Nassim Nicholas Taleb is, to my mind, one of the great authorities when it comes to uncertainty and probability. My dog-eared and pencil-tattooed copies of Fooled by Randomness and The Black Swan  are two of my more treasured possessions.

His most recent book, Antifragility, is, in my view, the most uneven of these three books. It’s obnoxious in places. It’s longer than it needs to be. It’s a hedgehog circled by two foxes. But a flawed masterpiece is nevertheless a masterpiece, and it is a resource I will revisit many times. 

What is “antifragility”? 

The title of the book is the answer to Taleb’s question: what is the opposite of fragility? What is the opposite of something that suffers from exposure to volatility, randomness, disorder, and stressers? 

It’s not resilience or robustness. Something that is resilient or robust may withstand shocks, volatility, randomness, disorder and/or stressors. But it doesn’t doesn’t necessarily thrive, or benefit, from these things. 

Taleb calls something that thrives or benefits from these things as having the characteristic of antifragility.

Barbell strategies

Uncertainty is inevitable. To increase the likelihood of long-term outcomes, it’s important to address this head-on. What can we do to apply this concept of antifragility and “domesticate” uncertainty? 

There are two aspects at work. The first is exposure to downside. The second is exposure to upside. 

Taleb refers to a barbell strategy, using “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)”. (A Black Swan is a highly improbable but impactful event. Whether it is negative or positive relates to how it impacts us.)

Reducing exposure to the downside  

Taleb notes that “The first step toward antifragility consists in first decreasing downside, rather than increasing upside; that is, by lowering exposure to negative Black Swans”. 

He suggests that in an inherently unpredictable world, it is more important to consider exposure to significant downside risks than the likelihood that such a thing may occur. In most cases, it’s genuinely impossible to calculate the real likelihood of an event occurring. We need to remove “the chances of ruin in any area”. 

Increasing exposure to the upside

Positive Black Swans, however, don’t take care of themselves. We need to be exposed to them in the first place. We need to hunt for these figurative “Black Swans” in some way other than buying lottery tickets.

After removing the chances of ruin, we can work on the other end of the barbell – by exposing ourselves to positive Black Swans.

Applying this philosophy to your professional career

One domain in which this philosophy can be applied is in the course of one’s career. The barbell strategy can be applied in different ways. For example, by focusing on both ends of the barbell :

  • at the same time – ie, by working in a secure job, while pursuing a business on the side which has the prospect of being especially lucrative;
  • sequentially – ie, by working in a secure role, and then trying something more ambitious for a period of time before reverting to another secure role (if necessary) before your allocated savings run out; or
  • in conjunction with a spouse or partner – ie, with one partner maintaining a steady income while the other pursues something with a higher degree of risk and potential reward.

The first part, relating to decreasing downside, might be by becoming employable in almost any economic environment. This might be achieved by developing a combination of skills, knowledge, credentials, and professional relationships which are valued in the marketplace, regardless of the status of the economy.

This is only one end of the barbell. There can itself be a (significant) degree of risk with focusing on just this one end. For example, many people who work in large corporate environments can find that “retirement” isn’t so much a choice but a euphemism for being displaced by the workforce. (If you’re employed, you essentially have one client to whom you are heavily exposed: if you’re self-employed, you have a number of them, and can generally afford to lose one or more.) 

The second part is to pursue opportunities that can be lucrative. (And when I say “lucrative”, I implore you to think of it more broadly than just the financial sense). 

An example might be Ken Jeong, who plays Mr Chow in The Hangover  movies and Señor Chang in the TV show Community. Jeong is a doctor. His wife is also a doctor. In the event that his comedy and acting career did not work out, he had a secure safety net. 

An important aspect of this approach is that one should aim not to expose themselves to financial ruin. A person spending their life’s savings, or all of the equity in their home, or spending money that they will cause them to struggle for a substantial portion of their life, is not pursuing a barbell strategy.

A more abstract example might be someone who accumulates a solid amount of knowledge and experience in a particular industry in an employment role, who is confident of their employability and has a supportive, steady-earning spouse. This person might try  his or her hand at establishing their own business, with a keen eye on the amount of capital and time they can afford to invest in the venture.

What I list above are examples only. The key point is that the purpose of using a barbell strategy is, to the largest extent possible, to domesticate uncertainty. It’s possible to pursue either end of the barbell and achieve your desired outcomes.

For every Ken Jeong there are many struggling “actors” who spend their time waiting tables or working at bars. Some of these eventually become the Brad Pitts of the world.

Many of the most dramatic business successes are those people who have a lopsided barbell, focusing entirely on the high risk-high return side of the equation. However, for every person who does this there are many more who will not be the focus of our attention.

This approach doesn’t guarantee success. But it certainly addresses the downside and gives you a chance at the upside.

Some speculation on why Antifragile is such an obnoxious book

I mentioned that Antifragility is obnoxious in places. It contains a number of ad hominem attacks and includes some diatribes that come across as mean-spirited. I suspect that this was intentional, to demonstrate the points that Taleb was making. One point that Taleb reinforces is that it’s much riskier to be in a position where you can’t offend anyone. Better to offend the majority of people and have the strong support of the few people you want, then to be palatable to everyone but compelling to no one at all. 

Sonnie Bailey

Sonnie is an Authorised Financial Adviser (AFA) and former lawyer with experience in the financial services and trustee industries. Sonnie operates Fairhaven Wealth (www.fairhavenwealth.co.nz).

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