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Antifragile
Things That Gain
From Disorder
by Nassim Nicholas Taleb
Random House
After “Lawrence of Arabia” swept the 1962 Academy Awards and made a mountain of money, director David Lean had a question for Sam Spiegel, the film’s producer. Before and during filming, Spiegel repeatedly told Lean the project was a disaster, suddenly ordered him to move production from Jordan to Spain to save money and terrorized Lean (who had to have surgery on an eye after suffering a sand-related injury in the desert) into a frantic seven-days-a-week editing pace by giving him only four months to finish the film in time for a royal gala by Christmas.
“You were absolutely horrible to me,” Lean told Spiegel, and asked him why. Spiegel’s answer: “Baby, artists work better under pressure.”
Nassim Nicholas Taleb, the Lebanon-born NYU professor of risk engineering and former Wall Street pit trader whose book “The Black Swan,” about the potential results of extremely unlikely events, is widely credited with predicting the financial crisis, believes there is a lot of truth to clichés like “What doesn’t kill me makes me stronger” and “When life gives you lemons, make lemonade.”
But until now there’s never been a word for the concept of something that actually benefits from (rather than merely resists) stress. Think of the difference between a dragon that is hard to kill and a Hydra that regrows two heads for every one you cut off.
Taleb’s new word is in the title of his new book “Antifragile.” It’s a kind of philosophical essay that reinforces and expands upon 20th-century economist Joseph Schumpeter’s concept of creative destruction. Some things need to break in order for the whole to improve, and we resist this tendency — by coddling fragile systems such as banking — at our peril. Yet at this moment, the coddlers, or “fragilistas,” as Taleb calls them, are very much in charge.
If antifragility means redundancy — when you keep extra commodities on hand in case of natural disaster, you are actually better off after a hurricane because the price of the items you hold skyrockets — then debt is a particularly dangerous kind of fragility. Debt can spiral, accelerate. At a firm, doubts about your solvency can lead to a “margin call,” which in turn means you have to raise more money.
“It is only when you don’t care about your reputation that you tend to have a good one,” Taleb writes. “Just as in matters of seduction, people lend the most to those who need them the least.”
So, where is our debt situation heading? Taleb doesn’t offer a prediction but notes dryly that “fragilista” Alan Greenspan’s response to the financial crisis was, “It never happened before.”
Taleb calls this failure of imagination “the Lucretius problem,” after the philosopher who noted that only a fool thinks that the tallest mountain in the world will be the size of the tallest one he has ever seen.
The much-vaunted Dodd-Frank law meant to prevent the next bank crisis centrally consisted of appointing future commissions of smart people whose job it will be to make sure nothing bad ever happens again. That’ll work!
Taleb, while pointing out that he is not against intervention per se, scoffs at naive interventionists and calls what they do “iatrogenics” — damage caused by the healer. George Washington, for instance, died after doctors prescribed massive bloodletting. Micromanaging small forest fires, which clear out dead wood, can lead to more catastrophic fires later.
Greenspan, with his constant small adjustments to interest rates that were meant to prevent swings in the stock market and keep the economy growing steadily, instead inflated a monster liquidity bubble that was doomed to pop, earning him the title “the top economic iatrogenist of all time” from Taleb. Greenspan’s avowed libertarianism, ironically, stamps him in many minds as someone who encouraged disaster by doing nothing when (like Herbert Hoover in an earlier age) the truth is the opposite.
Taleb can be eccentric: He says he won’t drink any liquids that are less than 1,000 years old — just coffee, wine and water. (Don’t get him started on the evils of that insufficiently tested potion you call orange juice.) And like many engineering types born without a humor nodule, he can be unintentionally funny, such as when he describes his beloved antifragility as “nonsissy.”
But the book is alive with ideas that invite closer study, and Taleb’s mathematical jargon, aggressive contrarianism and catchy new words often seem like mere common sense.
He notes that iatrogenics infects political science, urban planning, education, and other domains, and that no experts he talked to in any of those fields believed they could possibly be doing any damage. To these he cites the Koran: “Those who are wrongful while thinking of themselves that they are righteous.”