have forgotten; what I decided to read on my own, I still remember.
Socrates did not like the definitive and immutable character that is associated with the written word when for him answers are never final and should not be fixed.
We practitioners and quants aren’t too fazed by remarks on the part of academics—it would be like prostitutes listening to technical commentary by nuns.
So when deciding on one source of fuel against another, or similar comparisons, we do not realize that model error may hit one side more than the other.
What I can say for now is that much of what is taught in economics that has an equation, as well as econometrics, should be immediately ditched—which explains why economics is largely a charlatanic profession. Fragilistas, semper fragilisti!
In life, antifragility is reached by not being a sucker.
For the Arab scholar and religious leader Ali Bin Abi-Taleb (no relation), keeping one’s distance from an ignorant person is equivalent to keeping company with a wise man.
Finally, consider this modernized version in a saying from Steve Jobs: “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.”
And you do not need reams of paper full of data to destroy the megatons of papers using statistics in economics: the simple argument that Black Swans and tail events run the socioeconomic world—and these events cannot be predicted—is sufficient to invalidate their statistics.
If you have more than one reason to do something (choose a doctor or veterinarian, hire a gardener or an employee, marry a person, go on a trip), just don’t do it. It does not mean that one reason is better than two, just that by invoking more than one reason you are trying to convince yourself to do something. Obvious decisions (robust to error) require no more than a single reason.
Amateurs in any discipline are the best, if you can connect with them. Unlike dilettantes, career professionals are to knowledge what prostitutes are to love.
They have been scraping the bottom of the barrel, looking for disease among healthier and healthier people, lobbying for reclassifications of conditions, and fine-tuning sales tricks to get doctors to overprescribe. Now, if your blood pressure is in the upper part of the range that used to be called “normal,” you are no longer “normotensive” but “pre-hypertensive,” even if there are no symptoms in view. There is nothing wrong with the classification if it leads to healthier lifestyle and robust via negativa measures—but what is behind such classification, often, is a drive for more medication.
The mechanism of cheapest-to-deliver-for-a-given-specification pervades whatever you see on the shelves. Corporations, when they sell you what they call cheese, have an incentive to provide you with the cheapest-to-produce piece of rubber containing the appropriate ingredients that can still be called cheese—and do their homework by studying how to fool your taste buds. Actually, it is more than just an incentive: they are structurally designed and extremely expert at delivering the cheapest possible product that meets their specifications. The same with, say, business books: publishers and authors want to grab your attention and put in your hands the most perishable journalistic item available that still can be called a book. This is optimization at work, in maximizing (image and packaging) or minimizing (costs and efforts).
Marketing beyond conveying information is insecurity.
I have had the same experience with journalists citing each other about my books without the smallest effort to go to my writings—my experience is that most journalists, professional academics, and other in similar phony professions don’t read original sources, but each other, largely because they need to figure out the consensus before making a pronouncement.
Header photo © uwaterloo.ca
Body photo © permaculturenews.org