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November 23, 2012 6:38 pm
Antifragile: How to Live in a World We Don’t Understand, by Nassim Nicholas Taleb, Allen Lane, RRP£25/Random House, RRP$30, 544 pages
In recent weeks Mervyn King, governor of the Bank of England, has taken to quoting Nassim Nicholas Taleb, the maverick Lebanese-American trader-cum-author-cum-statistician. Taleb shot to fame five years ago with The Black Swan, which explained why modern societies are apt to be hit by low-probability surprises that can sometimes (but not always) be damaging. The timing of that book was either brilliantly canny or lucky, since it emerged just as the world was about to plunge into a financial crisis. Taleb’s work became a bestseller, a literary black swan in itself.
Now Taleb is back. Antifragile goes much further in developing his Black Swan idea. Little wonder that men such as King are paying attention: after pouring a vast amount of taxpayers’ money into the financial system, British regulators, like those elsewhere in the western world, urgently need to know whether or not the economy is any less prone to violent shocks.
So what advice can Taleb offer? His central argument is encapsulated in the title. Until now, Taleb says, modern society has generally assumed that people, systems or institutions fell into two camps: either they were fragile (and likely to break when shocks occur) or robust (and thus able to resist shocks without being impacted at all). Taleb insists there is a third category of people, institutions and systems that are resilient in a way we have been unable to articulate: they survive shocks not because they are immovable but precisely because they do change, bending in the face of stress; adapting and learning. This is the quality that he describes as “antifragile”. (In the US the book is being published with the rather more explicit subtitle “Things that Gain from Disorder”.)
Taleb goes on to explain how this works: while nation-states tend to be fragile (because they are highly dependent on one vision of the nation), city-states tend to be antifragile (because they can adapt and learn from history). Careers that are based on one large employer can be fragile but careers that are flexible and entrepreneurial are antifragile, because they can move with changing times. Similarly, the banking system is fragile, while Silicon Valley is antifragile; governments that are highly indebted are fragile, while those (such as Sweden) which have learnt from past mistakes and refuse to assume too much debt are antifragile. And Switzerland is presented as one of the most antifragile places of all, partly because its decentralised structure allows for plenty of experimentation.
Expressed like this, Taleb’s argument about the merits of resilience – and change – might seem almost laughably simple. However, the book develops the theme on multiple levels. Some of his arguments are highly technical: he uses mathematical techniques to prove how the antifragile concept can be measured, and to demonstrate why popular statistical measures of probability are wrong.
The bulk of the text is made up of personal anecdotes and philosophical musings that draw widely from Taleb’s eclectic, polymath mind. They reflect his family’s experience of the Lebanese civil war – and his own previous life as a successful financial trader, who used his iconoclastic analysis to predict earlier financial crashes and make money.
Taleb has plenty of advice to offer us on how to become more antifragile. We should embrace unpredictable change, rather than chase after an illusion of stability; refuse to believe anyone who offers advice without taking personal risk; keep institutions and systems small and self-contained to ensure that they can fail without bringing the entire system down; build slack into our lives and systems to accommodate surprises; and, above all, recognise the impossibility of predicting anything with too much precision. Instead of building systems that are excessively “safe”, Taleb argues, we should roll with the punches, learn to love the random chances of life and, above all, embrace small pieces of adversity as opportunities for improvement. “Wind extinguishes a candle and energises a fire,” he writes. “Likewise with randomness, uncertainty, chaos, you want to use them, not hide from them.”
As life advice goes, it all sounds very wise, if not cheering; although Taleb at times almost slips into the tone of the popular self-help guides that he professes to loathe (he opines on everything from French banking to the merits of orange juice). Indeed, the core philosophy is so darn sensible, in a home-spun way, that some readers may wonder why Taleb felt the need to present his work in such a long form (it is divided grandly into seven books-within-a-book, with titles such as “Book IV: Optionality, Technology, and the Intelligence of Antifragility”) or to write with a tone that at times veers towards the didactic.
Taleb is often hostile towards the mainstream economic profession, and in Antifragile he unleashes invective against many intellectual rivals and American establishment figures, such as Robert Rubin (the former Treasury secretary), Thomas Friedman (the New York Times columnist), Alan Blinder (the former Federal Reserve governor) and Joseph Stiglitz (the economist). While these attacks will not win Taleb many friends, the spicy language on display in his work certainly adds to its entertainment value.
In the end, it is the very simplicity of his core idea that makes Antifragile so appealing – and powerful. It remains to be seen whether his idea of the antifragile will ever influence policymakers on a large scale. Although it is relatively easy for our bodies to experience small amounts of stress and pain in order to become stronger (by going to the gym, for example) we cannot deliver similar training for the economy as a whole.
To quote Mervyn King: “‘Antifragility’ does not imply that it might be desirable to engineer small recessions in order to head off a deep depression. We know far too little about the economy to attempt any such strategy.” But, as King also notes, the western policymaking world could do with more humility about the limits of forecasting, and more readiness to learn from shocks, both good and bad.
As Taleb says: “The best way to verify that you are alive is by checking if you like variations.” That goes for everyone – even those who work in a central bank; or, for that matter, those who are simply trying to survive in the economy of 2012.
Gillian Tett is an FT assistant editor and columnist. She is author of ‘Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe’ (Abacus)
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