02 Antifragile (Part 2)

The transcription discusses how history is often rewritten by losers in various fields, including technology, medicine, and finance. It highlights the importance of practical experience over academic theory, with examples of how innovations like the jet engine and option pricing formulas actually came from hands-on tinkering rather than formal scientific knowledge. It also touches on the challenges practitioners face when trying to share their real-world insights in academic settings, where historical narratives can be manipulated to fit certain perspectives. Overall, the message emphasizes the value of experiential learning and the tendency for theory to follow practice rather than the other way around. Anti-fragile things that gain from disorder by Nassim Nicholas Taleb chapter 15 Rewriting the history of technology How in science history is rewritten by the losers and how I saw it in my own business and how we can generalize Does knowledge of biology hurt medicine? Hiding the role of luck. What makes a good entrepreneur? History written by the losers The birds may perhaps listen combining stupidity with wisdom rather than the opposite where we look for the arrow of discovery a vindication of trial and error Because of a spate of biases Historians are prone to epiphenomena and other illusions of cause and effect To understand the history of technology you need accounts by non historians or historians with the right frame of mind who develop their ideas by watching the formation of technologies instead of just reading accounts concerning it I mentioned earlier Terence Keeley debunking of the so-called linear model and that he was a practicing scientist a practicing laboratory scientist or an engineer can witness the real-life production of say Pharmacological innovations or the jet engine and can thus avoid falling for epiphenomena Unless he was brainwashed prior to starting practice. I Have seen evidence as an eyewitness of results that own nothing to a catalyzing science rather Evolutionary tinkering that was dressed up and claimed to have come from academia table 5 the lecturing birds how to fly effect across domains Example of misattribution of results in textbooks The origination of the jet engine is marketed as physicists busted by Scranton But it actually came from tinkering engineers with no understanding of why it works The origination of architecture is marketed as Euclidean geometry and mathematics busted by Bojew on But it actually came from heuristics and secret recipes guilds The origination of cybernetics is marketed as Norbert Wiener busted by Mendel But it actually came from programmers wiki style The origination of derivatives formulas is marketed as black shoals and fragilista Merton busted by Haug and Taleb But it actually came from traders and practitioners Reynaud Bachelier Thorpe The origination of medicine is marketed as biological understanding busted by a long series of doctors But it actually came from luck trial and error side effects of other medicines or sometimes poisoning mustard gas The origination of the Industrial Revolution is marketed as growth in knowledge Scientific revolution busted by Keely, but it actually came from adventurers and hobbyists The origination of technology is marketed as formal science But it actually came from technology and businesses Long before I knew the results in table five of other scholars debunking the lecturing birds How to fly effect the problem started screaming at me as follows around 1998 I was sitting in a Chicago restaurant with a late Fred a an economist though a true thoughtful gentleman He was the chief economist of one of the local exchanges and had to advise them on new complicated financial products and wanted my opinion on these as I Specialized in and had published a textbook of sorts on the so-called very complicated exotic options He recognized that the demand for these products was going to be very large But he wondered how traders could handle these complicated exotics if they did not understand the Gershon off theorem The Gershon off theorem is something mathematically complicated that at the time was only known by a very small number of persons and We were talking about pit traders who as we saw in the last chapter would most certainly mistake Gershon off for a vodka brand Traders usually uneducated were considered over educated if they could spell their street address correctly While the professor was truly under the epiphenomenal impression that traders studied mathematics to produce an option price I for myself had figured out by trial and error and picking the brains of experienced people how to play with these complicated payoffs before I heard of these theorems Something hit me then nobody worries that a child ignorant of the various theorems of Aerodynamics and incapable of solving an equation of motion would be unable to ride a bicycle So why didn't he transfer the point from one domain to another? Didn't he realize that these Chicago pit traders respond to supply and demand Little more in competing to make a buck with no need for the Gershon off theorem Any more than a trader of pistachios in the souk of Damascus needs to solve general equilibrium equations to set the price of his product For a minute I wondered if I was living on another planet or if the gentleman's PhD and research career had led to this blindness and his strange Loss of common sense or if people without practical sense usually managed to get the energy and interest to acquire a PhD in the fictional world of equation economics. Is there a selection bias? I smelled a rat and got extremely excited but realized that for someone to be able to help me He had to be both a practitioner and a researcher with practice coming before research I knew of only one other person a trader turned researcher Espen Haug who had to have observed the same mechanism Like me he got his doctorate after spending time in trading rooms So we immediately embarked on an investigation about the source of the option pricing formula that we were using What did people use before? Is it thanks to the academically derived formula that we are able to operate or did the formula come through some? Anti-fragile evolutionary discovery process based on trial and error now expropriated by academics. I Already had a hint as I had worked as a pit trader in Chicago and had observed veteran traders who refused to touch mathematical formulas using simple heuristics and saying real men don't use sheets the sheets being the printouts of output from the Complex formulas that came out of computers yet These people had survived their prices were sophisticated and more efficient than those produced by the formula and it was obvious What came first for instance the prices accounted for extremist on and fat tails which the standard formulas ignored? How does some interest that diverge from mine? He was into the subject of finance and eager to collect historical papers by practitioners He called himself the collector even used it as a signature as he went to assemble and collect books and articles on option theory Written before the Great War and from there. We built a very precise image of what had taken place To our great excitement. We had proof after proof that traders had vastly vastly more sophistication than the formula and Their sophistication preceded the formula by at least a century It was of course picked up through natural selection survivorship apprenticeship to experienced practitioners and one's own experience traders trade then traders figure out techniques and products then Academic economists find formulas and claim traders are using them then new traders believe academics then blow-ups from theory induced fragility Our paper sat for close to seven years before publication by an academic economics journal Until then a strange phenomenon it became one of the most downloaded papers in the history of economics But was not cited at all during its first few years Nobody wanted to stir the pot Practitioners don't write they do Birds fly and those who lecture them are the ones who write their story So it is easy to see that history is truly written by losers with time on their hands and a protected academic position the greatest irony is that we watched firsthand how narratives of thought are made as We were lucky enough to face another episode of blatant intellectual expropriation We received an invitation to publish our side of the story being option practitioners and the Honorable Wiley Encyclopedia of quantitative finance So we wrote a version of the previous paper mixed with our own experiences Shock we caught the editor of the historical section one Barnard College professor red-handed trying to modify our account a historian of economic thought he proceeded to rewrite our story to play down if not reverse its message and Change the arrow of the formation of knowledge This was scientific history in the making the fellow sitting in his office in Barnard College was now Dictating to us what we saw as traitors. We were supposed to override what we saw with our own eyes with his logic. I Came to notice a few similar inversions of the formation of knowledge For instance in his book written in the late 1990s the Berkeley professor highly certified Fragilista Mark Rubenstein attributed to publications by finance professors techniques and heuristics that we practitioners had been extremely familiar with Often in more sophisticated forms since the 1980s when I got involved in the business No, we don't put theories into practice. We create theories out of practice That was our story and it is easy to infer from it and from similar stories that the confusion is generalized The theory is the child of the cure not the opposite ex cura teoria nasci tour The evidence staring at us It turns out that engineers to get sandbags by historians Right after the previous nauseating episode. I presented the joint paper I had written with how on the idea of lecturing birds on how to fly in finance at the London School of Economics in their sociology of science seminar I was of course heckled but was by then very well trained at being heckled by economists then Surprise at the conclusion of the session the organizers informed me that exactly a week earlier Phil Scranton a professor from Rutgers had delivered the exact same story, but it was not about the option formula It was about the jet engine Scranton showed that we have been building and using jet engines in a completely trial-and-error Experiential manner without anyone truly understanding the theory Builders needed the original engineers who knew how to twist things to make the engine work Theory came later in a lame way to satisfy the intellectual bean counter But that's not what you tend to read in standard histories of technology My son who studies aerospace engineering was not aware of this Scranton was polite and focused on situations in which innovation is messy Distinguished from more familiar analytic and synthetic innovation approaches as if the latter were the norm, which it is obviously not I Looked for more stories and the historian of technology David Edgerton presented me with a quite shocking one We think of cybernetics which led to the cyber in cyberspace as invented by Norbert Wiener in 1948 the historian of engineering David Mindell debunked the story He showed that Wiener was articulating ideas about feedback control and digital computing that had long been in practice in the engineering world Yet people even today's engineers have the illusion that we owe the field to Wiener's mathematical thinking Then I was hit with the following idea we all learn geometry from textbooks based on axioms like say Euclid's book of elements and tend to think that it is thanks to such learning that we today have these beautiful Geometric shapes in buildings from houses to cathedrals to think the opposite would be anathema So I speculated immediately that the ancients developed an interest in Euclid's geometry and other mathematics Because they were already using these methods derived by tinkering and experiential knowledge Otherwise, they would not have bothered at all This is similar to the story of the wheel Recall that the steam engine had been discovered and developed by the Greeks some two millennia before the Industrial Revolution It is just that things that are implemented tend to want to be born from practice not theory Now take a look at architectural objects around us. They appear so geometrically sophisticated From the pyramids to the beautiful cathedrals of Europe So a sucker problem would make us tend to believe that mathematics led to these beautiful objects With exceptions here and there such as the pyramids as these preceded the more formal mathematics We had after Euclid and other Greek theorists some facts Architects or what were then called masters of works relied on heuristics Empirical methods and tools and almost nobody knew any mathematics according to the medieval science historian Guy Bourgeois Before the 13th century no more than five persons in the whole of Europe knew how to perform a division No theorem schmierum, but builders could figure out the resistance of materials without the equations we have today Buildings that are for the most part still standing the 13th century French architect Villard d'encore Documents with his series of drawings and notebooks in Picard the language of the Picardy region in France how cathedrals were built Experimental heuristics small tricks and rules later tabulated by Philibert Delorme in his architectural treatises For instance a triangle was visualized as the head of a horse Experimentation can make people much more careful than theories Further we are quite certain that the Romans admirable engineers built aqueducts without mathematics Roman numerals did not make quantitative analysis very easy Otherwise, I believe these would not be here as a patent side effect of mathematics is making people over optimize and cut corners causing fragility just look how the new is increasingly more perishable than the old and Take a look at Vitruvius's manual de architectura the Bible of architects written about 300 years after Euclid's elements There is little formal geometry in it And of course no mention of Euclid mostly heuristics the kind of knowledge that comes out of a master guiding his apprentices Tellingly the main mathematical result he mentions is Pythagoras's theorem Amazed that the right angle could be formed without the contrivances of the artisan Mathematics had to have been limited to mental puzzles until the Renaissance Now I am NOT saying that theories or academic science are not behind some practical technologies at all Directly derived from science for their final use not for some tangential use what the researcher Joel Mocher calls an epistemic base or propositional knowledge a sort of repository of formal knowledge that embeds the Theoretical and empirical discoveries and becomes a rule book of sorts used to generate more knowledge and he thinks more Applications in other words a body of theories from which further theories can be directly derived But let's not be suckers Following mr. Mocher would make one want to study economic geography to predict foreign exchange prices I would have loved to introduce him to the expert in green lumber While I accept the notion of epistemic base what I questioned is the role it has really played in the history of technology The evidence of a strong effect is not there and I am waiting for someone to show it to me Mocher and the advocates of such view provide no evidence that it is not epiphenomenal Nor do they appear to understand the implications of asymmetric effects. Where is the role of optionality in this? There is a body of know-how that was transmitted from master to apprentice and transmitted only in such a manner with degrees Necessary as a selection process or to make the profession more respectable or to help here and there but not Systematically and the role of such formal knowledge will be overappreciated precisely because it is highly visible Is it like cooking Cooking seems to be the perfect business that depends on optionality you add an ingredient and have the option of keeping the result if it is in agreement with fat Tony's taste buds or Forget about it if it's not We also have wiki style collaborative experimentation Leading to a certain body of recipes These recipes are derived entirely without conjectures about the chemistry of taste buds with no role for any epistemic base to generate theories out of theories Nobody is fooled so far by the process as Dan Ariely once observed We cannot reverse engineer the taste of food from looking at the nutritional label and we can observe ancestral heuristics at work Generations of collective tinkering resulting in the evolution of recipes these food recipes are embedded in cultures Cooking schools are entirely apprenticeship based on the other side We have pure physics with theories used to generate theories with some empirical validation There the epistemic base can play a role The discovery of the Higgs boson is a modern case of a particle entirely expected from theoretical derivations So was Einstein's relativity prior to the Higgs boson one spectacular case of a discovery with a small number of existing External data is that of the French astronomer Le Verrier's derivation of the existence of the planet Neptune He did that on the basis of solitary computation from the behavior of the surrounding planets When the planet was actually sighted he refused to look at it. So comfortable was he with his result These are exceptions and tend to take place in physics and other places I call linear where errors are from mediocrity on not from extremist on Now use this idea of cooking as a platform to grasp other pursuits Do other activities resemble it if we put technologies through scrutiny? We would see that most do in fact resemble cooking a lot more than physics particularly those in the complex domain Even medicine today remains an apprenticeship model with some theoretical science in the background but made to look entirely like science and if it leaves the Apprenticeship model it would be for the evidence-based method that relies less on Biological theories and more on the cataloging of empirical regularities the phenomenology I explained in chapter 7 Why is it that science comes and goes and technologies remain stable? Now one can see a possible role for basic science, but not in the way it is intended to be For an example of a chain of unintended uses. Let us start with phase one the computer the mathematical discipline of combinatorics here basic science derived from Propositional knowledge led to the building of computers or so the story goes and of course to remind the reader of cherry-picking We need to take into account the body of theoretical knowledge that went nowhere But at first nobody had an idea what to do with these enormous boxes full of circuits as they were cumbersome Expensive and their applications were not too widespread outside of database management Only good to process quantities of data. It is as if one needed to invent an application for the thrill of technology Baby boomers will remember those mysterious punch cards Then someone introduced the console to input with the aid of a screen monitor using a keyboard This led of course to word processing and the computer took off because of its fitness to word processing Particularly with a microcomputer in the early 1980s It was convenient, but not much more than that until some other unintended consequence came to be mixed into it Now phase two the internet this had been set up as a resilient military communication network device Developed by a research unit of the Department of Defense called DARPA and got a boost the days when Ronald Reagan was obsessed with the Soviets it was meant to allow the United States to survive a generalized military attack Great idea, but add the personal computer plus internet and we get social networks broken marriages a rise in nerdiness The ability for a post-soviet person with social difficulties to find a matching spouse all that Thanks to US tax dollars or rather budget deficit during Reagan's anti-soviet crusade So for now, we are looking at the forward arrow and at no point Although science was at some use along the way since computer technology relies on science in most of its aspects at no point Did academic science serve in setting its direction rather it served as a slave to chance discoveries in an opaque Environment with almost no one but college dropouts and overgrown high school students along the way the process remained self-directed and unpredictable at every step and the great fallacy is to make it sound irrational the Irrational resides in not seeing a free option when it is handed to us China might be a quite convincing story through the works of a genius observer Joseph Needham who debunked quite a bit of Western beliefs and figured out the powers of Chinese science as China became a top-down mandarinette That is a state managed by Soviet Harvard centralized scribes as Egypt had been before The players somehow lost the zest for bricolage the hunger for trial and error Needham's biographer Simon Winchester Cites the sinologist Mark Elvin's description of the problem as the Chinese did not have or rather no longer had What he called the European mania for tinkering and improving They had all the means to develop a spinning machine, but nobody tried another example of knowledge hampering optionality They probably needed someone like Steve Jobs blessed with an absence of college education and the right aggressiveness of temperament to take the elements to their natural conclusion as We will see in the next section. It is precisely this type of uninhibited doer who made the Industrial Revolution happen We will next examine two cases first the Industrial Revolution and second medicine So let us start by debunking a causal myth about the Industrial Revolution the overstatement of the role of science in it The Industrial Revolution Knowledge formation even when theoretical takes time some boredom and the freedom that comes from having another occupation Therefore allowing one to escape the journalistic style pressure of modern publish and perish academia to produce Cosmetic knowledge much like the counterfeit watches one buys in Chinatown in New York City The type that you know is counterfeit, although it looks like the real thing There were two main sources of technical knowledge and innovation in the 19th and early 20th centuries the hobbyist and the English rector both of whom were generally in barbell situations an Extraordinary proportion of work came out of the rector the English parish priest with no worries Erudition a large or at least comfortable house Domestic help a reliable supply of tea and scones with clotted cream and an abundance of free time and of course Optionality the enlightened amateur that is the reverence Thomas Bayes as in Bayesian Probability and Thomas Malthus Malthusian overpopulation are the most famous But there are many more surprises Cataloged in Bill Bryson's home in which the author found ten times more vicars and clergymen leaving recorded traces for posterity than scientists physicists Economists and even inventors in addition to the previous two giants. I randomly list contributions by country clergymen Reverend Edmund Cartwright invented the power loom contributing to the Industrial Revolution Reverend Jack Russell bred the Terrier. Reverend William Buckland was the first authority on dinosaurs Reverend William Greenwell invented modern archaeology Reverend Octavius Pickard Cambridge was the foremost authority on spiders Reverend George Garrett invented the submarine. Reverend Gilbert White was the most esteemed naturalist of his day Reverend MJ Barkley was the top expert on fungi. Reverend Jean-Michel helped discover Uranus and many more Note that just as with our episode documented with Haug that organized science tends to skip the not made here So the list of visible contribution by hobbyists and doers is most certainly shorter than the real one as some Academic might have appropriated the innovation by his predecessor Let me get poetic for a moment Self-directed scholarship has an aesthetic dimension For a long time I had on the wall of my study the following quote by Jacques Le Golfe The great French medievalist who believes that the Renaissance came out of independent humanists not professional scholars He examined the striking contrast in period paintings drawings and renditions that compare medieval university members and humanists One is a professor surrounded and besieged by huddled students the other is a solitary scholar sitting in the tranquility and privacy of his chambers at Ease in the spacious and comfy room where his thoughts can move freely Here we encounter the tumult of schools the dust of classrooms the indifference to beauty and collective workplaces There it is all order and beauty looks calm at Voltaire As to the hobbyist in general Evidence shows him along with the hungry adventurer and the private investor to be at the source of the Industrial Revolution Keeley who we mentioned was not a historian and thankfully not an economist in the economic laws of scientific research Questions the conventional linear model that is the belief that academic science leads to technology for him Universities prospered as a consequence of national wealth not the other way around He even went further and claimed that like naive interventions These had iatrogenics that provided a negative contribution He showed that in countries in which the government intervened by funding research with tax money Private investment decreased and moved away For instance in Japan the almighty Mitty Ministry for technology and investment has a horrible record of investment I am NOT using his ideas to prop up a political program against science funding only to debunk causal arrows in the discovery of important things The Industrial Revolution for a refresher came from technologists building technology or what he calls hobby science take again the steam engine the one artifact that more than anything else embodies the Industrial Revolution as We saw we had a blueprint of how to build it from hero of Alexandria Yet the theory didn't interest anyone for about two millennia So practice and rediscovery had to be the cause of the interest in heroes blueprint not the other way around Keeley presents a convincing very convincing argument that the steam engine emerged from pre-existing Technology and was created by uneducated often isolated men who applied practical common sense and intuition to address the mechanical problems that beset them and Whose solutions would yield obvious economic reward? Now second consider textile technologies Again, the main technologies that led to the jump into the modern world. Oh according to Keeley nothing to science in 1733 he writes John Kay invented the flying shuttle which mechanized weaving and in 1770 James Hargreaves invented the spinning Jenny which as its name implies mechanized spinning These major developments in textile technology as well as those of Wyatt and Paul spinning frame 1758 Arkwright water frame 1769 Presaged the Industrial Revolution Yet they owed nothing to science. They were empirical developments based on the trial error and Experimentation of skilled craftsmen who were trying to improve the productivity and so the profits of their factories David Edgerton did some work questioning the link between academic science and economic prosperity Along with the idea that people believed in the linear model that is that academic science was at the source of technology in the past People were no suckers in the 19th and 20th century We believe today that they believed in this said linear model then but they did not in fact Academics were mostly just teachers not researchers until well into the 20th century Now instead of looking into a scholar's writings to see whether he is credible or not It is always best to consider what his detractors say they will uncover what's worst in his argument So I looked for the detractors of Keeley or people opposing his ideas to see if they address anything of merit And to see where they come from Aside from some comments by Joel Mocher who as I said has not yet discovered Optionality and an attack by an economist of the type who don't count Given the devaluation of the currency of the economics profession the main critique against Keeley Published in the influential journal nature by a science bureaucrat was that he uses data from government-sponsored Agencies such as the OECD in his argument against tax funded research So far no substantive evidence that Keeley was wrong, but let us flip the burden of evidence There is zero evidence that the opposite of this thesis is remotely, right? Much of all of this is a religious belief in the unconditional power of organized science one that has replaced unconditional religious belief in organized religion Governments should spend on non teleological tinkering not research Note that I do not believe that the argument set forth above should logically lead us to say that no money should be spent by government This reasoning is more against teleology than research in general There has to be a form of spending that works by some vicious turn of events Governments have gotten huge payoffs from research, but not as intended Just consider the internet and look at the recapture We've had of military expenditures with innovations and as we will see medical cures It is just that functionaries are too teleological in the way they look for things Particularly the Japanese and so are large corporations most large corporations such as Big Pharma are their own enemies consider blue sky research whereby research grants and funding are given to people not projects and spread in small amounts across many researchers The sociologist of science Steve Chapin who spent time in California observing venture capitalists reports that investors tend to back entrepreneurs not ideas decisions are largely a matter of opinion strengthened with who you know and who said what as To use the venture capitalist lingo you bet on the jockey not the horse Why? Because innovations drift and one needs for nor like abilities to keep capturing the opportunities that arise Not stay locked up in a bureaucratic mold The significant venture capital decisions shape and showed were made without real business plans So if there was any analysis it had to be of a backup confirmatory nature I Myself spent some time with venture capitalists in California with an eye on investing myself and sure enough That was the mold Visibly the money should go to the tinkerers the aggressive tinkerers who you trust will milk the option Let us use statistical arguments and get technical for a paragraph Payoffs from research are from extremists on they follow a power law type of statistical distribution With big near unlimited upside, but because of optionality limited downside Consequently payoff from research should necessarily be linear to number of trials not total funds involved in the trials Since the winner will have an explosive payoff uncapped the right approach requires a certain style of blind funding It means the right policy would be what is called the one divided by n or one over n style Spreading attempts in as large a number of trials as possible if you face n options Invest in all of them in equal amounts small amounts per trial lots of trials broader than you want why because in extremist on it is more important to be in something in a small amount than to miss it as One venture capitalist told me the payoff can be so large that you can't afford not to be in everything The case in medicine Unlike technology medicine has a long history of domestication of luck it now has accepted randomness in its practice but not quite Medical data allow us to assess the performance of teleological research compared to randomly generated discoveries The US government provides us with the ideal data set for that the activities of the National Cancer Institute That came out of the Nixon war on cancer in the early 1970s Morton Myers a practicing doctor and researcher writes in his wonderful happy accidents serendipity in modern medical breakthroughs over a 20-year period of screening more than 144,000 plant extracts Representing about 15,000 species not a single plant-based anti-cancer drug reached approved status This failure stands in stark contrast to the discovery in the late 1950s of a major group of plant-derived cancer drugs the Vinca Alkaloids a discovery that came about by chance not through directed research John Lamatina an insider who described what he saw after leaving the pharmaceutical business shows statistics illustrating the gap between public perception of academic contributions and truth Private industry develops nine drugs out of ten Even the tax-funded National Institutes of Health found that out of 46 drugs on the market with significant sales About three had anything to do with federal funding We have not digested the fact that cures for cancer had been coming from other branches of research You search for non cancer drugs or non cancer non drugs and find something you were not looking for and vice versa But the interesting constant is that when a result is initially discovered by an academic researcher he is likely to disregard the consequences because it is not what he wanted to find an Academic has a script to follow So to put it in option terms He does not exercise his option in spite of its value a strict violation of rationality No matter how you define Like someone who both is greedy and does not pick up a large sum of money found in his garden Myers also shows the lecturing birds how to fly effect as discoveries are ex post narrated back to some academic research Contributing to our illusion in some cases because the source of the discovery is military. We don't know exactly what's going on take for instance chemotherapy for cancer as discussed in Myers book an American ship carrying mustard gas off Bari in Italy was bombed by the Germans in 1942 it helped develop chemotherapy owing to the effect of the gas on a condition of the soldiers who had liquid cancers Eradication of white blood cells, but mustard gas was banned by the Geneva Conventions. So the story was kept secret Churchill purged all mentioned from UK records and in the United States The information was stifled though not the research on the effect of nitrogen mustard James Lesmue the doctor and writer about medicine wrote that the therapeutic Revolution or the period in the post-war years that saw a large number of effective therapies was not ignited by a major scientific insight it came from the exact opposite a Realization by doctors and scientists that it was not necessary to understand in any detail What was wrong, but that synthetic chemistry blindly and randomly would deliver the remedies that had eluded doctors for centuries He uses as a central example the sulfonamides identified by Gerhardt Domach further the increase in our theoretical understanding the epistemic base to use mochers term came with a Decrease in the number of new drugs This is something fat Tony or the green lumber fellow could have told us Now one can argue that we depleted the low-hanging fruits But I go further with more cues from other parts such as the payoff from the human genome Project or the stalling of medical cures of the past two decades in the face of the growing research expenditures Knowledge or what is called knowledge in complex domains? inhibits research or Another way to see it Studying the chemical composition of ingredients will make you neither a better cook nor a more expert taster It might even make you worse at both Cooking is particularly humbling for teleology driven fellows one can make a list of medications that came black swan style from serendipity and Compare it to the list of medications that came from design I was about to embark on such a list until I realized that the notable exceptions That is drugs that were discovered in a teleological manner are too few mostly AZT AIDS drugs Designer drugs have a main property. They are designed and are therefore teleological But it does not look as if we are capable of designing a drug while taking into account the potential side effects Hence a problem for the future of designer drugs the more drugs there are on the market the more Interactions with one another so we end up with a swelling number of possible interactions with every new drug introduced If there are 20 unrelated drugs the 21st would need to consider 20 interactions No big deal but if there are a thousand we would need to predict a little less than a Thousand and there are tens of thousands of drugs available today Further there is research showing that we may be Underestimating the interactions of current drugs those already on the market by a factor of four So if anything the pool of available drugs should be shrinking rather than growing There is an obvious drift in that business as a drug can be invented for something and find new applications What the economist John Kay calls obliquity? Aspirin for instance changed many times in uses or the ideas of Judah Folkman about restricting the blood supply of tumors and Angiogenesis inhibitors have led to the treatment of macular degeneration They have a schizomab known as avastin an effect that is more effective than the original intent Now instead of giving my laundry list of drugs here too inelegant I refer the reader to in addition to Meyers book Claude Bouin and Claude Monterey Fabulo has odd histoire de la découverte de médicaments and J. Jack Lee's laughing gas Viagra and Lipitor Matt Ridley's anti teleological argument the great medieval Arabic language skeptic philosopher al-ghazal Aka al-ghazali who tried to destroy the teleology of Averroes and his rationalism Came up with the famous metaphor of the pin now falsely attributed to Adam Smith The pin doesn't have a single maker but 25 persons involved these are all collaborating in the absence of a central planner a Collaboration guided by an invisible hand for not a single one knows how to produce it on his own In the eyes of al-ghazal a skeptic fideist that is a skeptic with religious faith Knowledge was not in the hands of humans But in those of God while Adam Smith calls it the law of the market and some modern theorist presents it as self-organization If the listener wonders why fideism is epistemologically equivalent to pure Skepticism about human knowledge and embracing the hidden logics of things just replace God with nature fate the invisible opaque and Inaccessible and you mostly get the same result the logic of things stand outside of us in the hands of God or natural or spontaneous forces and Given that nobody these days is in direct communication with God even in Texas There is little difference between God and opacity Not a single individual has a clue about the general process and that is central The author Matt Ridley produces a more potent argument Thanks to his background in biology the difference between humans and animals lies in the ability to collaborate Engage in business let ideas part in the expression copulate Collaboration has explosive upside what is mathematically called a super additive function That is 1 plus 1 equals more than 2 and 1 plus 1 plus 1 equals much much more than 3 That is pure non-linearity with explosive benefits, we will get into details on how it benefits from the philosophers stone Crucially, this is an argument for unpredictability and black swan effects since you cannot forecast Collaborations and cannot direct them. You cannot see where the world is going all you can do is create an environment that facilitates these collaborations and lay the foundation for Prosperity and no, you cannot centralize innovations. We tried that in Russia remarkably to get a bit more philosophical with the ideas of Algazel One can see religions effect here in reducing dependence on the fallibility of human theories and agency So Adam Smith meets Algazel in that sense For one the invisible hand is the market for the other it is God It has been difficult for people to understand that historically skepticism has been mostly skepticism of expert knowledge rather than skepticism about abstract entities like God and that all the great skeptics have been largely either religious or at least Pro-religion that is in favor of others being religious Corporate teleology When I was in business school, I rarely attended lectures in something called strategic planning a required course And when I showed my face in class, I did not listen for a nanosecond to what was said There did not even buy the books There is something about the common sense of student culture. We knew that it was all babble I passed the required classes in management by confusing the professors playing with complicated logics And I felt it intellectually dishonest to enroll in more classes than the strictly necessary Corporations are in love with the idea of the strategic plan. They need to pay to figure out where they are going yet, there is no evidence that strategic planning works we even seem to have evidence against it a Management scholar William Starbuck has published a few papers debunking the effectiveness of planning It makes the corporation option-blind as it gets locked into a non opportunistic course of action Almost everything theoretical in management from Taylorism to all productivity stories upon empirical testing has been Exposed as pseudoscience and like most economic theories lives in a world parallel to the evidence Matthew Stewart who trained as a philosopher found himself in a management consultant job gives a pretty revolting if funny Inside story in the management myth. It is similar to the self-serving approach of bankers Abrahamson and Friedman in their beautiful book a perfect mess also debunk many of these neat crisp teleological approaches It turns out strategic planning is just superstitious babble For an illustration of business drift rational and opportunistic business drift take the following Coca-Cola began as a pharmaceutical product Tiffany and Company the fancy jewelry store company started life as a stationary store The last two examples are close perhaps but consider next Raytheon which made the first missile guidance system was a refrigerator maker One of the founders was no other than Vannevar Bush who conceived the teleological linear model of science We saw earlier go figure now worse Nokia who used to be the top mobile phone maker began as a paper mill at some stage. They were into rubber shoes DuPont now famous for Teflon nonstick cooking pans Corian countertops and the durable fabric Kevlar Actually started out as an explosives company Avon the cosmetics company started out in door-to-door book sales and the strangest of all Oneida silversmith was a community religious cult, but for regulatory reasons they needed to use as cover a joint stock company The inverse turkey problem Now some plumbing behind what I am saying epistemology of statistical statements The following discussion will show how the unknown what you don't see Can contain good news in one case and bad news in another and in extremist on territory things get even more accentuated To repeat it is necessary to repeat because intellectuals tend to forget it evidence of absence is not absence of evidence a Simple point that has the following implications For the anti fragile good news tends to be absent from past data and for the fragile it is the bad news That doesn't show easily Imagine going to Mexico with a notebook and trying to figure out the average wealth of the population From talking to people you randomly encounter Odds are that without Carlos slim in your sample you have little information For out of the hundred or so million Mexicans slim would I estimate be richer than the bottom 70 to 90 million all taken together So you may sample 50 million persons and unless you include that rare event you may have nothing in your sample and underestimate the total wealth Remember the payoff from trial and error When engaging in tinkering you incur a lot of small losses then once in a while you find something rather significant Such methodology will show nasty attributes when seen from the outside it hides its qualities not its defects in the anti fragile case of positive asymmetries positive black swan businesses such as trial and error the sample track record will tend to Underestimate the long-term average it will hide the qualities not the defects Recall our mission to not be a turkey The take-home is that when facing a long sample subjected to turkey problems one tends to estimate a lower number of adverse events simply rare events are rare and tend not to show up in past samples and Given that the rare is almost always negative we get a rosier picture than reality But here we face the mirror image the reverse situation Under positive asymmetries that is the anti fragile case the unseen is positive so empirical evidence tends to miss positive events and underestimate the total benefits as To the classic turkey problem the rule is as follows in the fragile case of negative asymmetries turkey problems The sample track record will tend to underestimate the long-term average. It will hide the defects and display the qualities The consequences make life simple But since standard methodologies do not take asymmetries into account about anyone who studied Conventional statistics without getting very deep into the subject just to theorize in social science or teach students We'll get the turkey problem wrong. I Have a simple rule that those who teach at Harvard should be expected to have much less Understanding of things than cab drivers or people innocent of canned methods of inference It is a heuristic it can be wrong But it works it came to my attention as the Harvard Business School used to include fragilista Robert C Merton on its staff So let us pick on Harvard Business School professors who deserve it quite a bit When it comes to the first case the error of ignoring positive asymmetries one Harvard Business School professor Gary Pisano writing about the potential of biotech made the elementary inverse turkey mistake Not realizing that in a business with limited losses and unlimited potential The exact opposite of banking what you don't see can be both significant and hidden from the past He writes despite the commercial success of several companies and the stunning growth in revenues for the industry as a whole Most biotechnology firms earn no profit This may be correct But the inference from it is wrong Possibly backward on two counts and it helps to repeat the logic owing to the gravity of the consequences First most companies in extremist on make no profit the rare event dominates and a small number of companies generate all the shekels and Whatever point he may have in the presence of asymmetry and optionality it is inconclusive So it is better to write about another subject something less harmful that may interest Harvard students Like how to make a convincing PowerPoint presentation or the difference in managerial cultures between the Japanese and the French Again, he may be right about the pitiful potential of biotech investments, but not on the basis of the data he showed Now why is such thinking by the likes of Professor Pisano dangerous? It is not a matter of whether or not he would inhibit research in biotech The problem is that such a mistake inhibits everything in economic life that has anti fragile properties More technically right skewed and it would fragilize by favoring matters that are sure bets Remarkably another Harvard professor Kenneth fruit made the exact same mistake But in the opposite direction with the negative asymmetries Looking at reinsurance companies those that ensure catastrophic events. He thought that he found an aberration They made too much profit given the risks they took as catastrophe seemed to occur less often than what was reflected in the premia He missed the point that catastrophic events hit them only negatively and tend to be absent from past data Again, they are rare Remember the turkey problem one single episode the asbestos liabilities Bankrupted families of Lloyd underwriters losing income made over generations one single episode We will return to these two distinct payoffs with bounded left limited losses like Bailey's bet and bounded right Limited gains like insurance or banking the distinction is crucial as most payoffs in life fall in either one or the other Category To fail seven times plus or minus two Let me stop to issue rules based on the chapter so far one look for optionality In fact rank things according to optionality to preferably with open-ended not closed-ended payoffs Three do not invest in business plans but in people so look for someone capable of changing six or seven times over his career or more an Idea that is part of the modus operandi of the venture capitalist Mark Andresen One gets immunity from the back-fit narratives of the business plan by investing in people It is simply more robust to do so For make sure you are barbelled whatever that means in your business The Charlatan the academic and the showman I End the chapter on a sad note our ingratitude toward many who have helped us get here letting our ancestors survive our misunderstanding of convex tinkering Antifragility and how to tame randomness is woven into our institutions though not consciously and explicitly There's a category of people in medicine called the empirics or empirical skeptics the doers and that is about it We do not have many names for them as they have not written a lot of books many of their works were destroyed or hidden from cultural consciousness or have naturally dropped out of the archives and Their memory has been treated very badly by history formal thinkers and theorizing theorizers tend to write books seat-of-the-pants People tend to be practitioners who are often content to get the excitement make or lose the money and discourse at the pub Their experiences are often formalized by academics Indeed history has been written by those who want you to believe that reasoning has a monopoly or near monopoly on a production of knowledge So the final point here is about those called charlatans Some were others were less so some were not and many were borderline For a long time official medicine had to compete with crowds of flashy showman Montebanks quacks sorcerers and sorceresses and all manner of unlicensed practitioners Some were itinerant going from town to town carrying out their curative acts in front of large gatherings They would perform surgery on occasion while repeating incantations This category included doctors who did not subscribe to the dominant greco-arabic school of rational medicine Developed in the Hellenistic world of Asia Minor and later grown by the Arabic language school The Romans were an anti-theoretical Pragmatic bunch the Arabs loved everything philosophical and scientific and put Aristotle About whom nobody seemed to have cared much until then on a pedestal For instance, we know very very little of the skeptical empirical school of monotis of Nicomedia We know a lot more about Galen the rationalist Medicine for the Arabs was a scholarly pursuit and founded on the logic of Aristotle and the methods of Galen they abhorred experience Medical practitioners were the other it is not very well Noticed that Arabic thought favors abstract thinking in science in the most theoretical sense of the word violently rationalistic away from empiricism The regulation of the medical establishment Corresponds to worries about the empirics for economic reasons as competition made their incomes drop so no wonder these were bundled with the thieves to wit this long title for an Elizabethan treatise a short discourse or discovery of certain stratagems whereby our London empirics have been observed strongly to Opium and oft times to expune their poor patients purses Charlatan was held to be a synonym for empiric The word empiric designated someone who relied on experiment and experience to ascertain What was correct in other words trial and error and tinkering that was held to be inferior? professionally socially and intellectually It is still not considered to be very intelligent But luckily for us the empirics enjoyed immense popular support and could not be uprooted You do not see their works, but they left a huge imprint on medicine note the initial peaking of iatrogenics after the academization and Institutionalization of medicine with the onset of modernity it has only recently started to reverse also formal academics seen in the light of history were not better than those they called charlatans and They just hid their fraud under the weight of more convincing rationalizations. They were just organized quacks My hope is for that to change Now I agree that most non academically vetted medical practitioners were scoundrels Montebanks quacks and often even worse than these but let's hold off jump into the wrong conclusions Formalists to protect their turf have always played on the logical fallacy that if quacks are found among non academics non Academics are all quacks. They keep doing it the statement all that is non rigorous is non academic Assuming one is a sucker and believes it does not imply that all that is non academic is non rigorous The fight between the legitimate doctors and the others is quite enlightening Particularly when you note that doctors were silently and reluctantly Copying some of the remedies and cures developed and promoted by the others They had to do so for economic reasons They benefited from the collective trial and error of the others and the process led to cures now integrated into medicine Now listener, let us take a minute and pay some respect Consider our ingratitude to those who got us here got our disrespect and do not even know that they were heroes Chapter 16 How to deal with soccer mobs the education of a flaneur A lesson in disorder Where is the next street fight how to decommoditize detouristify The intelligent student also in reverse flaneur as options Let us continue with teleology and disorder in private life and individual education Then an autobiographical vignette the ecological and the ludic as We saw with the fellow making the common but false analogy to blackjack in chapter 7 There are two domains the ludic which is set up like a game With its rules supplied in advance in an explicit way and the ecological where we don't know the rules and cannot isolate variables as in real life Seeing the non transferability of skills from one domain to the other led me to skepticism in general about whatever skills are Acquired in a classroom anything in a non ecological way as compared to street fights and real-life situations It is not well advertised that there is no evidence that abilities in chess lead to better reasoning off the chessboard Even those who play blind chess games with an entire cohort can't remember things outside the board better than a regular person We accept the domain specificity of games the fact that they do not really train you for life that there are severe losses in Translation, but we find it hard to apply this lesson to technical skills acquired in schools That is to accept the crucial fact that what is picked up in the classroom stays largely in the classroom Worse even the classroom can bring some detectable harm a measure of iatrogenics hardly ever discussed Laura Martignon showed me results from her doctoral student Virgit Ulmer Demonstrating that children's ability to count degrades right after they are taught arithmetic When you ask children how many intervals there are between 15 poles Those who don't know arithmetic figure out that there are 14 of them Those who studied arithmetic get confused and often make the mistake that there are 15 The touristification of the soccer mom The biologist and intellectual EO Wilson was once asked what? Represented the most hindrance to the development of children his answer was the soccer mom He did not use the notion of the procrustean bed, but he outlined it perfectly His argument is that they repress children's natural biophilia their love of living things But the problem is more general Soccer moms try to eliminate the trial and error the anti fragility from children's lives Move them away from the ecological and transform them into nerds working on pre-existing soccer mom compatible maps of reality Good students, but nerds that is they are like computers except slower Further they are now totally untrained to handle ambiguity as a child of civil war 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 flaneur 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 these structured fake and ineffective life of an empty suit ceo with a preset schedule and an alarm clock Even their leisure is subjected to a clock squash between four and five as their life is sandwiched between Appointments it is as if the mission of modernity was to squeeze every drop of variability and randomness out of life With as we saw in chapter 5 the ironic result of making the world a lot more Unpredictable as if the goddesses of chance wanted to have the last word Only the autodidacts are free and not just in school matters those who decommoditize detourist if I their lives Sports try to put randomness in a box like the one sold in aisle six next to canned tuna a form of alienation If you want to understand how vapid are the current modernistic arguments and understand your existential priorities Consider the difference between lions in the wild and those in captivity Lions in captivity live longer They are technically richer and they are guaranteed job security for life if these are the criteria you are focusing on as usual an ancient here Seneca Detected the problem and the difference with his saying we do not study for life, but only for the lecture room non-vitae sed scolai discus Which to my great horror has been corrupted and self-servingly changed to fit the motto of many colleges in the United States with? non-scolai sed vitae discus as their motto meaning that we study here for life not for the lecture hall Most of the tension in life will take place when the one who reduces and fragilizes say the policymaker invokes rationality An anti-fragile barbell education Something cured me of the effect of education and made me very skeptical of the very notion of standardized learning For I am a pure autodidact in spite of acquiring degrees My father was known in Lebanon as the intelligent student student intelligent a play on words as the Arabic phrase for Intelligent student or scholar is Taleb Naguib and his name was Naguib Taleb That was the way the newspaper published his name for having the highest grade on the Lebanese high school exit exam He was a national Victorian of sorts and the main newspaper announced his passing in 2002 with a front-page headline with a pun on his predestined name the intelligent students student intelligent is No longer His school education was harrowing though as he attended the elite Jesuit school The Jesuits mission was to produce the mandarins who ran the place by filtering and filtering students after every year They were successful beyond their aim as in addition to having one of the highest success rates in the world and the French Baccalaureate in spite of the war their school had a world-class roster of former students The Jesuits also deprived pupils of free time so many gave up voluntarily So one can surmise that having a father is national Valedictorian would definitely have provided me with a cure against school and it did My father himself did not seem to overvalue school education Since he did not put me in the Jesuit school to spare me what he went through But this clearly left me to seek ego fulfillment elsewhere Observing my father close up made me realize what being a valedictorian meant what being an intelligent student meant Mostly in the negative they were things that intelligent students were unable to understand Some blindness came with the package This idea followed me for a long time as when I worked in trading rooms where you sit most of the time waiting for things to happen a situation similar to that of people sitting in bars or mafia men hanging around I Figured out how to select people on their ability to integrate socially with others while sitting around doing nothing and enjoy fuzziness You select people on their ability to hang around as a filter and studious people were not good at hanging around They needed to have a clear task When I was about 10, I realized that good grades weren't as good outside school as they were in it And they carried some side effects. They had to correspond to a sacrifice an intellectual sacrifice of sorts Actually, my father kept hinting to me the problem of getting good grades himself The person who was at the exact bottom of his class and ironically the father of a classmate at Wharton Turned out to be a self-made merchant by far the most successful person in his class He had a huge yacht with his initials prominently displayed on it Another one made a killing buying wood in Africa retired before 40 then became an amateur historian mostly in ancient Mediterranean history and entered politics In a way, my father did not seem to value education rather culture or money And he prompted me to go for these two. I initially went for culture He had a total fascination with erudites and businessmen people whose position did not depend on credentials My idea was to be rigorous in the open market this made me focus on what an intelligent anti student needed to be an Autodidact or a person of knowledge compared to the students called Swallowers in Lebanese dialect those who swallow school material and whose knowledge is only derived from the curriculum The edge I realized isn't in the package of what was on the official program of the baccalaureate Which everyone knew with small variations multiplying into large discrepancies in grades, but exactly what lay outside it Some can be more intelligent than others in a structured environment In fact school has a selection bias as it favors those quicker in such an environment Unlike anything competitive at the expense of performance outside it Although I was not yet familiar with gyms. My idea of knowledge was as follows People who build their strength using these modern expensive gym machines can lift extremely large weights Show great numbers and develop impressive looking muscles, but fail to lift a stone They get completely hammered in a street fight by someone trained in more disorderly settings Their strength is extremely domain specific and their domain doesn't exist outside of ludic extremely organized constructs in fact their strength as with over specialized athletes is the result of a deformity I Thought it was the same with people who were selected for trying to get high grades in a small number of subjects rather than follow their curiosity Try taking them slightly away from what they studied and watch their decomposition loss of confidence and denial Just like corporate executives are selected for their ability to put up with the boredom of meetings Many of these people were selected for their ability to concentrate on boring material I've debated many economists who claim to specialize in risk and probability when one takes them slightly outside their narrow focus But within the discipline of probability they fall apart with the disconsolate face of a gym rat in front of a gangster hitman Again, I wasn't exactly an autodidact since I did get degrees I was rather a barbell autodidact as I studied the exact minimum necessary to pass any exam Overshooting accidentally once in a while and only getting in trouble a few times by undershooting, but I read voraciously Wholesale initially in the humanities later in mathematics and science and now in history outside a curriculum away from the gym machine so to speak I Figured out that whatever I selected myself. I could read with more depth and more breath There was a match to my curiosity and I could take advantage of what people later pathologized as attention-deficit hyperactive disorder ADHD by using natural stimulation as a main driver to scholarship The enterprise needed to be totally effortless in order to be worthwhile The minute I was bored with a book or a subject I moved to another one instead of giving up on reading altogether When you are limited to the school material and you get bored you have a tendency to give up and do nothing or play hooky Out of discouragement. The trick is to be bored with a specific book rather than with the act of reading So the number of pages absorbed could grow faster than otherwise and you find gold so to speak Effortlessly just as in rational but undirected trial-and-error based research It is exactly like options trial-and-error not getting stuck bifurcating when necessary But keeping a sense of broad freedom and opportunism trial and error is freedom. 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 My parents had an account with the largest bookstore in Beirut and I would pick up books in what seemed to me unlimited quantities There was such a difference between the shelves of the library and the narrow school material So I realized that school was a plot designed to deprive people of erudition by squeezing their knowledge into a narrow set of authors I started around the age of 13 to keep a log of my reading hours shooting for between 30 and 60 a week a Practice I've kept up for a long time I read the likes of Dostoyevsky, Turgenev, Chekhov, Bishop Boussuet, Stendhal, Dante, Proust Borges, Calvino, Celine, Schultz, Zweig, didn't like, Henry Miller, Max Brode, Kafka Ionesco, The Surrealists, Faulkner, Malraux Along with other wild adventurers such as Conrad and Melville. The first book I read in English was Moby Dick And similar authors in literature many of them obscure and Hegel, Schopenhauer, Nietzsche, Marx Jaspers, Husserl, Levi-Strauss Levinas, Sholem, Benjamin and similar ones in philosophy because they had the golden status of not being on the school Program and I managed to read nothing that was prescribed by school So to this day, I haven't read Racine, Corneille and other Boers One summer I decided to read the 20 novels by Emile Zola in 20 days, one a day and managed to do so at great expense Perhaps joining an underground anti-government group motivated me to look into Marxist studies And I picked up the most about Hegel indirectly mostly through Alexandra Kozhev When I decided to come to the United States I repeated around the age of 18 the marathon exercise by buying a few hundred books in English By authors ranging from Trollope to Burke, Macaulay and Gibbon with Anaïs Nin and other then fashionable authors des Scandales Not showing up to class and keeping the 30 to 60 hour discipline In school, I had figured out that when one could write essays with a rich literary but precise Vocabulary though not inadequate to the topic at hand and maintain some coherence throughout What one writes about becomes secondary and the examiners get a hint about one's style and rigor from that and My father gave me a complete break after I got published as a teenager in a local paper Just don't flunk was his condition It was a barbell play it safe at school and read on your own have zero expectation from school Later after I was jailed for assaulting a policeman in a student riot He acted scared of me and let me do whatever I wanted When I reached the few money stage in my 20s at the time when it was much much rarer than today in spite of a War raging in the home country. My father took credit for it by attributing it to the breadth of the education He allowed me to have and how it differentiated me from others like him with narrow background when at Wharton I discovered that I wanted to specialize in a profession linked to probability and rare events a Probability and randomness obsession took control of my mind I also smelled some flaws with statistical stuff that the professor could not explain brushing them away It was what the professor was brushing away. That had to be the meat. I Realized that there was a fraud somewhere that six Sigma events measures of very rare events were grossly Miscomputed and we had no basis for their computation But I could not articulate my realization clearly and was getting humiliated by people who started smoking me with complicated math I Saw the limits of probability in front of me clear as crystal but could not find the words to express the point So I went to the bookstore and ordered there was no web at the time almost every book with probability or stochastic In its title. I read nothing else for a couple of years. No course material No newspaper, no literature. Nothing I read them in bed jumping from one book to the next when stuck with something I did not get immediately or felt ever so slightly bored and I kept ordering those books I was hungry to go deeper into the problem of small probabilities. It was effortless That was my best investment risk turned out to be the topic. I know the best Five years later. I was set for life. And now I am making a research career out of various aspects of small probability events Had I studied the subject by pre-packaged means I would now be brainwashed into thinking that Uncertainty was something to be found in a casino that kind of thing There is such a thing as non nerdy applied mathematics Find a problem first and figure out the math that works for it Just as one acquires language rather than study in a vacuum through theorems and artificial examples Then change reality to make it look like these examples One day in the 1980s. I had dinner with a famous speculator a hugely successful man 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 Chapter 17 Fat Tony argues with Socrates Why can't we do things we can't explain and why do we have to explain things we do? the Dionysian the sucker non sucker approach to things Fat Tony debates Socrates Piety for the impious Fat Tony does not drink milk Always ask poets to explain their poetry mystagogue manifestor Fat Tony believes that they were totally justified in putting Socrates to death This chapter will allow us to complete the discussion of the difference between narrated intelligible knowledge and the more opaque kind that is entirely probed by tinkering the two columns of table for separating narrative and non-narrative action There is this error of thinking that things always have a reason that is accessible to us that we can comprehend easily Indeed the most severe mistake made in life is to mistake the unintelligible for the unintelligent something Nietzsche figured out In a way it resembles the turkey problem Mistaking what we don't see for the non-existent a sibling to mistaking absence of evidence for evidence of absence We've been falling for the green lumber problem since the beginning of the golden age of philosophy We saw Aristotle mistaking the source of Thales success now We turn to Socrates the greatest of the great masters Euthyphro Plato expressed himself chiefly through his use of the person who no doubt became the most influential philosopher in history Socrates the Athenian the first philosopher in the modern sense Socrates left no writing of his own so we get direct representation of him mainly through Plato and Xenophon and Just as fat Tony has as his self-appointed biographer yours truly trying to satisfy his own agenda Leading to distortions in his character and self-serving representation of some of the said authors ideas So I am certain that the Socrates of Plato is a more platonic character than the true Socrates the other biographer of Socrates Xenophon presents a different picture the Socrates of the memorabilia is no nonsense and down-to-earth He despises sterile knowledge and the experts who study matters without practical consequence when so many useful and important things are neglected Instead of looking at stars to understand causes figure out how you can use them to navigate Use geometry to measure land, but no more in one of Plato's dialogues Euthyphro Socrates was outside the courthouse Awaiting the trial in which he was eventually put to death When the eponymous Euthyphro a religious expert and prophet of sorts struck up a conversation with him Socrates started explaining that for the activities with which he was charged by the court Corrupting the youth and introducing new gods at the expense of the older ones Not only he did not charge a fee, but he was in perfect readiness to pay for people to listen to him It turned out that Euthyphro was on his way to charge his father with manslaughter not a bad conversation starter So Socrates started out by wondering how charging his own father with manslaughter was compatible with Euthyphro's religious duties Socrates his technique was to make his interlocutor who started with a thesis agree to a series of statements Then proceed to show him how the statements he agreed to are inconsistent with the original thesis Thus establishing that he has no clue as to what he was talking about Socrates used it mostly to show people how lacking in clarity they were in their thoughts How little they knew about the concepts they used routinely and the need for philosophy to elucidate these concepts In the beginning of the Euthyphro dialogue, he catches his interlocutor using the word piety Characterizing the prosecution of his father as a pious act and so giving the impression that he was conducting the prosecution on grounds of piety But he could not come up with a definition that suited Socrates Socrates kept pestering the poor fellow as he could not produce a definition of piety the dialogue continued with more definitions What is moral rectitude until Euthyphro found some polite excuse to run away? The dialogue ended abruptly, but the reader is left with the impression that it could have gone on until today 25 centuries later without it bringing us any closer to anything Let us reopen it Fat Tony versus Socrates How would fat Tony have handled the cross-examination by the relentless Athenian? Now that the reader is acquainted with our hefty character Let us examine as a thought experiment an equivalent dialogue between fat Tony and Socrates properly translated, of course Clearly there are similarities between the two characters both had time on their hands and enjoyed unlimited leisure Though in Tony's case free time was the result of productive insights both like to argue and both look at active conversation instead of TV screen or concert hall passivity as a main source of entertainment both dislike writing Socrates because he did not like the definitive and immutable character that is associated with a written word when for him answers are never Final and should not be fixed Nothing should be written in stone even literally Socrates in the Euthyphro boasts for ancestry the sculptor Daedalus whose statues came alive as soon as the work was completed When you talk to one of Daedalus's statues it talks back to you Unlike the ones you see in the Metropolitan Museum of Art in New York City Tony for his part did not like writing for other no less respectable reasons He almost flunked out of high school in Bay Ridge, Brooklyn But the similarity stopped somewhere which would be good enough for a dialogue Of course We can expect a bit of surprise on the part of fat Tony Standing in front of the man described to him by Nero is the greatest philosopher of all time Socrates we are told had looks beyond unprepossessing Socrates was repeatedly described as having a protruding belly thin limbs bulging eyes a snub nose He looked haggard. He might even have had body odor as he was said to bathe much less than his peers You can imagine fat Tony sneering while pointing his finger at the fellow Look Nero. Oh, you want me to talk to this? or perhaps not Socrates was said to have a presence a certain personal confidence and a serenity of mind that made some young men find him beautiful What Nero was certain of was that fat Tony would initially get close to Socrates and form his opinion on the fellow after some Olfactory investigation and as we said fat Tony doesn't even realize that this is part of his modus operandi Now assume fat Tony was asked by Socrates how he defined piety Fat Tony's answer would have been most certainly to get lost Fat Tony aware of Socrates his statement and not only would he debate for free But he would be ready to pay for conversation would have claimed one doesn't argue with someone who is ready to pay you to argue with Him but fat Tony's power in life is that he never lets the other person frame the question He taught Nero that an answer is planted in every question Never respond with a straight answer to a question that makes no sense to you fat Tony You are asking me to define what characteristic makes a difference between pious and non-pious Do I really need to be able to tell you what it is to be able to conduct a pious action? Socrates how can you use a word like piety without knowing what it means or pretending to know what it means? Fat Tony do I actually have to be able to tell you in plain barbarian non-greek English or in pure Greek? What it means to prove that I know and understand what it means. I don't know it in words, but I know what it is No doubt fat Tony would have taken Socrates of Athens further down his own road and be the one doing the framing of the question Fat Tony tell me old man. Does the child need to define mother's milk to understand the need to drink it? Socrates no, he does not need to fat Tony using the same repetitive pattern of Socrates in the Plato dialogues and My dear Socrates does a dog need to define what an owner is to be loyal to him Socrates puzzled to have someone ask him questions a dog has Instinct it does not reflect on its life. He doesn't examine his life. We are not dogs Fat Tony I Agree, my dear Socrates that a dog has instinct and that we are not dogs But are we humans so fundamentally different as to be completely stripped of instinct leading us to do things? We have no clue about do we have to limit life to what we can answer in proto Brooklyn English? Without waiting for Socrates's answer only suckers wait for answers questions are not made for answers 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 and 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 were 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 of the properties by means of which we can recognize them Socrates went even as far as questioning the poets and reported that they had no more clue than the public about their own works in Plato's account of his trial in the Apology Socrates recounted how he cross-examined the poets in vain I Took them some of the most elaborate passages in their own writings and asked what was the meaning of them? I am almost ashamed to speak of this But still I must say that there is hardly a person present who wouldn't have talked better about their poetry than they did themselves and This priority of definitional knowledge led to Plato's thesis that you cannot know anything unless you know the forms Which are what definitions specify if we cannot define piety from working with particulars Then let us start with the universals from which these particulars should flow In other words if you cannot get a map from a territory build a territory out of the map in Defense of Socrates his questions lead to a major result if they could not allow him to define what something was At least they allowed him to be certain about what a thing was not Mistaking the unintelligible for the unintelligent Fat Tony of course had many precursors Many we will not hear about because of the primacy of philosophy and the way it got integrated into daily practices by Christianity and Islam By philosophy, I mean theoretical and conceptual knowledge all knowledge things we can write down For until recently the term largely referred to what we call today science natural philosophy this attempt to rationalize nature penetrate her logic a Vivid modern attack on the point came from the young Friedrich Nietzsche Though dressed up in literary flights on optimism and pessimism mixed with a hallucination on what West typical Helene and the German soul mean The young Nietzsche wrote his first book the birth of tragedy while in his early 20s He went after Socrates whom he called the mystagogue of science for making existence appear Comprehensible this brilliant passage exposes what I call the sucker rationalistic fallacy perhaps thus he Socrates should have asked himself what is not intelligible to me is not necessarily Unintelligent perhaps there is a realm of wisdom from which the logician is exiled What is not intelligible to me is not necessarily? Unintelligent is perhaps the most potent sentence in all of Nietzsche's century And we use the version of it in the prologue in the very definition of the fragilista who mistakes what he does not understand for nonsense Nietzsche is also allergic to Socrates's version of truth largely motivated by the agenda of the promotion of understanding since according to Socrates one does not knowingly do evil an Argument that seems to have pervaded the Enlightenment as such thinkers as Condorcet made truth the only insufficient source for the good This argument is precisely what Nietzsche of I to parade it against knowledge is the panacea Error is evil hence science is an optimistic enterprise The mandate of scientific optimism irritated Nietzsche this use of reasoning and knowledge in the service of utopia Forget the optimism pessimism business that is addressed when people discuss Nietzsche as the so-called Nietzschean pessimism Distracts from the point it is the very goodness of knowledge that he questioned It took me a long time to figure out the central problem that Nietzsche addressed in the birth of tragedy He sees two forces the Apollonian and the Dionysian One is measured balanced rational imbued with reason and self-restraint The other is dark visceral wild untamed hard to understand emerging from the inner layers of ourselves Ancient Greek culture represented a balance of the two until the influence of Socrates on Euripides gave a larger share to the Apollonian and disrupted the Dionysian Causing this excessive rise of rationalism It is equivalent to disrupting the natural chemistry of your body by the injection of hormones The Apollonian without the Dionysian is as the Chinese would say yang without yin Nietzsche's potency as a thinker continues to surprise me. He figured out anti-fragility While many attribute mistakenly the notion of creative destruction to the economist Joseph Schumpeter Not wondering how something insightful and deep can come out of an economist While as we saw the more erudite source it to Karl Marx It is indeed Nietzsche who was first to coin the term with reference to Dionysus whom he called creatively destructive and destructively creative Nietzsche indeed figured out in his own way anti-fragility Adam Smith was first and last a moral philosopher Marx was a philosopher Kahneman and Simon are psychologists and cognitive scientists respectively. The exception is of course Hayek. I read Nietzsche's the birth of tragedy twice First as a child when I was very green the second time after a life thinking of randomness It hit me that Nietzsche understood something that I did not find explicitly stated in his work That growth in knowledge or in anything cannot proceed without the Dionysian It reveals matters that we can select at some point given that we have optionality in other words It can be the source of stochastic tinkering and the Apollonian can be part of the rationality in the selection process Let me bring the big boss Seneca into the picture. He too referred to Dionysian and Apollonian attributes He appeared to present in one of his writings a richer version of our human tendencies Talking about a God whom he also calls destiny equating him with the interaction of causes. He gives him free manifestations First the Lieber Pater the Bacchic force that is the Dionysus to whom Nietzsche referred That gives seminal power to the continuation of life Second Hercules who embodies strength and third Mercury who represented for Seneca's contemporaries Craft science and reason what for Nietzsche appeared to be the Apollonian richer than Nietzsche he included strength as an additional dimension as I said earlier attacks on philosophy in the sense of rationalistic knowledge from the Plato and Aristotle Traditions came from a variety of people not necessarily visible in the corpus mostly in forgotten or rarely mentioned texts Why forgotten? Because structured learning likes the impoverishment and simplification of naive rationalism Easy to teach not the rich texture of empiricism and as I said those who attacked academic thinking had little representation something that we will see is starkly apparent in the history of medicine and Even more accomplished and far more open-minded classical scholar than Nietzsche the 19th century French thinker Ernest Renan knew in addition to the usual Greek and Latin Hebrew Aramaic Syriac and Arabic in his attack on Averroes He expressed the famous idea that logic excludes by definition Nuances and since truth resides exclusively in the nuances It is a useless instrument for finding truth in the moral and political sciences Tradition As fat Tony said Socrates was put to death because he disrupted something that in the eyes of the Athenian Establishment was working just fine things are too complicated to be expressed in words by doing so you kill humans or People as with the green lumber may be focusing on the right things, but we are not good enough to figure it out intellectually Death and martyrdom make good marketing particularly when one faces destiny while unwavering in his opinions a Hero is someone imbued with intellectual confidence and ego and death is something too small for him While most of the accounts we hear of Socrates make him heroic Thanks to his death and his resignation to die in a philosophical way He had some classical critics who believed that Socrates was destroying the foundations of society The heuristics that are transmitted by the elders and that we may not be mature enough to question Cato the elder whom we met in chapter 2 was highly allergic to Socrates Cato had the bottom-line mind of fat Tony But with a much higher civic sense sense of mission respect for tradition and commitment to moral rectitude he was also allergic to things Greek as Exhibited in his allergy to philosophers and doctors an allergy which as we will see in later chapters had remarkably modern justifications Cato's commitment to democracy led him to believe in both freedom and the rules of custom in combination with fear of tyranny Plutarch quotes him as saying Socrates was a mighty babbler who tried to make himself Tyrant of his country in order to destroy its customs and entice its citizens into holding views contrary to law and order So the listener can see how the ancients saw naive rationalism by impoverishing rather than enhancing thought it Introduces fragility they knew that incompleteness half knowledge is always dangerous Many other people than the ancients have been involved in defending and inviting us to respect this different type of knowledge first Edmund Burke the Irish statesman and political philosopher who also countered the French Revolution for disrupting the collected reasons of the ages He believed that large social variations can expose us to unseen effects and thus advocated the notion of small trial-and-error Experiments in effect convex tinkering in social systems coupled with respect for the complex heuristics of tradition also, Michael Oakeshott the 20th century conservative political philosopher and philosopher of history who believed the traditions provide an aggregation of filtered collective knowledge Another one in that league would be Joseph de Metra who as we saw fought in second steps He was a French language royalist and counter enlightenment thinker who was vocal against the ills of the Revolution and believed in the fundamental depravity of men unless checked by some dictatorship Clearly Wittgenstein would be at the top of the list of modern anti fragile thinkers with his remarkable insight into the inexpressible With words and of all thinkers he best understands the green lumber issue He may be the first ever to express a version of it when he doubted the ability of language to express the literal in Addition the fellow was a saint. He sacrificed his life his friendships his fortune his reputation everything for the sake of philosophy We may be drawn to think that Friedrich Hayek would be in that anti fragile anti-rationalist category He is the 20th century philosopher and economist who opposed social planning on the grounds that the pricing system reveals through transactions the knowledge embedded in society Knowledge not accessible to a social planner But Hayek missed the notion of optionality as a substitute for the social planner in a way He believed in intelligence, but as a distributed or collective intelligence not in optionality as a replacement for intelligence The anthropologist Claude Lévi-Strauss showed that non-literate peoples had their own science of the concrete a Holistic way of thinking about their environment in terms of objects and their secondary Sensuous qualities, which was not necessarily less coherent than many of our scientific approaches and in many respects Can be as rich as and even richer than ours again, green lumber Finally John Gray the contemporary political philosopher and essayist who stands against human hubris and has been fighting the prevailing Ideas that the Enlightenment is a panacea treating a certain category of thinkers as Enlightenment fundamentalists Gray showed repeatedly how what we call scientific progress can be just a mirage When he myself and the essayist Brian Appleyard got together for lunch I was mentally prepared to discuss ideas and advocate my own I was pleasantly surprised by what turned out the best lunch I ever had in my entire life there was this smoothness of knowing that the three of us tacitly understood the same point and Instead went to the second step of discussing applications Something as mundane as replacing our currency holdings with precious metals as these are not owned by governments Gray worked in an office next to Hayek and told me that Hayek was quite a dull fellow lacking playfulness Hence optionality The sucker non sucker distinction Let us introduce the philosopher's stone back into this conversation Socrates is about knowledge Not fat Tony who has no idea what it is But Tony the distinction in life isn't true or false, but rather sucker or non sucker Things are always simpler with him in Real life as we saw with the ideas of Seneca and the bets of Thales Exposure is more important than knowledge decision effects supersede logic textbook knowledge Misses a dimension the hidden asymmetry of benefits just like the notion of average the need to focus on the payoff from your actions instead of studying the structure of the world or Understanding the true and the false has been largely missed in intellectual history Horribly missed The payoff what happens to you the benefits or harm from it is always the most important thing not the event itself Philosophers talk about truth and falsehood people in life talk about payoff exposure and consequences risks and rewards hence fragility and anti fragility and Sometimes philosophers and thinkers and those who study conflate truth with risks and rewards My point taken further is that true and false hence what we call belief play a poor secondary role in human decisions It is the payoff from the true and the false that dominates and it is almost always Asymmetric with one consequence much bigger than the other that is harboring positive and negative asymmetries fragile or anti fragile Let me explain Fragility not probability We check people for weapons before they board the plane. Do we believe that they are terrorists true or false? False as they are not likely to be terrorists a tiny probability But we check them nevertheless because we are fragile to terrorism There is an asymmetry We are interested in the payoff and the consequence or payoff of the true that they turn out to be terrorists is too large And the costs of checking are too low Do you think the nuclear reactor is likely to explode in the next year? false yet you want to behave as if it were true and spend a millions on additional safety because we are fragile to nuclear events a Third example, do you think that this random medicine will harm you? false Do you ingest these pills? No, no, no If you sat with a pencil and jotted down all the decisions you've taken in the past week Or if you could over your lifetime You would realize that almost all of them have had asymmetric payoff with one side carrying a larger consequence than the other You decide principally based on fragility not probability Or to rephrase you decide principally based on fragility not so much on true false Let us discuss the idea of the insufficiency of true false and decision-making in the real world Particularly when probabilities are involved true or false are interpretations corresponding to high or low probabilities scientists have something called confidence level a Result obtained with a 95% confidence level means that there is no more than a 5% probability of the result being wrong The idea of course is inapplicable as it ignores the size of the effects which of course makes things worse with extreme events If I tell you that some result is true with 95% confidence level you would be quite satisfied But what if I told you that the plane was safe with 95% confidence level? Even 99% confidence level would not do as a 1% probability of a crash would be quite a bit alarming Today commercial planes operate with less than one in several hundred thousand Probabilities of crashing and the ratio is improving as we saw that every error leads to the improvement of overall safety So to repeat the probability hence true false does not work in the real world. It is the payoff that matters You have taken probably a billion decisions in your life. How many times have you computed probabilities? Of course, you may do so in casinos, but not elsewhere Conflation of events and exposure this brings us again to the green lumber fallacy a Black Swan event and how it affects you its impact on your finances emotions the destruction it will cause are not the same thing and The problem is deeply ingrained in standard reactions The predictors reply when we point out their failures has typically been we need better Computation in order to predict the event better and figure out the probabilities Instead of the vastly more effective Modifier exposure and learn to get out of trouble something religions and traditional heuristics have been better at enforcing than naive and cosmetic science Conclusion to book 4 In addition to the medical empirics this section has attempted to vindicate the unreasonable mavericks engineers freelance entrepreneurs innovative artists and anti-academic thinkers who have been reviled by history Some of them had great courage not just the courage to put forth their ideas But the courage to accept to live in a world they knew they did not understand and they enjoyed it To conclude this section note that doing is wiser than you are prone to believe and more rational What I did here is just debunk the lecturing birds how to fly epiphenomenon and the linear model using among other things the simple mathematical properties of Optionality which does not require knowledge or intelligence merely rationality in choice Remember that there is no empirical evidence to support the statement that organized research in a sense it is currently marketed leads to the great things promised by universities and The promoters of the Soviet Harvard idea do not use optionality or second-order effects This absence of optionality in their accounts invalidates their views about the role of teleological science They need to rewrite the history of technology What will happen next When I last met Alison Wolfe we discussed this dire problem with education and illusions of academic contribution With Ivy League universities becoming in the eyes of the new Asian and US upper class a status luxury good Harvard is like a Vuitton bag or a Cartier watch It is a huge drag on the middle-class parents who have been plowing an increased share of their savings into these institutions Transferring their money to administrators real estate developers professors and other agents in the United States We have a buildup of student loans that automatically transfer to these rent extractors in a way It is no different from racketeering one needs a decent university name to get ahead in life But we know that collectively society doesn't appear to advance with organized education She requested that I write to her my thoughts about the future of education as I told her that I was optimistic on the subject my answer Bullshit is fragile Which scam in history has lasted forever. I have an enormous faith in time and history as eventual debunkers of fragility Education is an institution that has been growing without external stressors. Eventually the thing will collapse The next two books five and six will deal with a notion that fragile things break predictably Book five will show how to detect fragility in a more technical manner and will present the mechanics behind the philosophers stone Book six is based on the idea that time is an eraser rather than a builder and a good one at breaking the fragile whether buildings or ideas Ideas Book five the nonlinear and the nonlinear Time for another autobiographical vignette as Charles Darwin wrote in a historical section of his on the origin of species Presenting a sketch of the progress of opinion I hope I may be excused for entering on these personal details as I give them to show that I have not been hasty and coming to a decision For it is not quite true that there is no exact word concept and application for anti fragility My colleagues and I had one without knowing it and I had it for a long very long time So I've been thinking about the exact same problem most of my life partly consciously partly without being aware of it book five explores the journey and the idea that came with it on the importance of addicts and In the mid-1990s, I quietly deposited my necktie in the trash can at the corner of 45th Street and Park Avenue in New York I Decided to take a few years off and locked myself in the attic trying to express what was coming out of my guts Trying to frame what I called hidden nonlinearities and their effects What I had wasn't quite an idea rather just a method for the deeper central idea eluded me But using this method I produced close to a 600 page long discussion of managing nonlinear effects with graphs and tables Recall from the prologue that non-linearity means that the response is not a straight line But I was going further and looking at the link with volatility Something that should be clear soon and I went deep into the volatility of volatility and such higher-order effects The book that came out of this solitary investigation in the attic finally called dynamic hedging was about the techniques to manage and handle complicated nonlinear derivative exposures It was a technical document that was completely abovo from the egg and as I was going I knew in my guts that the point Had vastly more import than the limited cases. I was using in my profession I knew that my profession was the perfect platform to start thinking about these issues But I was too lazy and too conventional to venture beyond That book remained by far my favorite work before this one And I fondly remember the two harsh New York winters in the near complete Silence of the attic with the luminous effect of the Sun shining on the snow warming up both the room and the project I thought of nothing else for years. I Also learned something quite amusing from the episode My book was mistakenly submitted to four referees all four of them academic financial economists instead of quants quantitative analysts who work in finance using mathematical models The person who made the submissions wasn't quite aware of the difference the four academics rejected my book Interestingly for four sets of completely different reasons with absolutely no intersection in their arguments We practitioners and quants aren't too phased by remarks on the part of academics It would be like prostitutes listening to technical commentary by nuns What struck me was that if I had been wrong all of them would have provided the exact same reason for rejection That's anti fragility Then of course as the publisher saw the mistake the book was submitted to quantitative reviewers, and it saw the light of day The Procrustean bed in life consists precisely in simplifying the nonlinear and making it linear the simplification that distorts Then my interest in a non linearity of exposures went away as I began to deal with other matters related to uncertainty Which seemed more intellectual and philosophical to me like the nature of randomness rather than how things react to random events This may also have been due to the fact that I moved and no longer had that attic But some events brought me back to a second phase of intense seclusion After the crisis of the late 2000s. I went through an episode of hell owing to contact with the press I was suddenly De-intellectualized corrupted extracted from my habitat propelled into being a public commodity I had not realized that it is hard for members of the media and the public to accept that the job of the scholar is to ignore Insignificant current affairs to write books not emails and not to give lectures dancing on a stage But he has other things to do like read in bed in the morning right at a desk in front of a window Take long walks slowly drink espressos mornings chamomile tea afternoons Lebanese wine Evenings and muscat wines after dinner take more long walks slowly argue with friends and family members But never in the morning and read again in bed before sleeping Not keep rewriting one's book and ideas for the benefit of strangers and members of the local chapter of networking International who haven't read it Then I opted out of public life When I managed to retake control of my schedule in my brain Recovered from the injuries deep into my soul learned to use email filters and auto delete functions and restarted my life Lady Fortuna brought two ideas to me making me feel stupid for I realized I had had them inside me all along Clearly the tools of analysis of nonlinear effects are quite universal The sad part is that until that day in my new new life of solitary Walker come chamomile drinker When I looked at a porcelain cup I had not realized that Everything nonlinear around me could be subjected to the same techniques of detection as the ones that hit me in my previous episode of seclusion What I found is described in the next two chapters Chapter 18 Convexity concavity and convexity effects why size fragilizes on the difference between a large stone and a thousand pebbles how to punish with a stone I landed early once Why addicts are always useful on the great benefits of avoiding Heathrow unless you have a guitar? I noticed looking at the porcelain cup that it did not like volatility or variability or action It just wanted calm and to be left alone in the tranquility of the home study library The realization that fragility was simply Vulnerability to the volatility of the things that affect it was a huge personal embarrassment for me Since my specialty was the link between volatility and nonlinearity. I know I know a very strange specialty so let us start with the result a Simple rule to detect the fragile a Story presence in the rabbinical literature Madrash to Haleem probably originating from earlier Near Eastern lore says the following a King angry at his son swore that he would crush him with a large stone After he calmed down he realized he was in trouble as a king who breaks his oath is unfit to rule His sage advisor came up with a solution Have the stone cut into very small pebbles and have the mischievous son pelted with them The difference between a thousand pebbles and a large stone of equivalent weight is a potent illustration of how fragility stems from nonlinear effects nonlinear Once again nonlinear means that the response is not straightforward and not a straight line So if you double say the dose you get a lot more or a lot less than doubled the effect If I throw at someone's head a 10-pound stone It will cause more than twice the harm of a 5-pound stone more than five times the harm of a 1-pound stone, etc It is simple If you draw a line on a graph with harm on the vertical axis and the size of stone on the horizontal axis It will be curved not a straight line That is the refinement of asymmetry Now the very simple point in fact that allows for a detection of fragility For the fragile shocks bring higher harm as their intensity increases up to a certain level Let us generalize Your car is fragile If you drive it into the wall at 50 miles per hour It would cause more damage than if you drove it into the same wall 10 times at 5 miles per hour The harm at 50 miles per hour is more than 10 times the harm at 5 miles per hour other examples Drinking seven bottles of wine or dough in one sitting Then purified water with lemon twist for the remaining six days is more harmful than drinking one bottle of wine a day for seven days spread out in two glasses per meal Every additional glass of wine harms you more than the preceding one. Hence. Your system is fragile to alcoholic consumption Letting a porcelain cup drop on the floor from a height of one foot about 30 centimeters is Worse than 12 times the damage from a drop from a height of one inch two and a half centimeters Jumping from a height of 30 feet 10 meters brings more than 10 times the harm of jumping from a height of 3 feet 1 meter Actually 30 feet seems to be the cutoff point for death from free fall Note that this is a simple expansion of the foundational asymmetry We saw two chapters ago as we used Seneca's thinking as a pretext to talk about non-linearity Asymmetry is necessarily non-linearity. More harm than benefits. Simply an increase in intensity brings more harm than a corresponding decrease offers benefits Why is fragility non-linear? Let me explain the central argument why fragility is generally in the non-linear and not in the linear That was the intuition from the porcelain cup The answer has to do with the structure of survival probabilities Conditional on something being unharmed or having survived Then it is more harmed by a single rock than a thousand pebbles that is by a single large Infrequent event than by the cumulative effect of smaller shocks If for a human jumping one millimeter an impact of small force caused an exact linear fraction of the damage of say Jumping to the ground from 30 feet, then the person would already be dead from cumulative harm Actually a simple computation shows that he would have expired within hours from touching objects or pacing in his living room Given the multitude of such stressors and their total effect The fragility that comes from linearity is immediately visible. So we rule it out because the object would be already broken This leaves us with the following What is fragile is something that is both unbroken and subjected to nonlinear effects and Extreme rare events since impacts of a large size or high speed are rarer than ones of small size and slow speed Let me rephrase this idea in connection with black swans and extreme events There are a lot more ordinary events than extreme events in the financial markets There are at least 10,000 times more events of 0.1% magnitude than events of 10% magnitude There are close to 8,000 micro earthquakes daily on planet Earth That is those below 2 on the Richter scale about 3 million a year These are totally harmless and with 3 million per year You would need them to be so but shocks of intensity 6 and higher on the scale make the newspapers Take objects such as porcelain cups They get a lot of hits a million more hits of say 100th of a pound per square inch to take an arbitrary measure than hits of a hundred pounds per square inch Accordingly, we are necessarily immune to the cumulative effect of small deviations or shocks of very small magnitude Which implies that these affect us disproportionately less that is nonlinearly less than larger ones Let me re-express my previous rule For the fragile the cumulative effect of small shocks is smaller than the single effect of an equivalent single large shock This leaves me with the principle that the fragile is what is hurt a lot more by extreme events than by a succession of intermediate ones Finito and there is no other way to be fragile Now let us flip the argument and consider the anti-fragile Anti-fragility too is grounded in nonlinearities nonlinear responses For the anti-fragile shocks bring more benefits equivalently less harm as their intensity increases up to a point a Simple case known heuristically by weightlifters in the bodyguard emulating story in chapter 2 I focused only on the maximum I could do lifting 100 pounds once brings more benefits than lifting 50 pounds twice and Certainly a lot more than lifting one pound a hundred times Benefits here are in weightlifter terms Strengthening the body muscle mass and bar fight looks rather than resistance and the ability to run a marathon The second 50 pounds play a larger role hence the nonlinear that is we will see Convexity effect Every additional pound brings more benefits until one gets close to the limit what weightlifters call failure Actually, there are different muscle fibers each one responding to different sets of conditions with varied asymmetries of responses The so-called fast twitch fibers the ones used to lift very heavy objects are very Anti-fragile as they are convex to weight and they die in the absence of intensity For now note the reach of this simple curve it affects about just anything in sight even medical error government size innovation anything that touches uncertainty and It helps put the plumbing behind the statements on size and concentration in book 2 When to smile and when to frown Non-linearity comes in two kinds Concave curves inward as in the case of the king in the stone or its opposite convex Curves outward and of course mix with concave and convex sections The convex and the concave resemble a smile and a frown respectively. I Use the term convexity effect for both in order to simplify the vocabulary Saying positive convexity effects and negative convexity effects Why does asymmetry map to convexity or concavity? Simply if for a given variation you have more upside than downside and you draw the curve it will be convex the opposite for the concave Graphic 5 in your PDF file shows the asymmetry Re-expressed in terms of nonlinearities It also shows the magical effects of mathematics that allowed us to treat steak tartare entrepreneurship and financial risk in the same breath The convex graph turns into concave when one simply puts a minus sign in front of it For instance fat Tony had the exact opposite payoff then say a bank or financial institution in a certain Transaction he made a buck whenever they lost one and vice versa The profits and losses are mirror images of each other at the end of the day except that one is the minus sign times the other Graphic 5 also shows why the convex likes volatility If you earn more than you lose from fluctuations you want a lot of fluctuations Why is the concave hurt by black swan events Now the idea that has inhabited me all my life I never realized it could show so clearly when put in graphical form Graphic 6 in your PDF file illustrates the effect of harm and the unexpected the more concave and exposure the more harm from the unexpected and disproportionately so so very large deviations have a disproportionately larger and larger effect Next let us apply this very simple technique to the detection of fragility and position in the triad Traffic in New York Let us apply convexity effects to things around us Traffic is highly nonlinear When I take the day flight from New York to London and I leave my residence around 5 in the morning Yes, I know it takes me around 26 minutes to reach the British Air Terminal at JFK Airport At that time New York is empty eerily non, New York When I leave my place at 6 o'clock for the later flight there is almost no difference in travel time although traffic is a bit denser One can add more and more cars on the highway with no or minimal impact on time spent in traffic then a mystery Increase the number of cars by 10% and watch the travel time jump by 50% I'm using approximate numbers Look at the convexity effect at work The average number of cars on the road does not matter at all for traffic speed if you have 90,000 cars for one hour then 110,000 cars for another hour traffic would be much slower than if you had 100,000 cars for two hours Note that travel time is a negative so I count it as a cost like an expense and a rise is a bad thing So travel cost is fragile to the volatility of the number of cars on the highway It does not depend so much on their average number Every additional car increases travel time more than the previous one This is a hint to a central problem of the world today that of the misunderstanding of nonlinear response by those involved in creating inefficiencies and optimization of systems For instance European airports and railroads are stretched seeming overly efficient They operate at close to maximal capacity with minimal redundancies and idle capacity hence acceptable costs But a small increase in congestion say 5% more planes in the sky owing to a tiny backlog Can give rise to chaos in airports and cause scenes of unhappy travelers camping on floors They're only solace some bearded fellow playing French folk songs on his guitar We can see applications of the point across economic domains Central banks can print money. They print and print with no effect and claim the safety of such a measure then Unexpectedly the printing causes a jump in inflation Many economic results are completely cancelled by convexity effects and the happy news is that we know why? Alas the tools and culture of policymakers are based on the overly linear Ignoring these hidden effects. They call it Approximation when you hear of a second-order effect It means convexity is causing the failure of approximation to represent the real story If I graph the response of traffic to cars on the road a graph will curve inward concave not a good thing Someone call New York City officials an apt illustration of how convexity effects affect an over optimized system along with misforecasting large deviations is this simple story of an Underestimation made by New York City officials of the effect of a line closure on traffic congestion This error is remarkably general a small modification with compounded results in a system that is extremely stretched hence fragile One Saturday evening in November 2011 I drove to New York City to meet the philosopher Paul Boghossian for dinner in the village typically a 40-minute trip Ironically, I was meeting him to talk about my book this book and more particularly my ideas on redundancy in systems I have been advocating the injection of redundancy into people's lives and had been boasting to him and others that since my New Year's resolution of 2007 I have never been late to anything not even by a minute. Well almost Recall in chapter 2 my advocacy of redundancies as an aggressive stance Such personal discipline forces me to build buffers and as I carry a notebook It allowed me to write an entire book of aphorisms not counting the long visits to bookstores Or I can sit in a cafe and read hate mail with of course, no stress as I have no fear of being late But the greatest benefit of such discipline is that it prevents me from cramming my day with appointments Typically appointments are neither useful nor pleasant Actually by another rule of personal discipline I do not make appointments other than lectures except the very same morning as the date on the calendar makes me feel like a prisoner But that's another story As I hit midtown around 6 o'clock traffic stopped Completely by 8 I had moved hardly a few blocks So even my redundancy buffer failed to let me keep the so far unbroken resolution Then after relearning to operate the noisy cacophonic thing called a radio I started figuring out what had happened New York City had authorized a film company to use the 59th Street bridge blocking part of it assuming that it would be no problem on a Saturday and The small traffic problem turned into mayhem owing to the multiplicative effects What they felt would be at the worst a few minutes delays was multiplied by two orders of magnitude minutes became hours Simply the authorities running New York City did not understand non linearities This is the central problem of efficiency these types of errors compound Multiply swell with an effect that only goes in one direction the wrong direction Where more is different Another intuitive way to look at convexity effects Consider the scaling property if you double the exposure to something. Do you more than double the harm it will cause? If so, then this is a situation of fragility Otherwise you are robust the point has been aptly expressed by PW Anderson in the title of his paper more is different and What scientists involved in complexity call emerging properties is the nonlinear result of adding units as the sum? Becomes increasingly different from the parts Just look at how different the large stone is from the pebbles the latter have the same weight and the same general shape But that's about it Likewise we saw in chapter 5 that a city is not a large village a corporation is not a larger small business We also saw how randomness changes in nature from mediocrity on to extremist on How a state is not a large village and many alterations that come from size and speed all these show non-linearity in action a Balanced meal Another example of missing the hidden dimension that is variability We are currently told by the Soviet Harvard US health authorities to eat set quantities of nutrients Total calories protein vitamins etc every day in some recommended amounts of each Every food item has a percentage daily allowance Aside from the total lack of empirical rigor in the way these recommendations are currently derived more on that in the medical chapters there is another sloppiness in the edict an insistence in the discourse on the regularity Those recommending the nutritional policies fail to understand that steadily getting your calories and nutrients throughout the day with balanced composition and metronomic Regularity does not necessarily have the same effect as consuming them unevenly or randomly say by having a lot of proteins One day fasting completely another feasting the third etc This is a denial of hormesis a slight stressor of episodic deprivation For a long time nobody even bothered to try to figure out whether variability in distribution the second-order effect mattered as much as a long-term composition Now research is starting to catch up to such a very very simple point It turns out that the effect of variability in food sources and the non-linearity in the physiological response is central to biological systems Consuming no protein at all on Monday and catching up on Wednesday seemingly causes a different better physiological response Possibly because the deprivation as a stressor activates some pathways that facilitate the subsequent absorption of the nutrients or something similar and until a few recent and disconnected empirical studies this convexity effect has been totally missed by science though not by religions Ancestral heuristics and traditions and If scientists get some convexity effects as we said about domain dependence doctors just like weightlifters understand here and there non linearities and dose response The notion of convexity effects itself appears to be completely missing from their language and methods Run don't walk Another illustration this time a situation that benefits from variation positive convexity effects Take two brothers Castor and Polydeuces who need to travel a mile Castor walks the mile at a leisurely pace and arrives at the destination in 20 minutes Polydeuces spends 14 minutes playing with his handheld device getting updates on the gossip then runs the same mile in six minutes arriving at the same time as Castor So both persons have covered the exact same distance in exactly the same time same average Castor who walked all the way presumably will not get the same health benefits and gains in strength as Polydeuces who sprinted Health benefits are convex to speed up to a point of course the very idea of exercise is to gain from anti fragility to workout stressors as We saw all kinds of exercise are just exploitations of convexity effects Small may be ugly. It is certainly less fragile We often hear the expression small is beautiful. It is potent and appealing Many ideas have been offered in its support almost all of them anecdotal romantic or existential Let us present it within our approach of fragility equals concavity equals dislike of randomness and See how we can measure such an effect How to be squeezed a Squeeze occurs when people have no choice, but to do something and do it right away regardless of the costs Your other half is to defend a doctoral thesis in the history of German dance And you need to fly to Marburg to be present at such an important moment meet the parents and get formally engaged You live in New York and manage to buy an economy ticket to Frankfurt for $400 and you are excited about how cheap it is But you need to go through London Upon getting to New York's Kennedy Airport you are apprised by the airline agent that the flights to London are cancelled Sorry delays due to backlog due to weather problems that type of thing Something about Heathrow's fragility you can get a last-minute flight to Frankfurt, but now you need to pay $4,000 close to ten times the price and hurry is there are very few seats left you fume shout curse Blame yourself your upbringing and parents who taught you to save and shell out the $4,000 That's a squeeze Squeezes are exacerbated by size when one is large one becomes vulnerable to some errors Particularly horrendous squeezes the squeezes become non-linearly costlier as size increases To see how size becomes a handicap consider the reasons one should not own an elephant as a pet Regardless of what emotional attachment you may have to the animal Say you can afford an elephant as part of your post-promotion household budget and have one delivered to your backyard Should there be a water shortage hence a squeeze since you have no choice But to shell out the money for water you would have to pay a higher and higher price for each additional gallon of water That's fragility right there a negative convexity effect coming from getting too big The unexpected cost as a percentage of the total would be monstrous Owning say a cat or a dog would not bring about such high unexpected additional costs at times of squeeze The overruns taken as a percentage of the total costs would be very low In spite of what is studied in business schools concerning economies of scale size hurt you at times of stress It is not a good idea to be enlarged during difficult times Some economists have been wondering why mergers of corporations do not appear to play out The combined unit is now much larger hence more powerful and according to the theories of economies of scale It should be more efficient But the numbers show at best no gain from such increase in size. That was already true in 1978 when Richard Rolle voiced the hubris hypothesis Finding it irrational for companies to engage in mergers given their poor historical record Recent data more than three decades later still confirm both the poor record of mergers and the same hubris as Managers seem to ignore the bad economic aspect of the transaction there appears to be something about size that is harmful to corporations as With the idea of having elephants as pets squeezes are much much more expensive relative to size for large corporations The gains from size are visible, but the risks are hidden and some concealed risks seem to bring frailties into the companies Large animals such as elephants boa constrictors mammoths and other animals of size tend to become rapidly extinct Aside from the squeeze when resources are tight there are mechanical considerations Large animals are more fragile to shocks than small ones again stone and pebbles Jared Diamond always ahead of others figured out such vulnerability in a paper called why cats have nine lives If you throw a cat or a mouse from an elevation of several times their height they will typically manage to survive Elephants by comparison break limbs very easily Curvile and microcurvile Let us look at a case study from vulgar finance a field in which participants are very good at making mistakes on January 21st 2008 the Parisian Bank Société Générale Rushed to sell in the market close to 70 billion dollars worth of stocks a very large amount for any single fire sale markets were not very active called thin as it was Martin Luther King Day in the United States and Markets worldwide dropped precipitously close to 10% Costing the company close to six billion dollars in losses just from their fire sale The entire point of the squeeze is that they couldn't wait and they had no option but to turn a sale into a fire sale So they had over the weekend uncovered a fraud Jerome Curvio a rogue back-office employee was playing with humongous sums in the market and Hiding these exposures from the main computer system. They had no choice, but to sell immediately these stocks They didn't know they owned now to see the effect of fragility from size look at losses as a function of quantity sold a Fire sale of 70 billion dollars worth of stocks leads to a loss of six billion dollars but a fire sale a tenth of the size seven billion dollars would result in no loss at all as Markets would absorb the quantities without panic maybe without even noticing So this tells us that if instead of having one very large bank with Monsieur Curvio as a rogue trader We had ten smaller banks each with a proportional Monsieur micro Curvio and each conducted his rogue trading Independently and at random times the total losses for the ten banks would be close to nothing About a few weeks before the Curvio episode a French business school hired me to present to the Board of Executives of the Société Générale meeting in Prague my ideas of black swan risks in the eyes of the bankers I was like a Jesuit preacher visiting Mecca in the middle of the annual Hajj Their quants and risk people hated me with passion and I regretted not having insisted on speaking in Arabic Given that they had simultaneous translation My talk was about pseudo risk techniques a la Trifat Methods commonly used as I said to measure and predict events that have never worked before and how we needed to focus on fragility and barbells During the talk I was heckled relentlessly by Curvio's boss and his colleague the head of risk management After my talk everyone ignored me as if I were a Martian with a who brought this guy here awkward situation I had been selected by the school not the bank The only person who was nice to me was the chairman as he mistook me for someone else and had no clue about what? I was discussing So the reader can imagine my state of mind when shortly after my return to New York the curville trading scandal broke It was also tantalizing that I had to keep my mouth shut which I did except for a few slips for legal reasons Clearly the post-mortem analyses were plainly mistaken Attributing the problem to bad controls by the bad capitalistic system and lack of vigilance on the part of the bank It was not nor was it greed as we commonly assume The problem is primarily size and the fragility that comes from size Always keep in mind the difference between a stone and its weight in pebbles The curville story is illustrative so we can generalize and look at evidence across domains in Project management bent flu Pio has shown firm evidence that an increase in the size of projects Maps to poor outcomes and higher and higher costs of delays as a proportion of the total budget But there is a nuance it is the size per segment of the project that matters not the entire project Some projects can be divided into pieces not others Bridge and tunnel projects involve monolithic planning as these cannot be broken up into small portions Their percentage costs overruns increase markedly the size same with dams For roads built by small segments There is no serious size effect as the project managers incur only small errors and can adapt to them Small segments go one small error at a time with no serious role for squeezes another aspect of size Large corporations also end up endangering neighborhoods I've used the following argument against large superstore chains in spite of the advertised benefits a Large super megastore wanted to acquire an entire neighborhood near where I live Causing uproar owing to the change it would bring to the character of the neighborhood The argument in favor was the revitalization of the area that type of story I fought the proposal on the following grounds should the company go bust and the statistical elephant in the room is that it eventually Will we would end up with a massive war zone? This is the type of argument the British advisers Rohan Silva and Steve Hilton have used in favor of small merchants Along the poetic small is beautiful It is completely wrong to use the calculus of benefits without including the probability of failure How to exit a movie theater another example of the costs of a squeeze Imagine how people exit a movie theater Someone shouts fire and you have a dozen persons squashed to death So we have a fragility of the theater to size stemming from the fact that every additional person exiting brings more and more trauma such disproportional harm is a negative convexity effect a Thousand people exiting or trying to exit in one minute is not the same as the same number exiting in half an hour Someone unfamiliar with the business who naively optimizes the size of the place Heathrow Airport For example might miss the idea that smooth functioning at regular times is different from the rough functioning at times of stress It so happens that contemporary economic optimized life causes us to build larger and larger theaters But with the exact same door They no longer make this mistake too often while building cinemas movie theaters and stadiums But we tend to make the mistake in other domains such as for instance natural resources and food supplies Just consider that the price of wheat more than tripled in the years 2004 to 2007 in response to a small increase in net demand around 1% Bottlenecks are the mothers of all squeezes Projects and prediction why planes don't arrive early Let us start as usual with a transportation problem and generalize to other areas Travelers typically do not like uncertainty, especially when they are on a set schedule Why? There is a one-way effect I've taken the very same London New York flight most of my life The flight takes about seven hours The equivalent of a short book plus a brief polite chat with a neighbor and a meal with port wine stilton cheese and crackers. I Recall a few instances in which I arrived early about 20 minutes. No more But there have been instances in which I got there more than two or three hours late and in at least one instance It has taken me more than two days to reach my destination Because travel time cannot be really negative Uncertainty tends to cause delays Making arrival time increase almost never decrease or it makes arrival time decrease by just minutes But increase by hours and obvious asymmetry Anything unexpected any shock any volatility is much more likely to extend the total flying time This also explains the irreversibility of time in a way if you consider the passage of time as an increase in disorder Let us now apply this concept to projects Just as when you add uncertainty to a flight the planes tend to land later Not earlier and these laws of physics are so universal that they even work in Russia When you add uncertainty to projects they tend to cost more and take longer to complete This applies to many in fact almost all projects the interpretation I had in the past was that a Psychological bias the underestimation of the random structure of the world was the cause behind such underestimations Projects take longer than planned because the estimates are too optimistic We have evidence of such bias called over confidence decision scientists and business psychologists have theorized something called the Planning fallacy in which they try to explain the facts that projects take longer rarely less time using psychological factors But the puzzle was that such underestimation did not seem to exist in the past century or so Though we were dealing with the very same humans endowed with the same biases Many large-scale projects a century and a half ago were completed on time Many of the tall buildings and monuments we see today are not just more elegant than modernistic structures But were completed within and often ahead of schedule These include not just the Empire State Building still standing in New York, but the London Crystal Palace Erected for the great exhibition of 1851 the hallmark of the Victorian reign based on the inventive ideas of a gardener The palace which housed the exhibition went from concept to grand opening in just nine months The building took the form of a massive glass house 1848 feet long by 454 feet wide It was constructed from cast-iron frame components and glass made almost exclusively in Birmingham and Smithwick The ambience is usually missed here The Crystal Palace project did not use computers and the parts were built not far from the source With a small number of businesses involved in the supply chain Further there were no business schools at the time to teach something called project management and increase over confidence There were no consulting firms The agency problem which we defined as the divergence between the interest of the agent and that of his client was not significant in other words it was a much more linear economy less complex than today and we have more non linearities a Symmetry is convexities in today's world Black Swan effects are necessarily increasing as a result of complexity interdependence between parts Civilization and the beastly thing called efficiency that makes people now sail too close to the wind Add to that consultants and business schools One problem somewhere can halt the entire project So the projects tend to get as weak as the weakest link in their chain an acute negative convexity effect The world is getting less and less predictable and we rely more and more on Technologies that have errors and interactions that are harder to estimate let alone predict and The information economy is the culprit Bent flu piano the one of bridge and road projects mentioned earlier in this chapter showed another result The problem of cost overruns and delays is much more acute in the presence of information technologies IT as Computer projects cause a large share of these cost overruns and it is better to focus on these principally But even outside of these IT heavy projects we tend to have very severe delays But the logic is simple again negative convexity effects are the main culprit a direct and visible cause There is an asymmetry in the way errors hit you the same as with travel No psychologists who has discussed the planning fallacy has realized that at the core it is not essentially a Psychological problem not an issue with human errors. It is inherent to the nonlinear structure of the projects Just as time cannot be negative a three-month project cannot be completed in zero or negative time So on a timeline going left to right errors add to the right end Not the left end of it if uncertainty were linear we would observe some projects completed extremely early Just as we would arrive sometimes very early sometimes very late, but that is not the case wars deficits and deficits The Great War was estimated to last only a few months by the time it was over it had gotten France and Britain heavily in debt They incurred at least ten times what they thought their financial costs would be aside from all the horrors suffering and destruction The same of course for the second war which added to the UK debt causing it to become heavily indebted mostly to the United States In the United States the prime example remains the Iraq war Expected by George W Bush and his friends to cost 30 to 60 billion Which so far taking into account all the indirect costs may have swelled to more than 2 trillion indirect costs multiply causing chains Explosive chains of interactions all going in the same direction of more costs not less Complexity plus asymmetry plus such types as George W Bush once again lead to explosive errors The larger the military the disproportionately larger the cost overruns But wars with more than 20 fold errors are only illustrative of the way government's underestimate explosive nonlinearities convexity effects And why they should not be trusted with finances or any large-scale decisions Indeed governments do not need wars at all to get us in trouble with deficits The underestimation of the costs of their projects is chronic for the very same reason 98% of contemporary projects have overruns. They just end up spending more than they tell us This has led me to install a governmental golden rule No borrowing allowed forced fiscal balance Where the efficient is not efficient We can easily see the costs of fragility swelling in front of us visible to the naked eye Global disaster costs are today more than three times what they were in the 1980s adjusting for inflation The effect noted a while ago by the visionary researcher on extreme events Daniel Zeidenfaber seems to be accelerating The economy can get more and more efficient, but fragility is causing the costs of errors to be higher The stock exchanges have converted from open outcry where wild traders face each other yelling and screaming is in a souk then go drink together Traders were replaced by computers for very small visible benefits and massively large risks While errors made by traders are confined and distributed those made by computerized systems go wild in August 2010 a computer error made the entire market crash the flash crash in August 2012 as this manuscript was heading to the printer the night Capital group had its computer system go wild and caused ten million dollars of losses a minute losing 480 million dollars and Naive cost-benefit analyses can be a bit harmful an effect that of course swells with size for instance the French have in the past focused on nuclear energy as it seemed clean and cheap and optimal on a computer screen then after the wake-up call of the Fukushima disaster of 2011 they realized that they needed additional safety features and scrambled to add them at any cost In a way, this is similar to the squeeze. I mentioned earlier. They are forced to invest regardless of price Such additional expense was not part of the initial cost-benefit analysis that went into the initial decision and looked good on a computer screen 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 Pollution and harm to the planet From this we can generate a simple ecological policy We know that fossil fuels are harmful in a nonlinear way The harm is necessarily concave if a little bit of it is devoid of harm a lot can cause climatic disturbances While on epistemological grounds because of opacity we do not need to believe in anthropogenic climate change Caused by humans in order to be ecologically conservative We can put these convexity effects to use in producing a risk management rule for pollution Simply just as with size splits your sources of pollution among many natural sources The harm from polluting with ten different sources is smaller than the equivalent pollution from a single source Volatility and uncertainty are equivalent as we saw with the table of the disorder family Accordingly note that the fragile is harmed by an increase in uncertainty Let's look at nature-like ancestral mechanisms for regulating the concentration effects We contemporary humans go to the stores to purchase the same items say tuna coffee or tea rice Mozzarella Cabernet wine olive oil and other items that appear to us is not easily substitutable Because of sticky contemporary habits cultural contagion and the rigidity of factories We are led to the excessive use of specific products. This concentration is harmful extreme consumption of say tuna can hurt other animals mess with the ecosystem and lead species to extinction and Not only does the harm scale non-linearly, but the shortages lead to disproportional rise in prices Ancestral humans did it differently Jennifer Dunn a complexity researcher who studies hunter-gatherers Examined evidence about the behavior of the elutes a North American native tribe for which we have ample data covering five millennia They exhibit a remarkable lack of concentration in their predatorial behavior with a strategy of prey switching They were not as sticky and rigid as us in their habits Whenever they got low on a resource they switched to another one as if to preserve the ecosystem So they understood convexity effects or rather their habits did Note that globalization has had the effect of making Contagions planetary as if the entire world became a huge room with narrow exits and people rushing to the same doors with accelerated harm Just as about every child reads Harry Potter and joins for now Facebook people when they get rich are starting to engage in the same activities and buy the same items They drink Cabernet wine hope to visit Venice and Florence dream of buying a second home in the south of France, etc Tourist locations are becoming unbearable. Just go to Venice next July The non-linearity of wealth We can certainly attribute the fragilizing effect of contemporary globalization to complexity and how connectivity and cultural Contagions make gyrations in economic variables much more severe the classic switch to extremist on But there is another effect wealth Wealth means more and because of nonlinear scaling more is different We are prone to make more severe errors because we are simply wealthier Just as projects of 100 million dollars are more unpredictable and more likely to incur overruns than five million dollar ones Simply by being richer the world is troubled with additional unpredictability and fragility This comes with growth at a country level this highly dreamed of GDP growth Even at an individual level wealth means more headaches We may need to work harder at mitigating the complications arising from wealth than we do with acquiring it Conclusion to conclude this chapter fragility in any domain from a porcelain cup to an organism to a political system to the size of a firm or to delays in airports resides in the nonlinear Further discovery can be seen as antideficit Think of the exact opposite of airplane delays or project overruns something that benefits from uncertainty and Discovery presents the mirror image of what we saw as fragile randomness hating situations Chapter 19 the philosopher's stone deeper into convexity how Fannie Mae went bust Non linearity the heuristic to detect fragility and antifragility convexity biases Jensen's inequality and their impact on ignorance The philosopher's stone and its inverse They tell you when they are going bust gold is sometimes a special variety of lead And Now listener after the herculean effort I put into making the ideas of the last few chapters clearer to you my turn to take it easy and express things technically sort of Accordingly this chapter a deepening of the ideas of the previous ones will be denser and should be skipped by the enlightened listener How to detect who will go bust Let us examine a method to detect fragility the inverse philosopher's stone we can illustrate it with the story of the giant government-sponsored lending firm called Fannie Mae a Corporation that collapsed leaving the United States taxpayer with hundreds of billions of dollars of losses and alas still counting one day in 2003 Alex Berenson a New York Times journalist came into my office with the secret risk reports of Fannie Mae Given to him by a defector It was the kind of report getting into the guts of the methodology for risk calculation that only an insider can see Fannie Mae made its own risk calculations and disclosed what it wanted to whomever it wanted the public or someone else But only a defector could show us the guts to see how the risk was calculated we looked at the report simply a move upward in an economic variable led to massive losses a Move downward in the opposite direction to small profits Further moves upward led to even larger additional losses and further moves downward to even smaller profits Acceleration of harm was obvious. In fact, it was monstrous So we immediately saw that their blow-up was inevitable. Their exposures were severely concave similar to the traffic example earlier losses that accelerate as one deviates economic variables I did not even need to understand which one as fragility to one variable of this magnitude implies fragility to all other parameters I worked with my emotions not my brain and I had a pang before even understanding what numbers I had been looking at it was the mother of all fragilities and thanks to Berenson the New York Times presented my concern a Smear campaign ensued but nothing too notable for I had in the meantime called a few key people Charlatans and they were not too excited about it the key is that the nonlinear is vastly more affected by extreme events and Nobody was interested in extreme events since they had a mental block against them I kept telling anyone who would listen to me including random taxi drivers Well almost that the company Fannie Mae was sitting on a barrel of dynamite Of course blow-ups don't happen every day Just as poorly built bridges don't collapse immediately and people kept saying that my opinion was wrong and unfounded Using some argument that the stock was going up or something even more circular I also inferred that other institutions almost all banks were in the same situation After checking similar institutions and seeing that the problem was general I realized that a total collapse of the banking system was a certainty I was so certain I could not see straight and went back to the markets to get my revenge against the turkeys as In the scene from the Godfather 3 just when I thought I was out. They pulled me back in Things happened as if they were planned by destiny Fannie Mae went bust along with other banks. It just took a bit longer than expected. No big deal a Stupid part of the story is that I had not seen the link between financial and general fragility nor did I use the term? fragility Maybe I didn't look at too many porcelain cups However, thanks to the episode of the attic. I had a measure for fragility and anti-fragility It all boils down to the following figuring out if our Calculations or miss forecasts are on balance more harmful than they are beneficial and how accelerating the damage is Exactly as in the story of the king in which the damage from a 10 kilogram stone is more than twice the damage from a 5 kilogram one Such accelerating damage means that a large stone would eventually kill the person Likewise a large market deviation would eventually kill the company Once I figured out that fragility was directly from non-linearity and convexity effects and that convexity was measurable I got all excited the technique Detecting acceleration of harm applies to anything that entails decision-making under uncertainty and risk management While it was the most interesting in medicine and technology the immediate demand was in economics So I suggested to the International Monetary Fund a measure of fragility to substitute for their measures of risk that they knew didn't work Most people in the risk business have been frustrated by the poor rather the random performance of their models But they didn't like my earlier stance. Don't use any model. They wanted something and a risk measure was there The method does not require a good model for risk measurement. Take a ruler. You know, it is wrong It will not be able to measure the height of the child, but it can certainly tell you if he is growing In fact, the error you get about the rate of growth of the child is much much smaller than the error You would get measuring his height the same with a scale no matter how defective It will almost always be able to tell you if you are gaining weight. So stop blaming it convexity is about acceleration The remarkable thing about measuring convexity effects to detect model errors is that even if the model used for the Computation is wrong. It can tell you if an entity is fragile and by how much it is fragile as with the defective scale We are only looking for second-order effects So here is something to use the technique a simple heuristic called the fragility and anti fragility detection heuristic works as follows Let's say you want to check whether a town is over optimized Say you measure that when traffic increases by 10,000 cars travel time grows by 10 minutes But if traffic increases by 10,000 to more cars Travel time now extends by an extra 30 minutes Such acceleration of traffic time shows that traffic is fragile and you have too many cars and need to reduce traffic until the acceleration becomes mild Acceleration I repeat is acute concavity or negative convexity effect Likewise government deficits are particularly concave to changes in economic conditions Every additional deviation in say the unemployment rate particularly when the government has debt makes deficits incrementally worse and Financial leverage for a company has the same effect You need to borrow more and more to get the same effect just as in a Ponzi scheme the same with operational leverage on the part of a fragile company Should sales increase 10% then profits would increase less than they would decrease should sales drop 10% That was in a way the technique I used intuitively to declare that the highly respected firm Fannie Mae Was on its way to the cemetery and it was easy to produce a rule of thumb out of it Now with the IMF we had a simple measure with a stamp. It looks simple too simple So the initial reaction from experts was that it was trivial Said by people who visibly never detected these risks before Academics and quantitative analysts scorn what they can understand too easily and get ticked off by what they did not think of themselves According to the wonderful principle that one should use people's stupidity to have fun I invited my friend Raphael Duarte to collaborate in expressing this simple idea using the most opaque mathematical derivations with incomprehensible theorems that would take half a day for a professional to understand Raphael Bruno de Peer and I have been involved in an almost two decades long continuous conversation on how everything entailing risk Everything can be seen with a lot more rigor and clarity from the vantage point of an option professional Raphael and I managed to prove the link between non-linearity dislike of volatility and fragility Remarkably as has been shown if you could say something straightforward in a complicated manner with complex theorems Even if there is no large gain in rigor from these complicated equations people take the idea very seriously We got nothing but positive reactions and we were now told that this simple detection heuristic was Intelligent but a sane people who had found it trivial. The only problem is that mathematics is addictive The idea of positive and negative model error Now what I believe is my true specialty error in models When I was in the transaction business, I used to make plenty of errors of execution You buy 1,000 units and in fact you discover the next day that you bought 2,000 if the price went up in the meantime, you had a handsome profit. Otherwise you had a large loss So these errors are in the long run neutral in effect since they can affect you both ways They increase the variance, but they don't affect your business too much There is no one-sidedness to them and these errors can be kept under control Thanks to size limits you make a lot of small transactions So errors remain small and at year-end typically the errors wash out as they say But that is not the case with most things we build and with errors related to things that are fragile in the presence of negative convexity effects This class of errors has a one-way outcome that is negative and tends to make planes land later Not earlier wars tend to get worse not better as we saw with traffic Variations now called disturbances tend to increase travel time from South Kensington to Piccadilly Circus never shorten it Some things like traffic do rarely experience the equivalent of positive disturbances This one-sidedness brings both Underestimation of randomness and underestimation of harm since one is more exposed to harm than benefit from error If in the long run we get as much variation in the source of randomness one way is the other The harm would severely outweigh the benefits So and this is the key to the triad we can classify things by three simple distinctions Things that in the long run like disturbances or errors Things that are neutral to them and those that dislike them By now we have seen that evolution likes disturbances. We saw the discovery likes disturbances Some forecasts are hurt by uncertainty and like travel time one needs a buffer Airlines figured out how to do it, but not governments when they estimate deficits This method is very general I even used it with Fukushima style computations and realized how fragile their computation of small Probabilities was in fact all small probabilities tend to be very fragile to errors as a small change in the assumptions Can make the probability rise dramatically from one per million to one per hundred indeed a 10,000 fold underestimation Finally this method can show us where the math and economic models is bogus which models are fragile and which ones are not Simply do a small change in the assumptions and look at how large the effect and if there is acceleration of such effect Acceleration implies as with Fannie Mae that someone relying on the model blows up from black swan effects molto facile 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 How to lose a grandmother Next I will explain the following effect of non-linearity conditions under which the average the first-order effect does not matter as a first step before getting into the workings of the philosopher's stone as The saying goes do not cross a river if it is on average four feet deep You have just been informed that your grandmother will spend the next two hours at the very desirable average temperature of 70 degrees Fahrenheit about 21 degrees Celsius Excellent you think since 70 degrees is the optimal temperature for grandmothers since you went to business school You're a big-picture type of person and are satisfied with the summary information But there is a second piece of data Your grandmother it turns out will spend the first hour at zero degrees Fahrenheit around minus 18 Celsius and the second hour at 140 degrees around 60 degrees Celsius for an average of the very desirable Mediterranean style 70 degrees 21 degrees Celsius So it looks as though you will most certainly end up with no grandmother a funeral and possibly an inheritance Clearly temperature changes become more and more harmful as they deviate from 70 degrees as you see the second piece of information The variability turned out to be more important than the first The notion of average is of no significance when one is fragile to variations The dispersion and possible thermal outcomes here matters much more Your grandmother is fragile to variations of temperature to the volatility of the weather Let us call that second piece of information the second-order effect or more precisely the convexity effect Here consider that as much as a good simplification the notion of average can be it can also be a procrustean bed The information that the average temperature is 70 degrees Fahrenheit does not simplify the situation for your grandmother It is information squeezed into a procrustean bed and these are necessarily committed by scientific modelers Since a model is by its very nature a simplification You just don't want simplification to distort the situation to the point of being harmful. I can graph the fragility of the health of the grandmother to variations If I plot health on the vertical axis and temperature on the horizontal one I see a shape that curves inward a concave shape or negative convexity effect If the grandmother's response was linear no curve a straight line then the harm of temperature below 70 degrees would be offset by the benefits of temperature above it and The fact is that the health of the grandmother has to be capped at a maximum. Otherwise, she would keep improving Take this for now as we rapidly move to the more general attributes. In the case of the grandmother's health response to temperature A. There is non-linearity. The response is not a straight line not linear. B. It curves inward too much so and finally C. The more nonlinear the response the less relevant the average and the more relevant the stability around such average Now the Philosopher's Stone Much of medieval thinking went into finding the Philosopher's Stone It is always good to be reminded that chemistry is the child of alchemy Much of which consisted of looking into the chemical powers of substances The main efforts went into creating value by transforming metals into gold by the method of transmutation The necessary substance was called the Philosopher's Stone Many people fell for it. A list that includes such scholars as Albertus Magnus Isaac Newton and Roger Bacon and great thinkers who were not quite scholars such as Paracelsus It is a matter of no small import that the operation of transmutation was called the Magnus Opus the greatest work I truly believe that the operation I will discuss based on some properties of optionality is about as close as we can get to the Philosopher's Stone The following note would allow us to understand A. The severity of the problem of conflation Mistaking the price of oil for geopolitics or mistaking a profitable bet for good forecasting not convexity of payoff and optionality B. Why anything with optionality has a long-term advantage and how to measure it C. The merger of the two points above, conflation and optionality Recall from our traffic example in chapter 18 that 90,000 cars for an hour and 110,000 cars for the next one for an average of 100,000 and traffic will be horrendous on the other hand assume We have 100,000 cars for two hours and traffic will be smooth and time in traffic short The number of cars is the something a variable Traffic time is the function of something the behavior of the function is such that it is as we said not the same thing We can see here that the function of something becomes different from the something under non linearities A. The more nonlinear the more the function of something divorces itself from the something If traffic were linear then there would be no difference in traffic time between the two following situations 90,000 then 110,000 cars on the one hand or 100,000 cars on the other B. The more volatile the something the more uncertainty the more the function divorces itself from the something Let us consider the average number of cars again the function travel time depends more on the volatility around the average Things degrade if there is evenness of distribution for the same average you prefer to have 100,000 cars for both time periods 80,000 then 120,000 would be even worse than 90,000 and 110,000 C. If the function is convex Anti-fragile then the average of the function of something is going to be higher than the function of the average of something This is the philosopher's stone and the reverse when the function is concave fragile As an example assume that the function under question is the squaring function multiply a number by itself This is a convex function Take a conventional die six sides and consider a payoff equal to the number it lands on that is you get paid a number Equivalent to what the die shows 1 if it lands on 1 2 if it lands on 2 up to 6 if it lands on 6 the square of the expected average payoff is then the quantity of 1 plus 2 plus 3 plus 4 plus 5 plus 6 divided by 6 squared equals 3.5 squared here 12.25 So the function of the average equals 12.25 But the average of the function is as follows Take the square of every payoff 1 squared plus 2 squared plus 3 squared plus 4 squared plus 5 squared plus 6 squared Divided by 6 that is the average square payoff and you can see that the average of the function equals 15.67 So since squaring is a convex function the average of the square payoff is higher than the square of the average payoff the difference here between 15.67 and 12.25 is what I call the hidden benefit of antifragility here a 28% edge This is the convexity bias the philosophers stone The conflation problem Mistaking a property of a function of something for the function of the property of something leads to severe misunderstanding of the process Someone with a linear payoff needs to be right more than 50% of the time Someone with a convex payoff much less The hidden benefit of antifragility is that you can guess worse than random and still end up outperforming Here lies the power of optionality your function of something is very convex So you can be wrong and still do fine the more uncertainty the better This explains my statement that you can be dumb and antifragile and still do very well This convexity bias comes from a mathematical property called Jensen's inequality This is what the common discourse on innovation is missing If you ignore the convexity bias you are missing a chunk of what makes the nonlinear world go round and It is a fact that such an idea is missing from the discourse Sorry How to transform gold into mud the inverse philosophers stone Let us take the same example as before Using as the function the square root the exact inverse of squaring which is concave But much less concave than the square function is convex The square of the expected average payoff is then the square root of the quantity of 1 plus 2 plus 3 plus 4 plus 5 plus 6 divided by 6 equals the square root of 3.5 here 1.87 the function of the average equals 1.87 But the average of the function is as follows Take the square root of every payoff the quantity of the square root of 1 plus the square root of 2 Plus the square root of 3 plus the square root of 4 plus the square root of 5 plus the square root of 6 Divided by 6 that is the average square root payoff and you can see that the average of the function equals 1.80 The difference is called the negative convexity bias or if you're a stickler concavity bias The hidden harm of fragility is that you need to be much much better than random in your prediction and knowing where you are going Just to offset the negative effect Let me summarize the argument if you have favorable asymmetries or positive convexity Options being a special case then in the long run you will do reasonably well Outperforming the average in the presence of uncertainty The more uncertainty the more role for optionality to kick in and the more you will outperform This property is very central to life Book 6 via negativa Recall that we had no name for the color blue but managed rather well without it We stayed for a long part of our history culturally not biologically colorblind and Before the composition of chapter 1 we did not have a name for anti fragility Yet systems have relied on it effectively in the absence of human intervention There are many things without words Matters that we know and can act on but cannot describe directly Cannot capture in human language or within the narrow human concepts that are available to us Almost anything around us of significance is hard to grasp linguistically And in fact the more powerful the more incomplete our linguistic grasp But if we cannot express what something is exactly we can say something about what it is Not the indirect rather than the direct expression The apophatic focuses on what cannot be said directly in words from the Greek apotheosis saying no or mentioning without mentioning The method began as an avoidance of direct description leading to a focus on negative description What is called in Latin via negativa the negative way after theological traditions particularly in the Eastern Orthodox Church Via negativa does not try to express what God is leave that to the primitive brand of contemporary thinkers and Philosophers with scientific tendencies it just lists what God is not and proceeds by the process of elimination The idea is mostly associated with the mystical theologian Pseudo Dionysus the Areopagite He was some obscure near Easterner by the name of Dionysus who wrote powerful mystical treatises and was for a long time confused with Dionysus the Areopagite a Judge in Athens who was converted by the preaching of Paul the Apostle Hence the qualifier of Pseudo added to his name Neoplatonists are followers of Plato's ideas They focus mainly on Plato's forms those abstract objects that had a distinct existence on their own Pseudo Dionysus was the disciple of Proclus the Neoplatonist himself the student of Sirianus another Syrian Neoplatonist Proclus was known to repeat the metaphor that statues are carved by subtraction I have often read a more recent version of the idea with the following apocryphal pun Michelangelo was asked by the Pope about the secret of his genius Particularly how he carved at the Statue of David largely considered the masterpiece of all masterpieces His answer was it's simple. I just remove everything that is not David The reader might thus recognize the logic behind the barbell Remember from the logic of the barbell that it is necessary to first remove fragilities Where is the charlatan Recall that the interventionista focuses on positive action Doing just like positive definitions We saw that acts of Commission are respected and glorified by our primitive minds and lead to say naive Government interventions that end in disaster followed by generalized complaints about naive government interventions as these It is now accepted and in disaster followed by more naive government interventions Acts of omission not doing something are not considered acts and do not appear to be part of one's mission Graphic 3 in your PDF showed how generalized this effect can be across domains from medicine to business. I Have used all my life a wonderfully simple heuristic Charlatans are recognizable in that they will give you positive advice and only positive advice Exploiting our gullibility and sucker proneness for recipes that hit you in a flash is just obvious then evaporate later as you forget them Just look at the how-to books within their title ten steps for fill in Enrichment weight loss making friends innovation getting elected building muscles finding a husband running an orphanage Etc. Yet in practice. It is the negative that's used by the pros those selected by evolution Chess grandmasters usually win by not losing people become rich by not going bust particularly when others do Religions are mostly about interdicts. The learning of life is about what to avoid You reduce most of your personal risks of accident. Thanks to a small number of measures Further being fooled by randomness is that in most circumstances fraught with a high degree of randomness One cannot really tell if a successful person has skills or if a person with skills will succeed But we can pretty much predict the negative that a person totally devoid of skills will eventually fail You Subtractive knowledge Now when it comes to knowledge the same applies the greatest and most robust Contribution to knowledge consists in removing what we think is wrong subtractive epistemology in Life anti-fragility is reached by not being a sucker in Perry mystique a stale. Oh, yes Pseudo Dionysus did not use these exact words nor did he discuss? Disconfirmation nor did he get the idea with clarity? But in my view he figured out the subtractive epistemology and asymmetry to knowledge I have called platonicity a love of some crisp abstract forms the theoretical forms and Universals that make us blind to the mess of reality and cause black swan effects Then I realized that there was an asymmetry. I Truly believe in platonic ideas when they come in reverse like negative universals So the central tenet of the epistemology I advocate is as follows We know a lot more what is wrong than what is right or phrased according to the fragile robust classification Negative knowledge what is wrong? What does not work is more robust to error than positive knowledge. What is right? What works? So knowledge grows by subtraction much more than by addition Given that what we know today might turn out to be wrong But what we know to be wrong cannot turn out to be right at least not easily If I spot a black swan not capitalized I can be quite certain that the statement all swans are white is wrong But even if I have never seen a black swan, I can never hold such a statement to be true Rephrasing it again since one small observation can disprove a statement while millions can hardly confirm it disconfirmation is more rigorous than confirmation This idea has been associated in our times with the philosopher Karl Popper and I quite mistakenly thought that he was its originator So he is at the origin of an even more potent idea on the fundamental inability to predict the course of history The notion it turned out is vastly more ancient and was one of the central tenets of the skeptical Empirical School of Medicine of the post-classical era in the Eastern Mediterranean It was well known to a group of 19th century French scholars who rediscovered these works and this idea of the power of disconfirmation permeates the way we do a hard science as You can see we can link this to the general tableaus of positive additive and negative subtractive Negative knowledge is more robust, but it is not perfect Popper has been criticized by philosophers for his treatment of disconfirmation as hard Unequivocal black and white it is not clear-cut It is impossible to figure out whether an experiment failed to produce the intended results hence falsifying the theory because of the failure of the tools because of bad luck or because of fraud by the scientist Say you saw a black swan that would certainly invalidate the idea that all swans are white But what if you had been drinking Lebanese wine or hallucinating from spending too much time on the web? What if it was a dark night in which all swans look gray? Let us say that in general failure and disconfirmation are more informative than success and confirmation Which is why I claim that negative knowledge is just more robust Now before starting to write this section I spent some time scouring poppers complete works wondering how the great thinker with his obsessive approach to falsification completely missed the idea of fragility His masterpiece the poverty of historicism in which he presents the limits of forecasting shows the impossibility of an acceptable representation of the future But he missed the point that if an incompetent surgeon is operating on a brain one can safely predict serious damage even the death of the patient Yet such subtractive representation of the future is perfectly in line with his idea of disconfirmation It's logical second step What he calls falsification of a theory should lead in practice to the breaking of the object of its application In political systems a good mechanism is one that helps remove the bad guy It's not about what to do or who to put in for the bad guy can cause more harm than the collective actions of good ones John Elster goes further He recently wrote a book with the telling title preventing mischief in which he bases negative action on Bentham's idea that the Art of the legislator is limited to the prevention of everything that might prevent the development of their members of the assembly liberty and their intelligence and As expected via negativa is part of classical wisdom For the Arab scholar and religious leader Ali bin 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 a thousand things Barbells again Subtractive knowledge is a form of barbell critically it is convex What is wrong is quite robust what you don't know is fragile and speculative But you do not take it seriously, so you make sure it does not harm you in case it turns out to be false Now another application of via negativa lies in the less is more idea Less is more The less is more idea in decision-making can be traced to Spiros Makrodakis Robin Dawes Dan Goldstein and Gerd Gigerenzer who have all found in various contexts that simpler methods for forecasting and inference can work much Much better than complicated ones Their simple rules of thumb are not perfect, but are designed to not be perfect Adopting some intellectual humility and abandoning the aim at sophistication can yield powerful effects The pair of Goldstein and Gigerenzer coined the notion of fast and frugal heuristics that make good decisions despite limited time knowledge and computing power I Realized that the less is more heuristic fell squarely into my work in two places first extreme effects There are domains in which the rare event I repeat good or bad plays a disproportionate Share and we tend to be blind to it so focusing on the exploitation of such a rare event or protection Against it changes a lot a lot of the risky exposure Just worry about black swan exposures and life is easy Less is more has proved to be shockingly easy to find and apply and robust to mistakes and change of minds There may not be an easily identifiable cause for a large share of the problems But often there is an easy solution not to all problems, but good enough I mean really good enough and such a solution is immediately identifiable Sometimes with the naked eye rather than the use of complicated analyses and highly fragile error prone cause ferreting nerdiness Some people are aware of the 80-20 idea Based on the discovery by Vilfredo Pareto more than a century ago that 20% of the people in Italy owned 80% of the land and vice-versa of these 20% 20% that is 4% would have owned around 80% of the 80% that is 64% We end up with less than 1% Representing about 50% of the total These describe winner-take-all Extremists on effects these effects are very general from the distribution of wealth to book sales per author Few realize that we are moving into the far more uneven distribution of 99 to 1 across many things that used to be 80-20 99% of internet traffic is attributable to less than 1% of sites 99% of book sales come from less than 1% of authors and I need to stop because numbers are emotionally stirring Almost everything contemporary has winner-take-all effects, which includes sources of harm and benefits accordingly as I will show 1% modification of systems can lower fragility or increase Anti-fragility by about 99% and all it takes is a few steps Very few steps often at low cost to make things better and safer For instance a small number of homeless people cost the state's a disproportionate share of the bills which makes it obvious where to look for the savings a Small number of employees in a corporation caused the most problems corrupt the general attitude and vice-versa So getting rid of these is a great solution a small number of customers generate a large share of the revenues I Get 95% of my smear postings from the same three obsessive persons all representing the same prototypes of failure One of whom has written I estimate close to 100,000 words in posts He needs to write more and more and find more and more stuff to critique in my work and personality to get the same effect When it comes to health care Ezekiel Emanuel showed that half the population accounts for less than 3% of the costs with the sickest 10% consuming 64% of the total pie Bent Flupia of chapter 18 showed in his black swan management idea that the bulk of cost overruns by Corporations are simply attributable to large technology projects Implying that that's what we need to focus on instead of talking and talking and writing complicated papers As they say in the Mafia just work on removing the pebble in your shoe there are some domains like say real estate in which problems and solutions are crisply summarized by a heuristic a Rule of thumb to look for the three most important properties location location and location Much of the rest is supposed to be chicken Not quite and not always true, but it shows the central thing to worry about as the rest takes care of itself Yet people want more data to solve problems I once testified in Congress against a project to fund a crisis forecasting project The people involved were blind to the paradox that we have never had more data than we have now Yet have less predictability than ever More data such as paying attention to the eye colors of the people around when crossing the street can make you miss the big truck When you cross the street you remove data anything, but the essential threat As Paul Valerie once wrote could a show's you'll fall ignore a poor as year How many things one should disregard in order to act? Convincing and confident disciplines say physics tend to use little statistical backup while political science and economics Which have never produced anything of note are full of elaborate statistics and statistical evidence And you know that once you remove the smoke the evidence is not evidence the situation in science is similar to detective novels in which the person with the largest number of alibis turns out to be the Guilty one and you do not need reams of paper full of data to destroy the megatons of papers using statistics and 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 We have further evidence of the potency of less is more from the following experiment Christopher Shabrie and Daniel Simons in their book the invisible guerrilla Show how people watching a video of a basketball game when diverted with attention absorbing details such as counting passes can completely miss a guerrilla stepping into the middle of the court I Discovered that I had been intuitively using the less is more idea as an aid in decision-making Contrary to the method of putting a series of pros and cons side-by-side on a computer screen For instance 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 Likewise the French army had a heuristic to reject excuses for absenteeism for more than one reason like death of grandmother cold virus and being bitten by a boar if Someone attacks a book or idea using more than one argument. You know it is not real Nobody says he is a criminal He killed many people and he also has bad table manners and bad breath and is a very poor driver. I Have often followed what I call Bergson's razor a Philosopher should be known for one single idea not more. I can't source it to Bergson, but the rule is good enough The French essayist and poet Paul Valery once asked Einstein if he carried a notebook to write down ideas I never have ideas was the reply in fact. He just did not have chicken shit ideas So a heuristic if someone has a long bio I skip him at a conference a friend invited me to have lunch with an overachieving Hotshot whose resume can cover more than two or three lives. I Skipped to sit at a table with the trainees and stage engineers Likewise when I am told that someone has 300 academic papers and 22 honorary doctorates But no other single compelling contribution or main idea behind it. I avoid him like the bubonic plague Chapter 20 Neomania looking at the future by via negativa Valindi effect the old outlives the new in proportion to its age Empedocles tile why the irrational has an edge over the perceived to be rational time and fragility Prophecy like knowledge is subtractive not additive Valindi effect or how the old prevails over the new especially in technology no matter what they say in, California Prophecy not a recommended involuntary career Antifragility implies Contrary to initial instinct that the old is superior to the new and much more than you think No matter how something looks to your intellectual machinery or how well or poorly it narrates Time will know more about its fragilities and break it when necessary Here I expose a contemporary disease linked to interventionism called Neomania, which brings fragility, but I believe may be treatable if one is patient enough What survives must be good at serving some mostly hidden purpose that time can see but our eyes and logical Faculties can't capture in this chapter. We use the notion of fragility as a central driver of prediction Recall the foundational asymmetry the antifragile benefits from volatility and disorder the fragile is harmed Well time is the same as disorder From Simonides to Jensen As an exercise in the use of the distinction between fragility and antifragility Let us play profit with the understanding that it is not a good career choice unless you have a thick skin a good circle of friends a little access to the internet a Library with a good set of ancient proverbs and if possible the ability to derive personal benefits from your prophecy As shown from the track record of the prophets before you are proven right you will be reviled After you are proven right you will be hated for a while or what's worse your ideas will appear to be trivial Thanks to retrospective distortion This makes it far more convincing to follow the fat Tony method of focusing on shekels more than recognition and Such treatment is continued in modern times 20th century intellectuals who have embraced the wrong ideas such as communism or even stalinism have remained fashionable and their books remain on the bookstore shelves while those who like the political philosopher Raymond Heron Saw the problems got short shrift both before and after being acknowledged as having seen things, right? Now close your eyes and try to imagine your future surroundings in say five ten years Or twenty-five years odds are your imagination will produce new things in it things we call innovation Improvements killer technologies and other inelegant and hackneyed words from the business jargon These common concepts concerning innovation we will see are not just offensive aesthetically But they are nonsense both empirically and philosophically Why? Why? Odds are that your imagination will be adding things to the present world I am sorry, but I will show in this chapter that this approach is exactly backward the way to do it rigorously According to the notions of fragility and antifragility is to take away from the future reduce from it Simply things that do not belong to the coming times via negativa What is fragile will eventually break and luckily we can easily tell what is fragile Positive black swans are more unpredictable than negative ones Time has sharp teeth that destroy everything declaimed the 6th century BC poet Simonides of ceos Perhaps starting a tradition in Western literature about the inexorable effect of time I can trace a plethora of elegant classical expressions from Ovid Tempus Edox Rerum time devours everything to the no less poetic 20th century Franco-Russian poetess Elsa Triolet time burns, but leaves no ashes Naturally this exercise triggered some poetic waxing So I'm now humming a French poem put to music titled a vector at home About how time erases things even bad memories, so it doesn't say that it erases us as well in the process Now thanks to convexity effects We can put a little bit of science in these and produce our own taxonomy of what should be devoured the fastest by that inexorable time The fragile will eventually break and luckily we are capable of figuring out. What is fragile Even what we believe is antifragile will eventually break, but it should take much much longer to do so Wine does well with time but up to a point and not if you put it in a crater of a volcano The verse by Simonides that started the previous paragraph continues with the stipulation even the most solid So Simonides had the adumbration of the idea quite useful that the most solid will be swallowed with more difficulty hence last Naturally he did not think that something could be antifragile hence never swallowed Now I insist on the via negativa method of prophecy as being the only valid one There is no other way to produce a forecast without being a turkey somewhere Particularly in the complex environment in which we live today Now I am NOT saying that new technologies will not emerge Something new will rule its day for a while. What is currently fragile will be replaced by something else of course But this something else is Unpredictable in all likelihood the technologies you have in your mind are not the ones that will make it No matter your perception of their fitness and applicability with all due respect to your imagination Recall that the most fragile is the predictive what is built on the basis of predictability in other words those who? underestimate black swans will eventually exit the population an Interesting apparent paradox is that according to these principles longer term predictions are more reliable than short-term ones Given that one can be quite certain that what is black swan prone will be eventually swallowed by history since time augments the probability of such an event On the other hand typical predictions not involving the currently fragile Degrade with time in the presence of non linearities the longer the forecast the worse its accuracy Your error rate for a 10-year forecast of say the sales of a computer plant or the profits of a commodity vendor Can be a thousand times that of a one-year projection Learning to subtract Consider the futuristic projections made throughout the past century and a half as expressed in literary novels such as those by Jules Verne HG Wells or George Orwell or in now forgotten narratives of the future predicted by scientists or futurists It is remarkable that the tools that seem to currently dominate the world Such as the internet or more mundane matters such as the wheel on the suitcase of book four were completely missing from these forecasts But it is not here that the major error lies The problem is that almost everything that was imagined never took place except for a few Overexploited anecdotes such as the steam engine by hero the alexandrian or the assault vehicle by Leonardo da Vinci our world looks too close to theirs much closer to theirs than they ever imagined or wanted to imagine and We tend to be blind to that fact There seems to be no correcting mechanism that can make us aware of the point as we go along forecasting a highly technocratic future There may be a selection bias Those people who engage in producing these accounts of the future will tend to have incurable and untreatable Neomania the love of the modern for its own sake Tonight I will be meeting friends in a restaurant Tavernas have existed for at least 25 centuries I will be walking there wearing shoes hardly different from those worn 5,300 years ago by the mummified man discovered in a glacier in the Austrian Alps at the restaurant I will be using silverware a Mesopotamian technology which qualifies as a killer application Given what it allows me to do to the leg of lamb such as tear it apart while sparing my fingers from burns I will be drinking wine a liquid that has been in use for at least six millennia The wine will be poured into glasses an innovation claimed by my Lebanese compatriots to come from their Phoenician Ancestors and if you disagree about the source we can say that glass objects have been sold by them as trinkets for at least 2,900 years After the main course, I will have a somewhat younger technology Artisanal cheese paying higher prices for those that have not changed in their preparation for several centuries Had someone in 1950 predicted such a minor gathering he would have imagined something quite different So thank God I will not be dressed in a shiny synthetic space style suit Consuming nutritionally optimized pills while communicating with my dinner peers by means of screens The dinner partners in turn will be expelling airborne germs on my face as they will not be located in remote human colonies across the galaxy the food will be prepared using a very archaic technology fire with the aid of kitchen tools and Implements that have not changed since the Romans except in the quality of some of the metals used I will be sitting on an at least 3,000 year old device commonly known as the chair which will be if anything less ornate than its majestic Egyptian ancestor and I will not be repairing to the restaurant with the aid of a flying motorcycle I will be walking or if late using a cab from a century old technology driven by an immigrant Immigrants were driving cabs in Paris a century ago Russian aristocrats same as in Berlin and Stockholm Iraqis and Kurdish refugees Washington DC Ethiopian postdoc students Los Angeles musically oriented Armenians and New York multinationals today David Edgerton showed that in the early 2000s we produced two and a half times as many bicycles as we do cars and invest most of our Technological resources in maintaining existing equipment or refining old technologies Note that this is not just a Chinese phenomenon Western cities are aggressively trying to become bicycle friendly Also consider that one of the most consequential technologies seems to be the one people talk about the least the condom Ironically it wants to look like less of a technology It has been undergoing meaningful improvements with a precise aim of being less and less noticeable So the prime error is as follows When asked to imagine the future we have the tendency to take the present as a baseline Then produce a speculative destiny by adding new technologies and products to it and what sort of makes sense given interpolation of past developments We also represent society according to our utopia of the moment largely driven by our wishes Except for a few people called doomsayers the future will be largely inhabited by our desires So we will tend to over Technologize it and underestimate the might of the equivalent of these small wheels on suitcases that will be staring at us for the next millennia a word on the blindness to this over technologizing After I left finance I started attending some of the fashionable conferences attended by pre-rich and post-rich Technology people and the new category of technology intellectuals I was initially exhilarated to see them wearing no ties as living among tie-wearing abhorrent bankers I had developed the illusion that anyone who doesn't wear a tie was not an empty suit But these conferences all colorful and slick with computerized images and fancy animations felt depressing I knew I did not belong It was not just their additive approach to the future failure to subtract the fragile rather than add to destiny It was not entirely their blindness by uncompromising neomania, it took a while for me to realize the reason a profound lack of elegance Techno-thinkers tend to have an engineering mind to put it less politely they have autistic tendencies While they don't usually wear ties these types tend of course to exhibit all the textbook characteristics of nerdiness Mostly a lack of charm interest in objects instead of persons causing them to neglect their looks They love precision at the expense of applicability and they typically share an absence of literary culture This absence of literary culture is actually a marker of future blindness Because it is usually accompanied by a denigration of history a byproduct of unconditional neomania Outside of the niche and isolated genre of science fiction literature is about the past We do not learn physics or biology from medieval textbooks, but we still read Homer Plato was a very modern Shakespeare We cannot talk about sculpture without knowledge of the works of Phidias Michelangelo or the great Canova These are in the past not in the future Just by setting foot into a museum the aesthetically minded person is connecting with the elders whether overtly or not he will tend to acquire and respect historical knowledge even if it is to reject it and the past Properly handled as we will see in the next section is a much better teacher about the properties of the future than the present To understand the future you do not need techno autistic jargon obsession with killer apps these sort of things You just need the following some respect for the past some curiosity about the historical record a Hunger for the wisdom of the elders and a grasp of the notion of heuristics These often unwritten rules of thumb that are so determining of survival in other words You will be forced to give weight to things that have been around things that have survived Technology at its best But technology can cancel the effect of bad technologies by self subtraction Technology is at its best when it is invisible I am convinced that technology is of greatest benefit when it displaces the deleterious unnatural alienating and most of all inherently fragile preceding technology Many of the modern applications that have managed to survive today came to disrupt the deleterious effects of the philistinism of modernity particularly the 20th century the large multinational bureaucratic Corporation with empty suits at the top the isolated family nuclear in a one-way relationship with a television set Even more isolated thanks to car designed suburban society the dominance of the state particularly the militaristic nation-state with border controls the destructive dictatorship on thought and culture by the established media a Tight control on publication and dissemination of economic ideas by the charlatanic economics establishment Large corporations that tend to control their markets now threatened by the internet Pseudo rigor that has been busted by the web and many others You no longer have to press one for English or wait in line for a rude operator to make bookings for your honeymoon in Cyprus in many respects as Unnatural as it is the internet removed some of the even more unnatural elements around us For instance the absence of paperwork makes bureaucracy something modernistic more palatable than it was in the days of paper files With a little bit of luck a computer virus will wipe out all records and free people from their past mistakes Even now we are using technology to reverse technology Recall my walk to the restaurant wearing shoes not too dissimilar to those worn by the ancient pre-classical person found in the Alps The shoe industry after spending decades engineering a perfect walking and running shoe with all manner of support mechanisms and material for cushioning is Now selling us shoes that replicate being barefoot They want to be so unobtrusive that they're only claimed functions to protect our feet from the elements Not to dictate how we walk as the more modernistic mission was In a way they're selling us the calloused feet of a hunter-gatherer that we can put on Use and then remove upon returning to civilization It is quite exhilarating to wear these shoes when walking in nature as one wakes up to a new dimension While feeling the three dimensions of the terrain Regular shoes feel like casts that separate us from the environment and they don't have to be an elegant The technology is in the sole not the shoe as the new soles can be both robust and very thin Thus allowing the foot to hug the ground as if one was barefoot My best discovery is an Italian looking moccasin made in Brazil that allows me to both run on stones and go to dinner in restaurants Then again, perhaps they should just sell us reinforced waterproof socks in effect what the Alpine fellow had But it would not be very profitable for these firms There is anecdotal evidence from barefoot runners and users of five-finger style athletic shoes which includes myself that one's feet store some memory of the terrain remembering where they have been in the past and The great use of the tablet computer Notably the iPad is that it allows us to return to Babylonian and Phoenician roots of writing and taking notes on a tablet Which is how it started One can now jot down handwritten or rather finger written notes It is much more soothing to write longhand instead of having to go through the agency of a keyboard My dream would be to someday write everything longhand as almost every writer did before modernity So it may be a natural property of technology to only want to be displaced by itself Next let me show how the future is mostly in the past To age in reverse the Lindy effect Time to get more technical. So a distinction is helpful at this stage Let us separate the perishable humans single items from the non-perishable the potentially perennial The non-perishable is anything that does not have an organic unavoidable expiration date the perishable is typically an object the non-perishable has an informational nature to it a Single car is perishable But the automobile is a technology has survived about a century and we will speculate should survive another one Humans die, but their genes a code do not necessarily The physical book is perishable say a specific copy of the Old Testament But its contents are not as they can be expressed into another physical book Let me express my idea in Lebanese dialect first When you see a young and an old human you can be confident that the younger will survive the elder With something non-perishable say a technology that is not the case We have two possibilities either both are expected to have the same additional life expectancy the case in which the probability distribution is called exponential or the old is expected to have a longer expectancy than the young in proportion to their relative age in That situation if the old is 80 and the young is 10 The elder is expected to live eight times as long as the younger one Now conditional on something belonging to either category I propose the following building on the so-called Lindy effect in the version later developed by the great Benoit Mondalbrot For the perishable every additional day in its life translates into a shorter additional life expectancy For the non-perishable every additional day may imply a longer life expectancy So the longer a technology lives the longer it can be expected to live Let me illustrate the point people have difficulty understanding it at the first go Say I have for sole information about a gentleman that he is 40 years old and I want to predict how long he will live I can look at actuarial tables and find his age adjusted life expectancy as used by insurance companies The table will predict that he has an extra 44 to go next year when he turns 41 or Equivalently if apply the reasoning today to another person currently 41. He will have a little more than 43 years to go So every year that elapses reduces his life expectancy by about a year Actually a little less than a year So if his life expectancy at birth is 80 his life expectancy at 80 will not be zero but another decade or so The opposite applies to non-perishable items. I am simplifying numbers here for clarity If a book has been in print for 40 years, I can expect it to be in print for another 40 years But and that is the main difference if it survives another decade, then it will be expected to be in print another 50 years This simply as a rule tells you why things that have been around for a long time are not aging like persons but aging in reverse Every year that passes without extinction doubles the additional life expectancy This is an indicator of some robustness. The robustness of an item is proportional to its life the physicist Richard Gott Applied what appeared to be completely different reasoning to state that whatever we observe in a randomly selected way is Likely to be neither in the beginning nor in the end of its life Most likely in its middle his argument was criticized for being rather incomplete But by testing his argument he tested the one I just outlined above But the expected life of an item is proportional to its past life Gott made a list of Broadway shows on a given day May 17th 1993 and predicted that the longest running ones would last longest and vice versa He was proven right with 95% accuracy He had as a child visited both the Great Pyramid 5,700 years old and the Berlin Wall 12 years old and correctly guessed that the former would outlive the latter The proportionality of life expectancy does not need to be tested explicitly It is the direct result of winner-take-all effects in longevity Two mistakes are commonly made when I present this idea People have difficulties grasping probabilistic notions Particularly when they have spent too much time on the internet not that they need the internet to be confused We are naturally probability challenged The first mistake is usually in the form of the presentation of the counterexample of a technology that we currently see is inefficient and dying like say telephone landlines print newspapers and cabinets containing paper receipts for tax purposes These arguments come with anger as many neomaniacs get offended by my point But my argument is not about every technology, but about life expectancy Which is simply a probabilistically derived average if I know that a 40 year old has terminal pancreatic cancer I will no longer estimate his life expectancy using unconditional insurance tables It would be a mistake to think that he has 44 more years to live like others in his age group who are cancer-free likewise someone a technology guru Interpreted my idea as suggesting that the World Wide Web Being currently less than about 20 years old will only have another 20 to go This is a noisy estimator that should work on average not in every case But in general the older the technology not only the longer is it expected to last But the more certainty I can attach to such a statement Remember the following principle I am not saying that all technologies do not age only that those technologies that were prone to aging are already dead The second mistake is to believe that one would be acting young by adopting a young technology Revealing both a logical error and mental bias. It leads to the inversion of the power of generational contributions Producing the illusion of the contribution of the new generation over the old Statistically the young do almost nothing This mistake has been made by many people but most recently I saw an angry futuristic Consultant who accuses people who don't jump into technology of thinking old He is actually older than I am and like most techno maniacs I know looks sickly in pear-shaped and has an undefined transition between his jaw and his neck. I didn't understand why one would be acting particularly old by loving things historical So by loving the classics older I would be acting older than if I were interested in the younger medieval themes This is a mistake similar to believing that one would turn into a cow by eating cow meat It is actually a worse fallacy than the inference from eating a technology being informational rather than physical does not age Organically like humans at least not necessarily so the wheel is not old in the sense of experiencing degeneracy This idea of young and old Attached to certain crowd behavior is even more dangerous Supposedly if those who don't watch pre-packaged 18-minute hyped up lectures on the web Paid attention to people in their teens and 20s who do and in whom supposedly the key to the future lies They would be thinking differently much progress comes from the young because of their relative freedom from the system and Courage to take action that older people lose as they become trapped in life But it is precisely the young who propose ideas that are fragile not because they are young But because most unseasoned ideas are fragile and of course someone who sells Futuristic ideas will not make a lot of money selling the value of the past New technology is easier to hype up I Received an interesting letter from Paul Doolin from Zurich who was wondering how we could teach children skills for the 21st century Since we do not know which skills will be needed in the 21st century He figured out an elegant application of the large problem that Karl Popper called the error of historicism Effectively my answer would be to make them read the classics the future is in the past Actually, there's an Arabic proverb to that effect he who does not have a past has no future a Few mental biases Next I present an application of the fooled by randomness effect Information has a nasty property it hides failures Many people have been drawn to say financial markets after hearing success stories of someone getting rich in the stock market and building a large Mansion across the street, but since failures are buried, and we don't hear about them investors are led to overestimate their chances of success The same applies to the writing of novels we do not see the wonderful novels that are now completely out of print We just think that because the novels that have done well are well written whatever that means that what is well written will do well So we confuse the necessary and the causal because all surviving technologies have some obvious benefits We are led to believe that all technologies offering obvious benefits will survive I will leave the discussion of what impenetrable property may help survival to the section on Empedocles dog But note here the mental bias that causes people to believe in the power of some technology and its ability to run the world Another mental bias causing the overhyping of technology comes from the fact that we notice change not statics The classic example discovered by the psychologist Daniel Kahneman and Amos Tversky applies to wealth the pair developed the idea that our brains like minimal effort and get trapped that way and they pioneered a tradition of Cataloging and mapping human biases with respect to perception of random outcomes and decision-making under uncertainty If you announce to someone you lost $10,000 he will be much more upset than if you tell him your portfolio value Which was seven hundred eighty five thousand dollars is now seven hundred seventy five thousand dollars Our brains have a predilection for shortcuts and the variation is easier to notice and store than the entire record It requires less memory storage this psychological heuristic Often operating without our awareness the error of variation in place of total is quite pervasive Even in matters that are visual We notice what varies and changes more than what plays a large role, but doesn't change We rely more on water than on cell phones But because water does not change and cell phones do we are prone to thinking that cell phones play a larger role than they do Second because the new generations are more aggressive with technology We notice that they try more things, but we ignore that these implementations don't usually stick Most innovations are failures just as most books are flops, which should not discourage anyone from trying Neomania and treadmill effects You were driving on the highway in your two-year-old Japanese car when you were overtaken by a vehicle of the same make the latest version that looks markedly different and markedly better markedly better The bumper is slightly larger and the taillights are wider other than these cosmetic details and perhaps some hidden technical improvements Representing less than a few percentage points in variation the car looks the same But you can't tell by just looking at it You just see the lights and feel that you are due an upgrade and the upgrade will cost you after you sell your car About a third of the price of a new vehicle all that motivated by small mostly cosmetic variations But switching cars is a small cost compared to switching computers the recovery value of an old computer is so negligible You use an Apple Mac computer You just bought a new version the week before The person on the plane next to you just pulled out of his bag and older version It has a family resemblance to yours, but looks so inferior It is thicker and has a much less elegant screen But you forget the days when you used to have the same model and were thrilled with it The same with a cell phone you look down at those carrying older larger models But a few years ago you would have considered these small and slick So with so many technologically driven and modernistic items skis cars computers computer programs It seems that we notice differences between versions rather than commonalities We even rapidly tire of what we have continuously searching for versions 2.0 and similar iterations and After that another improved reincarnation These impulses to buy new things that will eventually lose their novelty particularly when compared to newer things are called treadmill effects as The listener can see they arise from the same generator of biases as the one about the salience of variations Mentioned in the section before we notice differences and become dissatisfied with some items in some classes of goods This treadmill effect has been investigated by Danny Kahneman and his peers when they studied the psychology of what they call hedonic states People acquire a new item feel more satisfied after an initial boost then rapidly revert to their baseline of well-being So when you upgrade you feel a boost of satisfaction with changes in technology But then you get used to it and start hunting for the new new thing But it looks as though we don't incur the same treadmill in techno dissatisfaction with classical art older furniture Whatever we do not put in the category of the technological You may have an oil painting in a flat-screen television set inhabiting the same room of your house The oil painting is an imitation of a classic Flemish scene made close to a century ago With the dark ominous skies of Flanders majestic trees and an uninspiring but calmative rural scene I am quite certain that you are not eager to upgrade the oil painting But that soon your flat-screen TV set will be donated to the local chapter of some kidney foundation the same with dishes Recall that we try to replicate 19th century dinner customs So there is at least one other domain in which we do not try to optimize matters. I Am initially writing these lines longhand using a seasoned fountain pen I do not fuss over the state of my pens Many of them are old enough to cross decades one of them the best I have had for at least 30 years Nor do I obsess over small variations in the paper? I prefer to use Claire Fontaine paper and notebooks that have hardly changed since my early childhood if Anything they have degraded in quality But when it comes to transcribing my writing into electronic form Then I get worried that my Mac computer may not be the best tool for the job I heard somewhere that the new version had a longer lasting battery and I plan to upgrade soon during my next impulse buying episode Note here is a strange inconsistency in the way we perceive items across the technological and real domains Whenever I sit on an airplane next to some businessman reading the usual trash Businessmen read on an e-reader said business person will not resist disparaging my use of the book by comparing the two items Supposedly an e-reader is more efficient It delivers the essence of the book which said businessman assumes is information But in a more convenient way as he can carry a library on his device and optimize his time between golf outings I have never heard anyone address the large differences between e-readers and physical books like smell texture dimension Books are in three dimensions color ability to change pages Physicality of an object compared to a computer screen and hidden properties causing unexplained differences in enjoyment The focus of the discussion will be commonalities how close to a book this wonderful device is Yet when he compares his version of an e-reader to another e-reader, he will invariably focus on minute differences Just as when Lebanese run into Syrians, they focus on the tiny variations in their respective Levantine dialects But when Lebanese run into Italians they focus on similarities There may be a heuristic that helps put such items in categories first the electronic on off switch Whatever has an off or on switch that I need to turn off before I get yelled at by the flight attendant will necessarily be In one category, but not the opposite as many items without an on-off switch will be prone to neomania For these items I focus on variations with attendant neomania But consider the difference between the artisanal the other category and the industrial What is artisanal has the love of the maker infused in it and tends to satisfy? We don't have this nagging impression of incompleteness. We encounter with electronics It also so happens that whatever is technological happens to be fragile Articles made by an artisan cause fewer treadmill effects and they tend to have some anti-fragility Recall how my artisanal shoes take months before becoming comfortable Items with an on-off switch tend to have no such redeeming anti-fragility But alas some things we wish were a bit more fragile which brings us to architecture Architecture and the irreversible neomania There is some evolutionary warfare between architects producing a compounded form of neomania The problem with modernistic and functional architecture is that it is not fragile enough to break physically So these buildings stick out just to torture our consciousness you cannot exercise your prophetic powers by leaning on their fragility Urban planning incidentally demonstrates the central property of the so-called top-down effect Top-down is usually irreversible So mistakes tend to stick whereas bottom-up is gradual and incremental with creation and destruction along the way Though presumably with a positive slope Further things that grow in a natural way whether cities or individual houses have a fractal quality to them Like everything alive all organisms like lungs or trees grow in some form of self-guided, but tame randomness What is fractal? Recall Mandelbrot's insight in chapter 3 Fractal entails both jaggedness and a form of self-similarity in things Mandelbrot preferred self-affinity Such as trees spreading into branches that look like small trees and smaller and smaller branches that look like a slightly modified But recognizable version of the whole These fractals induce a certain wealth of detail based on small number of rules of repetition of nested patterns The fractal requires some jaggedness, but one that has some method to its madness Everything in nature is fractal, jagged, and rich in detail though with a certain pattern The smooth by comparison belongs to the class of Euclidean geometry we study in school Simplified shapes that lose this layer of wealth alas Contemporary architecture is smooth even when it tries to look whimsical What is top-down is generally unwrinkled that is unfractal and feels dead Sometimes modernism can take a naturalistic turn then stop in its tracks Gaudi's buildings in Barcelona from around the turn of the 20th century are inspired by nature and rich architecture Baroque and Moorish. I managed to visit a rent-controlled apartment there It felt like an improved tavern with rich jagged details I was convinced that I had been there in a previous life wealth of details ironically leads to inner peace Yet Gaudi's idea went nowhere except in promoting modernism in its unnatural and naive versions Later modernistic structures are smooth and completely stripped of fractal jaggedness. I also enjoy writing facing trees and if possible wild untamed gardens with ferns but white walls with sharp corners and Euclidean angles and crisp shapes strain me and Once they are built there's no way to get rid of them almost everything built since World War two has an unnatural smoothness to it For some these buildings cause even more than aesthetic harm Many Romanians are bitter about the dictator Nicolae Ceaușescu's destruction of traditional villages replaced by modern high-rises Neomania and dictatorship are an explosive combination in France some blame the modernistic architecture of housing projects for the immigrant riots As the journalist Christopher Caldwell wrote about the unnatural living conditions The Corbusier called houses machines for living France's housing projects as we now know became machines for alienation James Jacobs the New York urban activist took a heroic stance as a political style resistant against Neomania in architecture and urban planning as the modernistic dream was carried by Robert Moses Who wanted to improve New York by raising tenements and installing large roads and highways? Committing a greater crime against natural order than Haussmann who as we saw in chapter 7 Removed during the 19th century entire neighborhoods of Paris to make room for the Grand Boulevards Jacobs stood against tall buildings as they deform the experience of urban living which is conducted at street level Further her bone with Robert Moses concerns the highway as these engines for travel suck life out of the city To her a city should be devoted to pedestrians Again, we have the machine organism dichotomy to her the city is an organism for Moses It is a machine to be improved upon Indeed Moses had plans to raise the West Village It is thanks to her petitions and unremitting resistance that the neighborhood the prettiest in Manhattan has survived nearly intact One might want to give Moses some credit for not all his projects turned out to be nefarious Some might have been beneficial such as the parks and beaches now accessible to the middle class. Thanks to the highways recall the discussion of municipal properties They don't translate into something larger because problems become more abstract as they scale up and the abstract is not Something human nature can manage properly the same principle needs to apply to urban life Neighborhoods are villages and need to remain villages. I Was recently stuck in a traffic jam in London where one hears the speed of traveling is equal to what it was a century And a half ago if not slower It took me almost two hours to cross London from one end to the other as I was depleting the topics of conversation with the Polish driver I wondered whether Haussmann was not right and whether London would be better off if it had its Haussmann raising neighborhoods and plowing wide arteries to facilitate circulation Until it hit me that in fact if there was so much traffic in London as compared to other cities It was because people wanted to be there and being there for them exceeded the costs More than a third of the residents in London are foreign-born and in addition to immigrants most high net worth Individuals on the planet get their starter pied-a-terre in central London It could be that the absence of these large avenues and absence of a dominating state is part of its appeal Nobody would buy a pied-a-terre in Brasilia the perfectly top-down city built from scratch on a map I Also checked and saw that the most expensive neighborhoods in Paris today Such as the 6th arrondissement or Ile Saint-Louis were the ones that had been left alone by the 19th century renovators Finally the best argument against teleological design is as follows Even after they are built buildings keep incurring mutations as if they needed to slowly evolve and be taken over by the dynamical Environment they change colors shapes windows and character in his book how buildings learn Stuart Brand shows in pictures how buildings change through time as if they needed to metamorphose into unrecognizable shapes Strangely buildings when erected do not account for the optionality of future alterations Wall-to-wall windows The skepticism about architectural modernism that I am proposing is not Unconditional while most of it brings unnatural stress some elements are a certain improvement For instance floor-to-ceiling windows in a rural environment expose us to nature here again technology making itself literally invisible in the past the size of windows was dictated by thermal considerations as Insulation was not possible heat escaped rather quickly from windows Today's materials allow us to avoid such constraint Further much French architecture was a response to the tax on windows and doors installed after the revolution So many buildings have a very small number of windows Just as with the unintrusive shoes that allow us to feel the terrain Modern technology allows some of us to reverse that trend as expressed by Oswald Spengler Which makes civilization go from plants to stone that is from the fractal to the Euclidean We are now moving back from the smooth stone to the rich fractal and natural Benoit Mandelbrot wrote in front of a window overlooking trees He craved fractal aesthetics so much that the alternative would have been inconceivable Now modern technology allows us to merge with nature and instead of a small window an entire wall can be Transparent and face lush and densely forested areas Metrification one example of the neomania of states the campaign for Metrification that is the use of the metric system to replace archaic ones on grounds of efficiency. It makes sense The logic might be impeccable until of course one supersedes it with a better less naive logic an attempt I will make here. Let us look at the wedge between rationalism and empiricism in this effort Warwick Cairns a fellow similar to Jane Jacobs has been fighting in courts to let market farmers in Britain keep selling bananas by the pound and Similar matters as they have resisted the use of the more rational kilogram The idea of metrification was born out of the French Revolution as part of the utopian mood Which includes changing the names of the winter months to Nevos, Pluvios, Vantos Descriptive of weather having decimal time 10 day weeks and similar naively rational matters Luckily the project of changing time has failed However after repeated failures the metric system was implemented there But the old system has remained refractory in the United States and England the French writer Edmond Abou Who visited Greece in 1832 a dozen years after its independence? Reports how peasants struggled with the metric system as it was completely unnatural to them and stuck to Ottoman standards instead Likewise the modernization of the Arabic alphabet from the easy to memorize old semitic sequence made to sound like words Abjad Hawass to the logical sequence Aleph Ba-Ta-Tha has created a generation of Arabic speakers without the ability to recite their alphabet But few realize that naturally born weights have a logic to them We use feet miles pounds inches furlongs stones in Britain because these are remarkably intuitive and we can use them with a minimal expenditure of cognitive effort and all cultures seem to have similar measurements with some physical correspondence to the everyday a Meter does not match anything a foot does I can imagine the meaning of 30 feet with minimal effort a Mile from the Latin milia possum is a thousand paces likewise a stone 14 pounds corresponds to well a stone an inch or poos corresponds to a thumb a Furlong is the distance one can sprint before running out of breath a Pound from Libra is what you can imagine holding in your hands Recall from the story of Thales in chapter 12 that we use heckle or shekel These mean weight in Canaanite semitic languages something with a physical connotation similar to the pound There is a certain non randomness to how these units came to be in an ancestral environment And the digital system itself comes from the correspondence to the ten fingers as I am writing these lines No doubt some European Union official of the type who eats 200 grams of well-cooked meat with 200 centilitres worth of red wine every day for dinner the optimal quantity for his health benefits is concocting plans to promote the efficiency of the metric system deep into the countryside of the member countries Turning science into journalism So we can apply criteria of fragility and robustness to the handling of information The fragile in that context is like technology. What does not stand the test of time? The best filtering heuristic therefore consists in taking into account the age of books and scientific papers Books that are one year old are usually not worth reading a very low probability of having the qualities for surviving No matter the hype and how earth-shattering they may seem to be So I follow the Lindy effect as a guide in selecting what to read Books that have been around for ten years will be around for ten more Books that have been around for two millennia should be around for quite a bit of time and so forth Many understand this point but do not apply it to academic work Which is in much of its modern practice hardly different from journalism except for the occasional original production Academic work because of its attention-seeking orientation can be easily subjected to Lindy effects Think of the hundreds of thousands of papers that are just noise in spite of how hyped they were at the time of publication The problem in deciding whether a scientific result or a new innovation is a breakthrough that is the opposite of noise is that one needs to see all aspects of the idea and There is always some opacity that time and only time can dissipate Like many people watching cancer research like a hawk. I fell for the following There was at some point a great deal of excitement about the work of Judah Folkman who as we saw in chapter 15 Believed that one could cure cancer by choking the blood supply Tumors require nutrition and tend to create new blood vessels what is called neovascularization The idea looked impeccable on paper, but about a decade and a half later It appears that the only significant result we got was completely outside cancer in the mitigation of macular degeneration Likewise seemingly uninteresting results that go unnoticed can years later turn out to be breakthroughs So time can act as a cleanser of noise by confining to its dustbins all these overhyped works Some organizations even turn such scientific production into a cheap spectator sport with ranking of the ten hottest papers in say rectal oncology or some such sub sub specialty if we replace Scientific results with scientists we often get the same neomaniac hype There is a disease to grant a prize for a promising scientist under 40 a disease that is infecting economics mathematics finance etc Mathematics is a bit special because the value of its results can be immediately seen so I skipped the criticism of The fields I am familiar with such as literature finance and economics I can pretty much ascertain that the prizes given to those under 40 are the best reverse indicator of value Much like the belief well tested by traders that companies that get hyped up for their potential and called best on the cover of magazines or in books such as good to great are about to Underperform and one can derive an abnormal profit by shorting their stock The worst effect of these prizes is penalizing those who don't get them and debasing the field by turning it into an athletic competition Should we have a prize it should be for over a hundred it took close to 140 years to validate the contribution of one's you'll renew who discovered optionality and mapped it mathematically Along with what we dubbed the philosopher's stone his work stayed obscure all this time Now if you want to be convinced of my point of how noisy science can be take any Elementary textbook you read in high school or college with interest then in any discipline Open it to a random chapter and see if the idea is still relevant Odds are that it may be boring, but still relevant or non-boring and still relevant It could be the famous 1215 Magna Carta British history Caesars Gallic Wars Roman history a historical presentation of the school of Stoics Philosophy an introduction to quantum mechanics physics or the genetic trees of cats and dogs Biology now try to get the proceedings of a random conference about the subject matter concerned that took place five years ago Odds are it will feel no different from a five-year-old newspaper perhaps even less interesting So attending breakthrough conferences might be Statistically speaking as much a waste of time as buying a mediocre lottery ticket one with a small payoff The odds of the papers being relevant and interesting in five years is no better than one in ten thousand the fragility of science even the Conversation of a high school teacher or that of an unsuccessful college professor is likely to be more worthwhile than the latest academic paper less corrupted with neomania My best conversations in philosophy have been with French lycee teachers who love the topic But are not interested in pursuing a career writing papers in it in France. They teach philosophy in the last year of high school 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 Of course you may be lucky enough to hit on a jewel here and there but in general at best Conversation with an academic would be like the conversation of plumbers at the worst that of a concierge bandying the worst brand of gossip gossip about uninteresting people other academics small talk True the conversation of top scientists can sometimes be captivating those people who aggregate knowledge and for whom cruising the subject is Effortless as the entire small parts of the field come glued together But these people are just currently too rare on this planet I complete this section with the following anecdote one of my students who was majoring in of all subjects economics asked me for a rule on what to read as Little as feasible from the last 20 years except history books that are not about the last 50 years I blurted out with irritation as I hate such questions as what's the best book you've ever read or what are the 10 best books? My 10 best books ever change at the end of every summer Also, I have been hyping Daniel Kahneman's recent book because it is largely an exposition of his research of 35 and 40 years ago with filtering and modernization My recommendation seemed impractical But after a while the student developed a culture in original texts such as Adam Smith Karl Marx and Hayek Texts he believes he will cite at the age of 80. He told me that after his detoxification He realized that all his peers do is read timely material that becomes instantly obsolete What should break in 2010 the Economist magazine asked me to partake in an exercise imagining the world in 2036 as they were aware of my reticence concerning Forecasters their intention was to bring a critical balance and use me as a counter to the numerous imaginative forecasts Hoping for my usual angry dismissive and irascible philippic Quite surprised they were when after a two-hour slow walk I wrote a series of forecasts at one go and sent them the text They probably thought at first that I was pulling a prank on them or that someone got the wrong email and was impersonating me Outlining the reasoning on fragility and asymmetry Concavity to errors I explained that I would expect the future to be populated with wall-to-wall bookshelves a device called a telephone Artisans and such using the notion that most technologies that are now 25 years old should be around in another 25 years Once again most not all I have had the privilege of reading a 500 year old book an experience Hardly different from that of reading a modern book compare such robustness to the lifespan of electronic documents Some of the computer files of my manuscripts that are less than a decade old are now irretrievable But the fragile should disappear or be weakened now What is fragile the large optimized over reliant on technology over reliant on the so-called? scientific method instead of age tested heuristics Corporations that are large today should be gone as they have always been weakened by what they think is their strength Size which is the enemy of corporations as it causes disproportionate fragility to black swans City states and small corporations are more likely to be around even thrive The nation-state the currency printing central bank these things called economics departments may stay nominally But they will have their power severely eroded in other words what we saw on the left column of the triad should be gone Alas to be replaced by other fragile items Prophets and the present By issuing warnings based on vulnerability that is subtractive prophecy We are closer to the original role of the prophet to warn not necessarily to predict and to predict calamities if people don't listen The classical role of the prophet at least in the Levantine sense is not to look into the future but to talk about the present He tells people what to do or rather in my opinion the more robust what not to do in the Near Eastern monotheistic traditions Judaism Christianity and Islam The major role of the prophets is the protection of monotheism from its idolatrous and pagan enemies that may bring calamities on the straying population The prophet is someone who is in communication with a unique God or at least can read his mind and what is key? issues warnings to his subjects the Semitic Nabi Expressed as Nevi or Nevi in the original Hebrew the same with minor differences in pronunciation in Aramaic Nabi and Arabic Nebi is principally someone connecting with God Expressing what is on God's mind the meaning of Neb in Arabic is news The original Semitic root in Akkadian Nabu meant to call the initial Greek translation Prophetes meant spokesman which is retained in Islam as a dual role for Muhammad The prophet is that of the messenger Rasool There was some small ranking differences between the roles of spokesman Nabi and messenger Rasool the job of mere forecasting is rather limited to seers or the variety of people involved in divination such as the astrologers so dismissed by the Quran in the Old Testament again, the Canaanites had been too promiscuous in their theologies and various approaches to handling the future and the prophet is Precisely someone who deals only with the one God not with the future like a mere ball light Nor has the vocation of Levantine prophet been a particularly desirable professional occupation as I said at the beginning of the chapter Acceptance was far from guaranteed Jesus mentioning the fate of Elijah who warned against Baal then ironically had to go find solace in Sidon where Baal was worshipped announced that no one becomes a prophet in his own land and the prophetic mission was not necessarily voluntary Considered Jeremiah's life laden with Jeremiah's Lamentations as his unpleasant warnings about destruction and captivity and their causes did not make him particularly Popular and he was the personification of the notion of shoot the messenger and the expression veritas odium parit truth brings hatred Jeremiah was beaten punished persecuted and the victim of numerous plots which involved his own brothers Apocryphal and imaginative accounts even have him stoned to death in Egypt Further north of the Semites in the Greek tradition. We find the same focus on messages warnings about the present And the same punishment inflicted on those able to understand things others don't for example Cassandra gets the gift of prophecy along with the curse of not being believed when the temple snakes cleaned her ears So she could hear some special messages Tiresias was made blind and transformed into a woman for revealing the secrets of the gods But as a consolation Athena licked his ears so he could understand secrets in the songs of birds Recall the inability we saw in chapter 2 to learn from past behavior The problem with lack of recursion and learning lack of second-order thinking is as follows If those delivering some messages deemed valuable for the long term have been persecuted in past history One would expect that there would be a correcting mechanism that intelligent people would end up learning from such historical experience So those delivering new messages would be greeted with the new understanding in mind, but nothing of the sort takes place This lack of recursive thinking applies not just a prophecy, but to other human activities as well If you believe that what will work and do well is going to be a new idea that others did not think of what? We commonly call innovation Then you would expect people to pick up on it and have a clearer eye for new ideas without too much reference to the perception of others, but they don't Something deemed original tends to be modeled on something that was new at the time, but is no longer new So being an Einstein for many scientists means solving a similar problem to the one Einstein solved when at the time Einstein was not solving a standard problem at all The very idea of being an Einstein in physics is no longer original I've detected in the area of risk management a similar error made by scientists trying to be new in a standard way People in risk management only consider risky things that have hurt them in the past given their focus on evidence Not realizing that in the past before these events took place these occurrences that hurt them severely were completely without precedent Escaping standards and my personal efforts to make them step outside their shoes to consider these second-order Considerations have failed as have my efforts to make them aware of the notion of fragility Empedocles dog In Aristotle's Magnum Aurelia There is a possibly apocryphal story about Empedocles, the pre-socratic philosopher Who was asked why a dog prefers to always sleep on the same tile? His answer was that there had to be some likeness between the dog and that tile Actually, the story might be even twice as apocryphal since we don't know if Magnum Aurelia was actually written by Aristotle himself consider the match between the dog and the tile a natural biological explainable or non explainable match Confirmed by long series of recurrent frequentation in place of rationalism. Just consider the history of it Which brings me to the conclusion of our exercise in prophecy I surmise that those human technologies such as writing and reading that have survived are like the tile to the dog a Match between natural friends because they correspond to something deep in our nature Every time I hear someone trying to make a comparison between a book and an e-reader or something ancient and a new technology Opinions pop up as if reality cared about opinions and narratives There are secrets to our world that only practice can reveal and no opinion or analysis will ever capture in full This secret property is of course revealed through time and thankfully only through time What does not make sense Let's take this idea of Empedocles dog a bit further If something that makes no sense to you say religion if you are an atheist or some age-old habit or practice called Irrational if that something has been around for a very very long time then Irrational or not you can expect it to stick around much longer and outlive those who call for its demise Chapter 21 medicine and asymmetry Decision rules in medical problems why the very ill have a convex payoff and the healthy have concave exposures Medicine convexity and opacity What they call non-evidence where medicine fragilizes humans then tries to save them Newton's law or evidence The History of medicine is the story largely documented of the dialectic between doing and thinking and how to make decisions under opacity in the medieval Mediterranean Maimonides of a Sena al-ruhawi and the Syriac doctors such as Hunayn Ibn Aishak were at once philosophers and doctors a Doctor in the medieval semitic world was called al-hakim the wise or practitioner of wisdom a synonym for philosopher or rabbi Hakum is the semitic root for wisdom Even in the earlier period there was a crop of Hellenized fellows who stood in the exact middle between medicine and the practice of philosophy The great skeptic philosopher Sextus Empiricus was himself a doctor member of the skeptical empirical school So were monodicists of Nicomedia and the experience-based predecessor of evidence-based medicine on whom a bit more in a few pages The works of these thinkers or whatever remains extant are quite refreshing for those of us who distrust those who talk without doing Simple quite simple decision rules and heuristics emerge from this chapter Via negativa, of course by removal of the unnatural only resort to medical techniques when the health payoff is very large Say saving the life and visibly exceeds its potential harm such as the incontrovertibly needed surgery or life-saving medicine penicillin It is the same as with government intervention. This is squarely Felician not Aristotelian That is decision-making based on payoffs not knowledge for in these cases medicine has positive Asymmetries convexity effects and the outcome will be less likely to produce fragility Otherwise in situations in which the benefits of a particular medicine procedure or nutritional or lifestyle modification Appear small say those aiming for comfort We have a large potential sucker problem hence putting us on the wrong side of convexity effects Actually one of the unintended side benefits of the theorems that Raphael Duarte and I developed in our paper mapping risk detection techniques in chapter 19 is an exact link between a non-linearity and exposure or dose response and be potential fragility or antifragility I also extend the problem to epistemological grounds and make rules for what should be considered evidence as With whether a cup should be considered half empty or half full there are situations in which we focus on absence of evidence Others in which we focus on evidence in some cases one can be confirmatory not others It depends on the risks take smoking which was at some stage viewed as bringing small gains in pleasure and even health Truly people thought it was a good thing It took decades for its harm to become visible yet had someone questioned it He would have faced the canned naive Academized and faux expert response. Do you have evidence that this is harmful? the same type of response as is there evidence that polluting is harmful as Usual the solution is simple an extension of via negativa and fat Tony's don't be a sucker rule The non-natural needs to prove its benefits not the natural According to the statistical principle outlined earlier that nature is to be considered much less of a sucker than humans in a complex domain Only time a long time is evidence For any decision the unknown will preponderate on one side more than the other The do you have evidence fallacy? Mistaking evidence of no harm for no evidence of harm is similar to the one of misinterpreting NED no evidence of disease for evidence of no disease This is the same error as mistaking absence of evidence for evidence of absence the one that tends to affect smart and educated people as if education made people more confirmatory in their responses and more liable to fall into simple logical errors and Recall that under nonlinearities the simple statements harmful or beneficial break down. It is all in the dosage How to argue in an emergency room I once broke my nose walking for the sake of antifragility, of course, I Was trying to walk on uneven surfaces as part of my antifragility program Under the influence of the weak look or who believes in naturalistic exercise. It was exhilarating I felt the world was richer more fractal and when I contrasted this terrain with the smooth surfaces of sidewalks and corporate offices Those felt like prisons Unfortunately, I was carrying something much less ancestral a cellular phone which had the influence to ring in the middle of my walk In the emergency room the doctor and staff insisted that I should ice my nose Meaning apply an ice-cold patch to it in the middle of the pain It hit me that the swelling that Mother Nature gave me was most certainly not directly caused by the trauma It was my own body's response to the injury It seemed to me that it was an insult to Mother Nature to override her programmed reactions Unless we had a good reason to do so backed by proper empirical testing to show that we humans can do better The burden of evidence falls on us humans So I mumbled to the emergency room doctor whether he had any Statistical evidence of benefits from applying ice to my nose or if it resulted from a naive version of an interventionism His response was you have a nose the size of Cleveland and you are now interested in numbers. I Recalled developing from his blurry remarks the thought that he had no answer Effectively he had no answer because as soon as I got to a computer I was able to confirm that there is no compelling empirical evidence in favor of the reduction of swelling At least not outside of the very rare cases in which the swelling would threaten the patient which was clearly not the case It was pure sucker rationalism in the mind of doctors following what made sense to boundedly intelligent humans Coupled with interventionism this need to do something this defect of thinking that we knew better and denigration of the unobserved This defect is not limited to our control of swelling this Confabulation plagues the entire history of medicine along with of course many other fields of practice the researchers Paul meal and Robin Dawes Pioneered a tradition to catalog the tension between clinical and actuarial that is statistical knowledge and Examine how many things believed to be true by professionals and clinicians aren't so and don't match empirical evidence The problem is of course that these researchers did not have a clear idea of where the burden of empirical evidence lies the difference between naive or pseudo empiricism and rigorous empiricism The onus is on the doctors to show us why reducing fever is good Why eating breakfast before engaging in activity is healthy? There is no evidence or why bleeding patients is the best alternative. They've stopped doing so Sometimes I get the answer that they have no clue when they have to utter defensively. I am a doctor or are you a doctor? But worst I sometimes get some letters of support and sympathy from the alternative medicine fellows Which makes me go postal the approach in this book is ultra orthodox ultra rigorous and ultra scientific Certainly not in favor of alternative medicine The hidden costs of health care are largely in the denial of anti fragility But it may not be just medicine what we call diseases of civilization Result from the attempt by humans to make life comfortable for ourselves against our own interest since the comfortable is what? Fragilizes the rest of this chapter focuses on specific medical cases with hidden negative convexity effects small gains large losses and Reframes the ideas of iatrogenics in connection with my notion of fragility and non linearities First principle of iatrogenics empiricism The first principle of iatrogenics is as follows We do not need evidence of harm to claim that a drug or an unnatural via positiva procedure is dangerous Recall my comment earlier with the turkey problem that harm is in the future not in the narrowly defined past in other words Empiricism is not naive empiricism We saw the smoking argument now consider the adventure of a human invented fat trans fat Somehow humans discovered how to make fat products and as it was the great era of scientism They were convinced they could make it better than nature not just equal better Chemists assumed that they could produce a fat replacement that was superior to lard or butter from so many standpoints First it was more convenient Synthetic products such as margarine stay soft in the refrigerator So you can immediately spread them on a piece of bread without the usual weight while listening to the radio Second it was economical as the synthetic fats were derived from vegetables Finally what is worst trans fat was assumed to be healthier Its use propagated very widely and after a few hundred million years of consumption of animal fat People suddenly started getting scared of it particularly something called saturated fat mainly from shoddy statistical interpretations Today trans fat is widely banned as it turns out that it kills people as it is behind heart disease and cardiovascular problems For another murderous example of such sucker and fragilizing rationalism Consider the story of thalidomide. It was a drug meant to reduce the nausea episodes of pregnant women. It led to birth defects Another drug diethylstilbestrol silently harmed of the fetus and led to delayed gynecological cancer among daughters These two mistakes are quite telling because in both cases the benefits appear to be obvious and immediate Though small and the harm remained delayed for years at least three-quarters of a generation The next discussion will be about the burden of evidence as you can easily imagine that someone defending these treatments would have immediately raised the objection Monsieur Taleb, do you have evidence for your statement? Now we can see the pattern Iatrogenics being a cost-benefit situation Usually results from the treacherous condition in which the benefits are small and visible and the costs very large Delayed and hidden and of course the potential costs are much worse than the cumulative gains Second principle of Iatrogenics, non-linearity in response Second principle of Iatrogenics, it is not linear We should not take risks with near healthy people, but we should take a lot a lot more risks with those deemed in danger Why do we need to focus treatment on more serious cases not marginal ones? Take this example showing non-linearity, convexity When hypertension is mild say marginally higher than the zone accepted as normal tensive The chance of benefiting from a certain drug is close to 5.6% Only one person in 18 benefit from the treatment But when blood pressure is considered to be in the high or severe range The chances of benefiting are now 26 and 72 percent respectively That is one person in four and two persons out of three will benefit from the treatment So the treatment benefits are convex to condition The benefits rise disproportionately in an accelerated manner But consider that the Iatrogenics should be constant for all categories In the very ill condition the benefits are large relative to Iatrogenics In the borderline one they are small This means that we need to focus on high symptom conditions and ignore I mean really ignore other symptoms The argument here is based on the structure of conditional survival probabilities Similar to the one that we use to prove that harm needs to be non-linear for porcelain cups Consider that mother nature had to have tinkered through selection In inverse proportion to the rarity of the condition Of the hundred and twenty thousand drugs available today I can hardly find a very effective treatment For a very ill patient With the hundred and twenty thousand drugs available today I can hardly find a via positiva one that makes a healthy person unconditionally better And if someone shows me one I will be skeptical of yet unseen side effects Once in a while we come up with drugs that enhance performance Such as say steroids Only to discover what people in finance have known for a while In a mature market there is no free lunch anymore And what appears as a free lunch has a hidden risk When you think you have found a free lunch Say steroids or trans fat Something that helps the healthy without visible downside It is most likely that there is a concealed trap somewhere Actually my days in trading it was called a sucker's trade And there is a simple statistical reason That explains why we have not been able to find drugs That make us feel unconditionally better when we are well Or unconditionally stronger etc Nature would have been likely to find this magic pill by itself But consider that illness is rare And the more ill the person the less likely nature would have found the solution by itself In an accelerating way A condition that is say three units of deviation away from the norm Is more than three hundred times rarer than normal An illness that is five units of deviation from the norm Is more than a million times rarer The medical community has not modeled such non-linearity of benefits to iatrogenics And if they do so in words I have not seen it formalized in papers Hence into a decision making methodology that takes probability into account As we will see in the next section There is little explicit use of convexity biases Even risks seem to be linearly extrapolated Causing both underestimation and overestimation Most certainly miscalculation of degrees of harm For instance a paper on the effect of radiation states the following The standard model currently in use supplies a linear scale Extrapolating cancer risk from high doses to low doses of ionizing radiation Further pharmaceutical companies are under financial pressures To find diseases and satisfy the security analysts They have been scraping the bottom of the barrel Looking for disease among healthier and healthier people Lobbying for reclassification 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 normal-tensive 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 I am not against the function and mission of pharma Rather it's business practice They should focus for their own benefit on extreme diseases Not on reclassifications or pressuring doctors to prescribe medicines Indeed pharma plays on the interventionism of doctors Another way to view it The iatrogenics is in the patient not in the treatment If the patient is close to death All speculative treatment should be encouraged No holds barred Conversely if the patient is near healthy Then mother nature should be the doctor The philosopher's stone explained that the volatility of an exposure Can matter more than its average The difference is the convexity bias If you are antifragile that is convex to a given substance Then you are better off having it randomly distributed Rather than provided steadily I found very few medical papers making use of nonlinearity By applying convexity effects to medical problems In spite of the ubiquity of nonlinear responses in biology I am being generous I actually found only one explicit use of Jensen's inequality In one single application Thanks to my friend Eric Bree And only one that used it properly So the response we know that by medical researchers When the consequence nonlinearity is explained to them Is rather lame Remarkably convexity effects work in an identical way With options, innovations, anything convex Now let us apply it to lungs People with a variety of lung diseases Including acute respiratory distress syndrome Used to be put on mechanical ventilators The belief was to be that constant pressure and volume were desirable Steadiness seemed a good idea But the reaction of the patient is nonlinear to the pressure Convex over an initial range Then concave above it And he suffers from such regularity Further, people with very sick lungs Cannot take high pressure for a long time While they need a lot of volume J.F. Brewster and his associates Figured out that dispensing higher pressure on occasion And low pressure at other times Allowed them to provide a lot more volume to the lungs For a given mean pressure And thus decrease patient mortality An additional benefit is that an occasional spike in pressure Helps to open up collapsed alveoli Actually, that's how our lungs function when healthy With variations in noise rather than steady airflow Humans are antifragile to lung pressure And this arises directly from the nonlinearity of the response Since as we saw, everything convex is antifragile Up to a certain dosage Brewster's paper went through empirical validation But this is not even necessary You don't need empirical data to prove that 1 plus 1 equals 2 Or that probabilities need to add up to 100% It does not look as though people who deal with nutrition Have examined the difference between random calories and steady nutrition Something to which we will return in the next chapter Not using models of nonlinear effects Such as convexity biases While doing empirical work Is like having to catalogue every apple falling from a tree And call the operation empiricism Instead of just using Newton's equation Burying the evidence Now some historical background What made medicine mislead people for so long Is that its successes were prominently displayed And its mistakes literally buried Just like so many other interesting stories in the cemetery of history I cannot resist the following illustration of intervention bias With negative convexity effects In the 1940s and 1950s Many children and teenagers received radiation For acne, thymus gland enlargement, tonsillitis To remove birthmarks and treat ringworm of the scalp In addition to the goiters and other late complications Approximately 7% of patients who received this radiation Developed thyroid cancer 2 to 4 decades later But let's not write off radiation When it comes from Mother Nature We are necessarily antifragile to some dose of radiation At naturally found levels It may be that small doses prevent injuries and cancers Coming from larger ones As the body develops some kind of immunity When we are talking about radiation Few wonder why, after hundreds of millions of years Of having our skins exposed to sun rays We suddenly need so much protection from them Is it that our exposure is more harmful than before Because of changes in the atmosphere Or populations living in an environment Mismatching the pigmentation of their skin Or rather that makers of sun protection products Our ending history of turkey situations The list of such attempts to outsmart nature Driven by naive rationalism is long Always meant to improve things With continuous first order learning That is, banning the offending drug or medical procedure But not figuring out that we could be making the mistake again elsewhere Statins Statin drugs are meant to lower cholesterol in your blood But there is an asymmetry and a severe one One needs to treat 50 high-risk persons for 5 years To avoid a single cardiovascular event Statins can potentially harm people who are not very sick For whom the benefits are either minimal or totally non-existent We will not be able to get an evidence-based picture Of the hidden harm in the short term We need years for that Remember smoking Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins Statins 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Like many people who have lost weight, the fellow was eager to talk about it. It is easier to talk about weight loss theories than to stick to them. The fellow told me that he did not believe in such diets as the low-carbohydrate Atkins or Dukan diet until he was told of the mechanism of insulin, which convinced him to embark on the regimen. He then lost 30 pounds. He had to wait for a theory before taking any action. That was in spite of the empirical evidence showing people losing 100 pounds by avoiding carbohydrates without changing their total food intake. Just the composition. Now being the exact opposite of the consultant, I believe that insulin as a cause is a fragile theory, but that the phenomenology, the empirical effect, is real. Let me introduce the ideas of the post-classical school of the skeptical empiricists. We are built to be dupes for theories, but theories come and go. Experience stays. Explanations change all the time and have changed all the time in history because of causal opacity, the invisibility of causes, with people involved in the incremental development of ideas thinking they always had a definitive theory. Experience remains constant. As we saw in chapter 7, what physicists call the phenomenology of the process is the empirical manifestation without looking at how it glues to existing general theories. Take for instance the following statement, entirely evidence-based. If you build muscle, you can eat more without getting more fat deposits in your belly and can gorge on lamb chops without having to buy a new belt. While in the past, the theory to rationalize it was, your metabolism is higher because muscles burn calories, currently, I tend to hear, you become more insulin sensitive and store less fat. Insulin schminsulin, metabolism schmetabolism. Another theory will emerge in the future, and some other substance will come about, but the exact same effect will continue to prevail. The same holds for the statement, lifting weights increases your muscle mass. In the past they used to say that weightlifting caused the micro-tearing of muscles, with subsequent healing and increase in size. Today some people discuss hormonal signaling or genetic mechanisms, tomorrow they will discuss something else. But the effect has held forever, and will continue to do so. When it comes to narratives, the brain seems to be the last province of the theoretician's skeleton. Add neuro-something to a field and suddenly it rises in respectability and becomes more convincing as people now have the illusion of a strong causal link, yet the brain is too complex for that. It is both the most complex part of the human anatomy and the one that seems most susceptible to sucker causation. Christopher Chabris and Daniel Simons brought to my attention the evidence I had been looking for. Whatever theory has a reference in it to brain circuitry seems more scientific and more convincing, even when it is just randomized psycho-neuro-battle. But this causation is highly rooted in orthodox medicine as it was traditionally built. Avicenna in his canon, which in Arabic means law, we must know the causes of health and illness if we wish to make medicine a scientia. I am writing about health, but I do not want to rely on biology beyond the minimum required – not in a theoretical sense – and I believe that my strength will lie there. I just want to understand as little as possible to be able to look at regularities of experience. So the modus operandi in every venture is to remain as robust as possible to changes in theories. Let me repeat that my deference to Mother Nature is entirely statistical and risk-management based, that is, again, grounded in the notion of fragility. The doctor and medical essayist James Lefenoux showed how our understanding of the biological processes was coupled with a decline of pharmaceutical discoveries, as if rationalistic theories were blinding and somehow a handicap. In other words, we have in biology a green lumber problem. Now a bit of history of ancient and medieval medicine. Traditionally, medicine used to be split into three traditions. Rationalists, based on pre-set theories, the need of global understanding of what things were made for. Skeptical empiricists, who refused theories and were skeptical of ideas making claims about the unseen. And Methodists, who taught each other some simple medical heuristics, stripped of theories, and found an even more practical way to be empiricists. While differences can be overplayed by the categorization, one can look at the three traditions not as entirely dogmatic approaches, but rather ones varying in their starting point, the weight of the prior beliefs. Some start with theories, others with evidence. Tensions among the three tendencies have always existed over time, and I put myself squarely in the camp attempting to vindicate the empiricists, who, as a philosophical school, were swallowed by late antiquity. I have been trying to bring alive these ideas of Anesidemus of Knossos, Antiochus of Laodicea, Monoditus of Nicomedia, Herodotus of Tarsus, and, of course, Sextus Empiricus. The empiricists insisted on the I did not know, while facing situations not exactly seen in the past, that is, in nearly identical conditions. The Methodists did not have the same strictures against analogy, but were still careful. The Ancients were more caustic. This problem of iatrogenics is not new, and doctors have been traditionally the butt of jokes. Martial, in his epigrams, gives us an idea of the perceived expert problem in medicine in his time. I thought that Diodorus was a doctor, not a caretaker, but for him it appears to be the same job. Nuper erat medicus nunc est visbelo dilos, quod visbelo facit, fecerat et medicus. Or I did not feel ill, Simache, now I do, after your ministrations. Non habewi phabrem, Simache, nunc habeo. The Greek term pharmakon is ambiguous, as it can mean both poison and cure, and has been used as a pun to warn against iatrogenics by the Arab doctor Ruhawi. An attribution problem arises when the person imputes his positive results to his own skills and his failures to luck. Nicocles, as early as the fourth century BC, asserts that doctors claimed responsibility for success and blamed failure on nature, or on some external cause. The very same idea was rediscovered by psychologists some twenty-four centuries later, and applied to stockbrokers, doctors, and managers of companies. According to an ancient anecdote, the emperor Hadrian continually exclaimed, as he was dying, that it was his doctors who had killed him. Montaigne, mostly a synthesizer of classical writers, has his essays replete with anecdotes. A Lacedaemonian was asked what had made him live so long. He answered, ignoring medicine. Montaigne also detected the agency problem, or why the last thing a doctor needs is for you to be healthy. No doctor derives pleasure from the health of his friends, wrote the ancient Greek satirist. No soldier from the peace of his city, etc. Nous le médecins n'éprouve plaisir à la santé de ses amis mêmes. Ni d'anciens comiques grecs, ni soldats à la paix de sa vie, ainsi du reste. How to medicate half the population. Recall how a personal doctor can kill you. We saw in the story of the grandmother our inability to distinguish in our logical reasoning, though not in intuitive actions, between average and other richer properties of what we observe. I was once attending a lunch party at the country house of a friend when someone produced a hand-held blood pressure measuring tool. Tempted, I measured my arterial pressure, and it turned out to be slightly higher than average. A doctor, who was part of the party and had a very friendly disposition, immediately pulled out a piece of paper prescribing some medication to lower it, which I later threw in the garbage can. I subsequently bought the same measuring tool and discovered that my blood pressure was much lower, hence better, than average, except once in a while, when it peaked episodically. In short, it exhibits some variability, like everything in life. This random variability is often mistaken for information, hence leading to intervention. Let us play a thought experiment, without making any assumption on the link between blood pressure and health. Further, assume that normal pressure is a certain known number. Take a cohort of healthy persons. Suppose that because of randomness, half the time a given person's pressure will be above that number, and half the time, for the same person, the measurement will be below. So on about half the doctor's visits, they will show the alarming above normal. If the doctor automatically prescribes medication on the days the patients are above normal, then half the normal population will be on medication. Note that we are quite certain that their life expectancy will be reduced by unnecessary treatments. Clearly, I am simplifying here. Sophisticated doctors are aware of the variable nature of the measurements and do not prescribe medication when the numbers are not compelling, though it is easy to fall into the trap, and not all doctors are sophisticated. But the thought experiment can show how frequent visits to the doctor, particularly outside the cases of a life-threatening ailment or an uncomfortable condition, just like frequent access to information, can be harmful. This example also shows us the process outlined in Chapter 7, by which a personal doctor ends up killing the patient simply by overreacting to noise. This is more serious than you think. It seems that medicine has a hard time grasping normal variability in samples. It is hard sometimes to translate the difference between statistically significant and significant in effect. A certain disease might marginally lower your life expectancy, but it can be deemed to do so with high statistical significance, prompting panics when in fact all these studies might be saying is they established with a significant statistical margin that in some cases, say 1% of the cases, patients are likely to be harmed by it. Let me rephrase. The magnitude of the result, the importance of the effect, is not captured by what is called statistical significance, something that tends to deceive specialists. We need to look in two dimensions. How much a condition, say blood pressure a certain number of points higher than normal, is likely to affect your life expectancy, and how significant the result is. Why is this serious? If you think that the statisticians really understand statistical significance in the complicated texture of real life, the large world as opposed to the small world of textbooks, some surprises. Kahneman and Tversky showed that statisticians themselves made practical mistakes in real life in violation of their teachings, forgetting that they were statisticians. Thinking, I remind the listener, requires effort. My colleague Daniel Goldstein and I did some research on quants, professionals of quantitative finance, and realized that the overwhelming majority did not understand the practical effect of elementary notions such as variance or standard deviation, concepts they used in about every one of their equations. A recent powerful study by M. Ray Sawyer and Robin Hogarth showed that many professionals and experts in the field of econometrics, supplying pompous numbers such as regression and correlation, made egregious mistakes translating into practice the numbers they were producing themselves. They get the equation right, but make severe translation mistakes when expressing it into reality. In all cases they underestimate randomness and underestimate the uncertainty in the results. And we are talking about errors of interpretation made by the statisticians, not by the users of statistics such as social scientists and doctors. Alas, all these biases lead to action, almost never inaction. In addition, we now know that the craze against fats and the fat-free slogans result from an elementary mistake in interpreting the results of a regression. When two variables are jointly responsible for an effect—here, carbohydrates and fat—sometimes one of them shows sole responsibility. Many fell into the error of attributing problems under joint consumption of fat and carbohydrates to fat rather than carbohydrates. Further, the great statistician and debunker of statistical misinterpretation, David Friedman, showed, very convincingly, with a co-author, that the link everyone is obsessing about between salt and blood pressure has no statistical basis. It may exist for some hypertensive people, but it is more likely the exception than the rule. The Rigor of Mathematics in Medicine For those of us who laugh at the charlatanism hidden behind fictional mathematics in social science, one may wonder why this did not happen to medicine. And indeed, the cemetery of bad ideas—and hidden ideas—shows that mathematics fooled us there. There have been many forgotten attempts to mathematize medicine. There was a period during which medicine derived its explanatory models from the physical sciences. Giovanni Borelli, in De Motu Animalium, compared the body to a machine consisting of animal levers. Hence, we could apply the rules of linear physics. Let me repeat. I am not against rationalized learned discourse, provided it is not fragile to error. I am first and last a decision-maker hybrid and will never separate the philosopher-probabilist from the decision-maker. So I am that joint person all the time—in the morning when I drink the ancient liquid called coffee, at noon when I eat with my friends, and at night when I go to bed clutching a book. What I am against is naïve, rationalized, pseudo-learned discourse, with green lumber problems, one that focuses solely on the known and ignores the unknown. Nor am I against the use of mathematics when it comes to gauging the importance of the unknown. This is the robust application of mathematics. Actually, the arguments in this chapter and the next are all based on the mathematics of probability. But it is not a rationalistic use of mathematics, and much of it allows the detection of blatant inconsistencies between statements about severity of disease and intensity of treatment. On the other hand, the use of mathematics in social science is like interventionism. Those who practice it professionally tend to use it everywhere except where it can be useful. The only condition for such a brand of more sophisticated rationalism? To believe and act as if one does not have the full story. To be sophisticated, you need to accept that you are not so. Next, this chapter has introduced the idea of convexity effects and burden of evidence into medicine and into the assessment of risk of iatrogenics. Next, let us look at more applications of convexity effects and discuss via negativa as a rigorous approach to life. Chapter 22, Medicine by Subtraction, introduces the match between individuals and the type of randomness in the environment, why I don't want to live forever. To live long, but not too long. Wednesdays and Fridays plus Lent. How to live forever, according to Nietzsche or others, or why, when you think about it, not to live longer. Life expectancy and convexity. Whenever you question some aspects of medicine or unconditional technological progress, you are invariably and promptly provided the sophistry that we tend to live longer than past generations. Note that some make the even sillier argument that a propensity to natural things implies favoring a return to the day of brutish and short lives, not realizing it is the exact same argument as saying that eating fresh, non-canned foods implies rejecting civilization, the rule of law, and humanism. So there are a lot of nuances in this life expectancy argument. Life expectancy is increased because of the combination of many factors, sanitation, penicillin, a drop in crime, life-saving surgery, and, of course, some medical practitioners operating in severe life-threatening situations. If we live longer, it is thanks to medicine's benefits in cases that are lethal, in which the condition is severe, hence low iatrogenics, as we saw, the convex cases. So it is a serious error to infer that if we live longer because of medicine, that all medical treatments make us live longer. Further, to account for the effect of progress, we need to deduct, of course, from the gains in medical treatment the costs of the diseases of civilization. Primitive societies are largely free of cardiovascular disease, cancer, dental cavities, economic theories, lounge music, and other modern ailments. Advances in lung cancer treatment need to be offset by the effect of smoking. In the research papers, one can estimate that medical practice may have contributed a small number of years to the increase, but again, this depends greatly on the gravity of the disease. Cancer doctors certainly provide a positive contribution in advanced and curable cases, while interventionistic personal doctors, patently, provide a negative one. We need to take into account the unfortunate fact that iatrogenics, hence medicine, reduces life expectancy in a set, an easy-to-map number of cases, the concave ones. We have a few pieces of data from the small number of hospital strikes during which only a small number of operations are conducted, for the most urgent cases, and elective surgery is postponed. Depending on whose side in the debate you joined, life expectancy either increases in these cases or, at the least, does not seem to drop. Further, which is significant, many of the elective surgeries are subsequently cancelled upon the return to normalcy, evidence of the denigration of Mother Nature's work by some doctors. Another fooled-by-randomness style mistake is to think that because life expectancy at birth used to be 30 until the last century, that people lived just 30 years. The distribution was massively skewed, with the bulk of the deaths coming from birth and childhood mortality. Conditional life expectancy was high, just consider that ancestral men tended to die of trauma. Perhaps legal enforcement contributed more than doctors to the increase in length of life, so the gains in life expectancy are more societal than from the result of scientific advance. While there are some controversies concerning conditional life expectancy, the numbers are quite revealing. For instance, on one extreme, Richard Lewontin estimates in the last 50 years, only four months have been added to the expected lifespan of a person who is already 60 years old. Data from the Centers for Disease Control and Prevention, CDC, show a few more years, but we are still unsure how much of it came from medicine as compared to improvements in life conditions and social mores. Still, the CDC shows that life expectancy at age 20 only increased from 42.79 additional years in 1900-1902, to 51.2 in 1949-1951, and to 58.2 in 2002. As a case study, consider mammograms. It has been shown that administering them to women over 40 on an annual basis does not lead to an increase in life expectancy. At best, it could even lead to a decrease. While female mortality from breast cancer decreases for the cohort subjected to mammograms, the death from other causes increases markedly. We can spot here simple measurable iatrogenics. The doctor, seeing the tumor, cannot avoid doing something harmful, like surgery followed by radiation, chemotherapy, or both, that is, more harmful than the tumor. There is a break-even point that is easily crossed by panicked doctors and patients. Treating the tumor that will not kill you shortens your life. Chemotherapy is toxic. We have built up so much paranoia against cancer, looking at the chain backward, an error of logic called affirming the consequent. If all of those dying prematurely from cancer had a malignant tumor, that does not mean that all malignant tumors lead to death from cancer. Most equally intelligent persons do not infer from the fact that all cretins are liars that all liars are cretins, or from the condition that all bankers are corrupt that all corrupt people are bankers. Only in extreme cases does nature allow us to make such violations of logic, called modus ponens, in order to help us survive. Moderation is beneficial in an ancestral environment. Misunderstanding of the problems with mammograms has led to overreactions on the part of politicians, another reason to have a society immune from the stupidity of lawmakers by decentralization of important decisions. One politician of the primitive kind, Hillary Clinton, went so far as to claim that critics of the usefulness of mammograms were killing women. We can generalize the mammogram problem to unconditional laboratory tests, finding deviations from the norm and acting to cure them. Subtraction adds to your life. Now I speculate the following, having looked closely at data with my friend Spiros Makrodakis, a statistician and decision scientist who we introduced a few chapters ago as the first to find flaws in statistical forecasting methods. We estimated that cutting medical expenditures by a certain amount, while limiting the cuts to elective surgeries and treatments, would extend people's lives in most rich countries, especially the United States. Why? Simple basic convexity analysis. A simple examination of conditional iatrogenics. The error of treating the mildly ill puts them in a concave position. And it looks as if we know very well how to do this. Just raise the hurdle of medical intervention in favor of cases that are most severe, for which the iatrogenics effect is very small. It may even be better to increase expenditures on these and reduce the one on elective ones. In other words, reason backward, starting from the iatrogenics to the cure, rather than the other way around. Whenever possible, replace the doctor with human antifragility. But otherwise, don't be shy with aggressive treatments. Another application of via negativa. Spend less, live longer is a subtractive strategy. We saw that iatrogenics comes from the intervention bias, via positiva, the propensity to want to do something, causing all the problems we've discussed. But let's do some via negativa here. Removing things can be quite a potent and, empirically, a more rigorous action. Why? Removal of a substance not seasoned by our evolutionary history reduces the possibility of black swans, while leaving one open to improvements. Should the improvements occur, we can be pretty comfortable that they are as free of unseen side effects as one can get. So there are many hidden jewels in via negativa applied to medicine. For instance, telling people not to smoke seems to be the greatest medical contribution of the last 60 years. Drewyn Burch, in Taking the Medicine, writes, The harmful effects of smoking are roughly equivalent to the combined good ones of every medical intervention developed since the war. Getting rid of smoking provides more benefit than being able to cure people of every possible type of cancer. As usual, the ancients. As Ennius wrote, the good is mostly in the absence of bad. Likewise, happiness is best dealt with as a negative concept. The same non-linearity applies. Modern happiness researchers, who usually look quite unhappy, often psychologists-turned-economists, or vice versa, do not use non-linearities and convexity effects when they lecture us about happiness, as if we knew what it was and whether that's what we should be after. Instead, they should be lecturing us about unhappiness. I speculate that just as those who lecture on happiness look unhappy, those who lecture on unhappiness would look happy. The pursuit of happiness is not equivalent to the avoidance of unhappiness. Each of us certainly knows not only what makes us unhappy-for instance, copy editors, commuting, bad odors, pain, the sight of a certain magazine in a waiting room, etc.-but what to do about it. Let us probe the wisdom of the ages. Sometimes scantiness of nourishment restores the system, wrote Plotinus, and the ancients believed in purges, one manifestation of which was the oft-harmful, though often beneficial, routine of bloodletting. The regimen of the Salerno School of Medicine. Joyful mood, rest, and scant nourishment. MEDICI TIBI DEFICIANTE MEDICI, MEDICI TIBI FIANTE HEIC TRIA, MENS LITA REQUIES MATERATA DIETA. There is a seemingly apocryphal, but nevertheless interesting, story about Pomponius Atticus, famous for being Cicero's relative and epistolary recipient. Being ill, incurably ill, he tried to put an end to both his life and his suffering by abstinence, and only succeeded in ending the latter, as, according to Montaigne, his health was restored. But I am citing the story in spite of its apocryphal nature simply because, from a scientific perspective, it seems that the only way we may manage to extend people's lives is through caloric restriction, which seems to cure many ailments in humans and extend lives in laboratory animals. But, as we will see in the next section, such restriction does not need to be permanent. Just an occasional but painful fast might do. We know we can cure many cases of diabetes by putting people on a very strict starvation-style diet, shocking their system. In fact, the mechanism had to have been known heuristically for a long time since there are institutes in sanatoria for curative starvation in Siberia. It has been shown that many people benefit from the removal of products that did not exist in their ancestral habitat—sugars and other carbohydrates in unnatural format, wheat products, those with celiac disease, but almost all of us are somewhat ill-adapted to this new addition to the human diet, milk and other cow products, for those of non-northern European origin who did not develop lactose tolerance, sodas, both diet and regular, wine, for those of Asian origin who do not have the history of exposure, vitamin pills, food supplements, the family doctor, headache medicine, and other painkillers. Reliance on painkillers encourages people to avoid addressing the cause of the headache with trial and error, which can be sleep deprivation, tension in the neck, or bad stressors. It allows them to keep destroying themselves in a procrustean, bed-style life. But one does not have to go far. Just start removing the medications that your doctor gave you, or, preferably, remove your doctor. As Oliver Wendell Holmes, Sr., put it, if all the medications were dumped in the sea, it would be better for mankind, but worse for the fishes. My father, an oncologist, who also did research in anthropology, raised me under that maxim. Alas, while not completely following it in practice, he cited it enough, though. I, for my part, resist eating fruits not found in the ancient eastern Mediterranean. I use I here in order to show that I am not narrowly generalizing to the rest of humanity. I avoid any fruit that does not have an ancient Greek or Hebrew name, such as mangoes, papayas, even oranges. Oranges seem to be the post-medieval equivalent of candy. They did not exist in the ancient Mediterranean. Apparently, the Portuguese found a sweet citrus tree in Goa or elsewhere and started breeding it for sweeter and sweeter fruits, like a modern confectionery company. Even the apples we see in the stores are to be regarded with some suspicion. Original apples were devoid of sweet taste, and fruit corporations bred them for maximal sweetness. The mountain apples of my childhood were acid, bitter, crunchy, and much smaller than the shiny variety in U.S. stores said to keep the doctor away. As to liquid, my rule is drink no liquid that is not at least a thousand years old, so its fitness has been tested. I drink just wine, water, and coffee. No soft drinks. Perhaps the most possibly deceitfully noxious drink is the orange juice we make poor innocent people imbibe at the breakfast table while, thanks to marketing, we convince them it is healthy. Aside from the point that the citrus our ancestors ingested was not sweet, they never ingested carbohydrates without large, very large quantities of fiber. Eating an orange or an apple is not biologically equivalent to drinking orange or apple juice. From such examples, I derive the rule that what is called healthy is generally unhealthy, just as social networks are antisocial, and the knowledge-based economy is typically ignorant. I would add that, in my own experience, a considerable jump in my personal health has been achieved by removing offensive irritants. Copy the morning newspapers. The mere mention of the names of the fragilista journalists Thomas Friedman or Paul Krugman can lead to explosive bouts of unrequited anger on my part. The boss. The daily commute. Air conditioning, though not heating. Television. Emails from documentary filmmakers. Economic forecasts. News about the stock market, gym strength training machines, and many more. One example of lack of empirical wisdom in the use of evidence. In a New York Times magazine article, a doctor who claimed that he stopped eating sugar because of its potential harm was apologetic for doing so without full evidence. The best test of empirical wisdom in someone is in where he puts the burden of evidence. The iatrogenics of money. To understand the outright denial of antifragility and the way we seek wealth, consider that construction laborers seem happier with a ham and cheese baguette than businessmen with a Michelin three-star meal. Food tastes so much better after exertion. The Romans had a strange relation to wealth. Anything that softens or mollifies was seen negatively. Their reputation for decadence is a bit overdone. Nobody likes the lurid. They disliked comfort and understood its side effects. The same with the Semites, split between desert tribes and city dwellers, with city dwellers harboring a certain cross-generational nostalgia for their roots and their original culture. So there is the culture of the desert, full of poetry, chivalry, contemplation, rough episodes and frugality, plotted against the city's comfort, which is associated with physical and moral decay, gossip and decadence. The city dweller repairs to the desert for purification, as Christ did for forty days in the Judean desert, or Saint Mark in the Egyptian desert, starting a tradition of such asceticism. There was at some point an epidemic of monasticism in the Levant, perhaps the most impressive being Saint Simeon, who spent forty years on top of a column in northern Syria. The Arabs kept the tradition, shedding possessions to go to silent, barren, empty places, and of course with mandatory fasting, on which a bit later. Note that medical iatrogenics is the result of wealth and sophistication rather than poverty and artlessness, and of course the product of partial knowledge rather than ignorance. So this idea of shedding possessions to go to the desert can be quite potent as a via negativa style subtractive strategy. Few have considered that money has its own iatrogenics, and that separating some people from their fortune would simplify their lives and bring great benefits in the form of healthy stressors. So being poorer might not be completely devoid of benefits, if one does it right. We need modern civilization for many things, such as the legal system and emergency room surgery. But just imagine how, by the subtractive perspective, via negativa, we can be better off by getting tougher. No sunscreen, no sunglasses if you have brown eyes, no air conditioning, no orange juice, just water. No smooth surfaces, no soft drinks, no complicated pills, no loud music, no elevator, no juicer, no... I stop. When I see pictures of my friend the godfather of the paleo-ancestral lifestyle, Art Devaney, who was extremely fit in his seventies, much more than most people thirty years younger than him, and those of the pear-shaped billionaires Rupert Murdoch or Warren Buffett or others in the same age group, I am invariably hit with the following idea. If true wealth consists in worryless sleeping, clear conscience, reciprocal gratitude, absence of envy, good appetite, muscle strength, physical energy, frequent laughs, no meals alone, no gym class, some physical labor or hobby, good bowel movements, no meeting rooms, and periodic surprises, then it is largely subtractive elimination of iatrogenics. Religion and Naive Interventionism Religion has invisible purposes beyond what the literal-minded scientistic-scientifiers identify, one of which is to protect us from scientism, that is, them. We can see in the corpus of inscriptions on graves accounts of people erecting fountains or even temples to their favorite gods after these succeeded where doctors failed. Indeed, we rarely look at religion's benefits in limiting the intervention bias and its iatrogenics. In a large set of circumstances, marginal disease, anything that takes you away from the doctor and allows you to do nothing, hence gives nature a chance to do its work, will be beneficial. So going to church or the Temple of Apollo for mild cases, say, those devoid of trauma, like a mild discomfort, not injuries from a car accident, those situations in which the risk of iatrogenics exceeds the benefit of cure, to repeat it again, the cases with negative convexity, will certainly help. We have so many inscriptions on temples of the type, Apollo saved me, my doctors tried to kill me, typically the patient has bequeathed his fortune to the temple, and it seems to me that human nature does, deep down, know when to resort to the solace of religion and when to switch to science. If it's Wednesday, I must be vegan. Sometimes for a conference dinner, the organizers send me a form asking me if I have dietary requirements. Some do so close to six months in advance. In the past, my usual answer had been that I avoid eating cats, dogs, rats, and humans, especially economists. Today, after my personal evolution, I truly need to figure out the day of the week to know if I will be vegan then or capable of eating those thick, monstrous steaks. How? Just by looking at the Greek Orthodox calendar and its required fasts. This confuses the usual categorizing business reader TED conference modern version of the naive fellow who cannot place me in the paleo camp or the vegan camp. The paleo people are carnivores who try to replicate the supposed ancestral high-meat, high-animal-fat diet of hunter-gatherers. Vegans are people who eat no animal product, not even butter. We will see further down why it is a naive, rationalistic mistake to be in either category, except for religious or spiritual reasons, except episodically. I believe in the heuristics of religion and blindly accommodate its rules. As an Orthodox Christian, I can cheat once in a while, as it is part of the game. Among other things, the role of religion is to tame the iatrogenics of abundance. Fasting makes you lose your sense of entitlement. But there are more subtle aspects. Convexity effects and random nutrition. Recall from the lung ventilator discussion this practical consequence of Jensen's inequality. Irregularity has its benefits in some areas. Regularity has its detriments. Where Jensen's inequality applies, irregularity might be medicine. Perhaps what we mostly need to remove is a few meals at random, or at least avoid steadiness in food consumption. The error of missing nonlinearities is found in two places, in the mixture and in the frequency of food intake. The problem with the mixture is as follows. We humans are said to be omnivorous, compared to more specialized mammals, such as cows and elephants, who eat salads, and lions, who eat prey, generally salad-eating prey. But such ability to be omnivorous had to come in response to more variegated environments with unplanned, haphazard and, what is key, serial availability of sources. Diversification is the response to a very stable habitat free of abrupt changes, redundancy of pathways the response to a more variegated one. Diversification of function had to come in response to variety, and a variety of a certain structure. Notice subtlety in the way we are built. The cow and other herbivores are subjected to much less randomness than the lion in their food intake. They eat steadily, but need to work extremely hard in order to metabolize all these nutrients, spending several hours a day just eating, not to count the boredom of standing there eating salads. The lion, on the other hand, needs to rely on more luck. It succeeds in a small percentage of the kills, less than 20%, but when it eats, it gets in a quick and easy way all these nutrients produced thanks to very hard and boring work by the prey. So take the following principles derived from the random structure of the environment. When we are herbivores, we eat steadily. But when we are predators, we eat more randomly. Hence our proteins need to be consumed randomly for statistical reasons. So if you agree that we need balanced nutrition of a certain combination, it is wrong to immediately assume that we need such balance at every meal, rather than serially so. Assuming that we need on average certain quantities of the various nutrients that have been identified, let's say a certain quantity of carbohydrates, proteins, and fats. Some people claim that we need more fat than carbohydrates, others offer the opposite. They all tend to agree on protein, though few realize we need to randomize protein intake. Both sides still advocate non-randomness in the mixing and ignore the non-linearities from sequence and composition. There is a big difference between getting them together at every meal with a classical steak, salad, followed by fresh fruits, or having them separately, serially. Why? Because deprivation is a stressor, and we know what stressors do when allowed adequate recovery. Convexity effects at work here again. Getting three times the daily dose of protein in one day and nothing the next two is certainly not biologically equivalent to steady, moderate consumption if our metabolic reactions are non-linear. It should have some benefits. At least this is how we are designed to be. I speculate. In fact, I more than speculate. I am convinced, an inevitable result of non-linearity, that we are anti-fragile to randomness in food delivery and composition, at least over a certain range or number of days. And one blatant denial of convexity bias is the theory about the benefits of the so-called Cretan or Mediterranean diet that triggered a change in the eating habits of the U.S. enlightened class, away from steak and potatoes in favor of grilled fish with salad and feta cheese. It happened as follows. Someone looked at the longevity of Cretans, cataloged what they ate, then inferred, naively, that they lived longer because of the types of food they consumed. It could be true. But the second-order effect, the variations in intake, could be dominant, something that went unnoticed by mechanistic researchers. Indeed, it took a while to notice the following. The Greek Orthodox Church has, depending on the severity of the local culture, almost 200 days of fasting per year. And these are harrowing fasts. Yes, harrowing fasts, as I am feeling it right now. For I am writing these lines during Orthodox Lent, a 40-day period in which almost no animal product can be consumed, no sweets, and for some sticklers, no olive oil. As there are several gradations, I try to stick to a semi-strict level, and life is not very easy, as is meant to be. I just spent a long weekend in Amyun, my ancestral village in northern Lebanon, in the Greek Orthodox area called the Koura Valley. There, traditional ruse foods are perfected, with great imagination. Levantine kibbeh made with herbs and beans in place of meat, meatballs made of matzo-style small brown balls in a lentil soup. Remarkably, while fish is banned, most days, shellfish is allowed, probably as it was not considered a luxury item. The compensation for the absence of some nutrients from my daily diet will take place in lumps. I will make up my deprivation of what researchers for now call protein with fish on days when it is allowed, and of course I will ravenously eat lamb on Easter Day, then consume disproportionately high quantities of fatty red meat for a while thereafter. I dream of the red steak served in fat Tony patronized restaurants in unapologetically monstrous portions. And there is this anti-fragility to the stressor of the fast, as it makes the wanted food taste better and can produce euphoria in one's system. Breaking a fast feels like the exact opposite of a hangover. The principal disease of abundance can be seen in habituation and jadedness, what biologists currently call dulling of receptors, Seneca. To a sick person, honey tastes better. How to eat yourself. I wonder how people can accept that the stressors of exercise are good for you, but do not transfer to the point that food deprivation can have the same effect. But scientists are in the process of discovering the effects of episodic deprivation of some or all foods. Somehow, evidence shows, we get sharper and fitter in response to the stress of the constraint. We can look at biological studies, not to generalize or use in the rationalistic sense, but to verify the existence of a human response to hunger, that biological mechanisms are activated by food deprivation. And we have experiments on cohorts showing the positive effect of hunger or deprivation of a food group on the human body. Researchers rationalize now with the mechanism of autophagy, eating oneself. When deprived of external sources, the theories are that your cells start eating themselves, or breaking down proteins and recombining amino acids to provide material for building other cells. It is assumed by some researchers, for now, that the vacuum cleaner effect of autophagy is the key to longevity, though my ideas of the natural are impervious to their theories. As I will show further down, occasional starvation produces some health benefits and that's that. The response to hunger, our antifragility, has been underestimated. We've been telling people to eat a good meal for breakfast, so they can face the travails of the day. And it is not a new theory by empirically blind modern-day nutritionists. For instance, I was struck by a dialogue in Stendhal's monumental novel, Les Rouges et le Noir, in which the protagonist, Julien Sorel, is told the work for the day will be long and rough, so let us fortify ourselves with a breakfast, which in the French of the period was called the first lunch. Indeed, the idea of breakfast as a main meal with cereals and other such materials has been progressively shown to be harming humans. I wonder why it took so long before anyone realized that such an unnatural idea needs to be tested. Further, the tests show that harm, or at least no benefits, are derived from breakfast unless one has worked for it beforehand. Let us remember that we are not designed to be receiving foods from the delivery person. In nature, we had to expend some energy to eat. Lions hunt to eat. They don't eat their meal, then hunt for pleasure. Giving people food before they expend energy would certainly confuse their signaling process. And we have ample evidence that intermittently, and only intermittently, depriving organisms of food has been shown to engender beneficial effects on many functions. Walter Longo, for instance, noted that prisoners in concentration camps got less sick in the first phase of food restriction, then broke down later. He tried the result experimentally and found out that mice in the initial phases of starvation can withstand high doses of chemotherapy without visible side effects. Scientists use the narrative that starvation causes the expression of a gene coding a protein called SIRT, SIRT1, or sirtuin, which brings longevity and other effects. The antifragility of humans manifests itself in the response with up-regulation of some genes in response to hunger. So once again, religions with ritual fasts have more answers than assumed by those who look at them too literally. In fact, what these ritual fasts do is try to bring non-linearities in consumption to match biological properties. Walk Deprived Another source of harm from naive rationalism. Just as for a long time people tried to shorten their sleep, as it seemed useless to our earthling logic, many people think that walking is useless. So they use mechanical transportation, car, bicycle, etc., and get their exercise working out at the gym. And when they walk, they do this ignominious power walk, sometimes with weights on their arms. They do not realize that for reasons still opaque to them, walking effortlessly at a pace below the stress level can have some benefits, or, as I speculate, is necessary for humans, perhaps as necessary as sleep, which at some point modernity could not rationalize and tried to reduce. Now it may or may not be true that walking effortlessly is as necessary as sleep, but since all my ancestors until the advent of the automobile spent much of their time walking around and sleeping, I try to just follow the logic, even before some medical journal catches up to the idea and produces what referees of medical journals call evidence. I Want to Live Forever All I hear is how to live longer, richer, and of course more laden with electronic gadgets. We are not the first generation to believe that the worst possible thing to befall us is death. But for the ancients, the worst possible outcome was not death, but a dishonorable death, or even just a regular one. For a classical hero, dying in a retirement home with a rude nurse and a network of tubes coming into and out of your nose would not be the attractive telos for a life. And of course, we have this modern illusion that we should live as long as we can, as if we were each the end product. This idea of the me as a unit can be traced to the Enlightenment, and with it, fragility. Before that, we were part of the present collective and future progeny. Both present and future tribes exploited the fragility of individuals to strengthen themselves. People engaged in sacrifices, sought martyrdom, died for the group, and derived pride from doing so. They worked hard for future generations. Sadly, as I am writing these lines, the economic system is loading future generations with public governmental debt, causing depletion of resources and environmental blight to satisfy the requirements of the security analysts and the banking establishment. Once again, we cannot separate fragility from ethics. As I wrote in Chapter 4, while the gene is anti-fragile, since it is information, the carrier of the gene is fragile, and needs to be so for the gene to get stronger. We live to produce information, or improve on it. Nietzsche had the Latin pun, outlibri, outlibri, either children or books, both information that carries through the centuries. I was just reading in John Gray's wonderful The Immortalization Commission about attempts to use science in a post-religious world to achieve immortality. I felt some deep disgust, as would any ancient, at the efforts of the singularity thinkers, such as Ray Kurzweil, who believe in humans' potential to live forever. Note that if I had to find the anti-me, the person with diametrically opposite ideas and lifestyle on the planet, it would be that Ray Kurzweil fellow. It is not just neomania. While I propose removing offensive elements from people's diets and lives, he works by adding, popping close to 200 pills daily. Beyond that, these attempts at immortality leave me with a deep moral revulsion. It is the same kind of deep internal disgust that takes hold of me when I see a rich, 82-year-old man surrounded with babes, 20-something mistresses, often Russian or Ukrainian. I am not here to live forever as a sick animal. Recall that the antifragility of a system comes from the mortality of its components, and I am part of that larger population called humans. I am here to die a heroic death for the sake of the collective, to produce offspring and prepare them for life and provide for them, or eventually, books. My information, that is, my genes, the antifragile in me, should be the one seeking immortality, not me. Then say goodbye. Have a nice funeral in St. Sergius, Mars Arctis, in Amiens, and, as the French say, Place Autre. Make room for others. Book Seven The Ethics of Fragility and Antifragility Now, ethics. Under opacity and in the newfound complexity of the world, people can hide risks and hurt others with the law incapable of catching them. Iatrogenics has both delayed and invisible consequences. It is hard to see causal links to fully understand what's going on. Under such epistemic limitations, skin in the game is the only true mitigator of fragility. Hammurabi's code provided a simple solution close to 3,700 years ago. This solution has been increasingly abandoned in modern times, as we have developed a fondness for neomanic complication over archaic simplicity. We need to understand the everlasting solidity of such a solution. Chapter Twenty-Three The Agency Problem as Transfer of Fragility Skin in the Game Doxastic Commitment or Soul in the Game The Robert Rubin Problem, The Joseph Stiglitz Problem, and The Alan Blinder Problem, all three about agency and one about cherry-picking. Skin in the Game Antifragility and Optionality at the Expense of Others Making Talk Less Cheap, Looking at the Spoils, Corporations with Random Acts of Pity, Predict and Inverse Predict This chapter will look at what we are getting ourselves into when someone gets the upside and a different person gets the downside. The worst problem of modernity lies in the malignant transfer of fragility and antifragility from one party to the other, with one getting the benefits, the other one unwittingly getting the harm, with such transfer facilitated by the growing wedge between the ethical and the legal. This state of affairs has existed before, but is acute today. Modernity hides it especially well. It is, of course, an agency problem. And the agency problem is, of course, an asymmetry. We are witnessing a fundamental change. Consider older societies, those societies that have survived. The main difference between us and them is the disappearance of a sense of heroism, a shift away from a certain respect and power to those who take downside risks for others. For heroism is the exact inverse of the agency problem. Someone elects to bear the disadvantage, risks his own life or harm to himself, or in milder forms, accepts to deprive himself of some benefits for the sake of others. What we have currently is the opposite. The power seems to go to those like bankers, corporate executives, non-entrepreneurs and politicians who steal a free option from society. And heroism is not just about riots and wars. An example of the inverse agency problem. As a child, I was most impressed with the story of a nanny who died in order to save a child from being hit by a car. I find nothing more honorable than accepting death in someone else's place. In other words, what is called sacrifice. And the word sacrifice is related to sacred, the domain of the holy that is separate from that of the profane. In traditional societies, a person is only as respectable and as worthy as the downside he or more, a lot more than expected, she, is willing to face for the sake of others. The most courageous or valorous occupy the highest rank in their society. Knights, generals, commanders, even mafia dons accept that such rank in the hierarchy makes them the most exposed to be whacked by competitors and the most penalized by the authorities. The same applies to saints, those who abdicate, devote their lives to serve others, to help the weak, the deprived and the dispossessed. So graphic seven in your PDF presents another triad. There are those with no skin in the game but who benefit from others, those who neither benefit from nor harm others, and finally, the grand category of those sacrificial ones who take the harm for the sake of others. Let me follow my emotions and start with a third column, on the far right, the one about heroes and people of courage. The robustness, even anti-fragility of society depends on them. If we are here today, it is because someone, at some stage, took some risks for us. But courage and heroism do not mean blind risk-taking, it is not necessarily recklessness. There is a pseudo-courage that comes from risk-blindness in which people underestimate the odds of failure. We have ample evidence that the very same people become chicken and overreact in the face of real risks, the exact opposite. For the Stoics, prudence is connatural to courage, the courage to fight your own impulses. In an aphorism by, who else, Publilius Cyrus, prudence was deemed the courage of the general. Heroism has evolved through civilization, from the martial arena to that of ideas. Initially, in pre-classical times, the Homeric hero was someone principally endowed with physical courage, since everything was physical. In later classical times, for such people as the great Lacedaemonian king Agesilaus, a truly happy life was one crowned by the privilege of death in battle, little else, perhaps even nothing else. But for Agesilaus, courage had already evolved from purely martial prowess into something greater. Courage was often seen in acts of renunciation, as when one is ready to sacrifice himself for the benefit of others, of the collective, something altruistic. Finally a new form of courage was born, that of the Socratic Plato, which is the very definition of the modern man, the courage to stand up for an idea and enjoy death in a state of thrill, simply because the privilege of dying for truth, or standing up for one's values, had become the highest form of honor. No one has had more prestige in history than two thinkers who overtly and defiantly sacrificed their lives for their ideas, two Eastern Mediterraneans, one Greek and one Semite. We should pause a little when we hear happiness defined as an economic or otherwise puny materialistic condition. You can imagine how distraught I feel when I hear about the glorified, heroism-free middle-class values which, thanks to globalization and the Internet, have spread to any place easily reached by British air, enshrining the usual opiates of the deified classes. Hard work for a bank or a tobacco company, diligent newspaper reading, obedience to most but not all traffic laws, captivity in some corporate structure, dependence on the opinion of a boss, with one's job records filed in the personnel department, good legal compliance, reliance on stock market investments, tropical vacations, and a suburban life under some mortgage with a nice-looking dog and Saturday night wine tasting. Those who meet with some success enter the gallery of the annual billionaire list, where they will hope to spend some time before their fertilizer sales are challenged by competitors from China. They will be called heroes rather than lucky. Further, if success is random, a conscious act of heroism is non-random, and the ethical middle-class may work for a tobacco company, and thanks to casuistry, call themselves ethical. I am even more distraught for the future of the human race when I see a nerd behind a computer in a D.C. suburb, walking distance from a Starbucks coffeehouse or a shopping mall, capable of blowing up an entire battalion in a remote place, say Pakistan, and afterward going to the gym for a workout. Compare his culture to that of knights or samurai. Cowardice enhanced by technology is all connected. Society is fragilized by spineless politicians, draft dodgers afraid of polls, and journalists building narratives who create explosive deficits and compound agency problems because they want to look good in the short term. A disclaimer. Graphic seven does not imply that those with soul in the game are necessarily right, or that dying for one's ideas makes one necessarily good for the rest of us. Many messianic utopians have caused quite a bit of harm. Nor is a grandiose death a necessity. Many people fight evil in the patient grind of their daily lives without looking like heroes. They suffer society's ingratitude even more, while media-friendly pseudo-heroes rise in status. These people will not get a statue from future generations. A half-man, or rather half-person, is not someone who does not have an opinion, just someone who does not take risks for it. The great historian Paul Venn has recently shown that it is a big myth that gladiators were forced labor. Most were volunteers who wanted the chance to become heroes by risking their lives in winning or, when failing, to show in front of the largest crowd in the world how they were able to die honorably, without cowering. When a gladiator loses the fight, the crowd decides whether he should be spared or put to death by the opponent. And spectators did not care for non-volunteers, as these did not have their soul in the fight. My greatest lesson in courage came from my father. As a child, I had admired him before for his erudition, but was not overly fazed, since erudition on its own does not make a man. He had a large ego and immense dignity, and he demanded respect. He was once insulted by a militiaman at a road check during the Lebanese War. He refused to comply and got angry at the militiaman for being disrespectful. As he drove away, the gunman shot him in the back. The bullet stayed in his chest for the rest of his life, so he had to carry an X-ray image through airport terminals. This set the bar very high for me. Dignity is worth nothing unless you earn it, unless you are willing to pay a price for it. A lesson I learned from this ancient culture is the notion of megalopsicon, a term expressed in Aristotle's Ethics, a sense of grandeur that was superseded by the Christian value of humility. There is no word for it in Romance languages. In Arabic it is called shahum, best translated as non-small. If you take risks and face your fate with dignity, there is nothing you can do that makes you small. If you don't take risks, there is nothing you can do that makes you grand, nothing. And when you take risks, insults by half-men, small men, those who don't risk anything, are similar to barks by non-human animals. You can't feel insulted by a dog. Hammurabi Let us now work with the elements of Graphic 7 in your PDF and bring the unifying foundational asymmetry between upside and downside into our central theme, Ethics. Just as only business school professors and similar fragilistas separate robustness and growth, we cannot separate fragility and ethics. Some people have options or have optionality at the expense of others, and the others don't know it. The effects of transfers of fragility are becoming more acute as modernity is building up more and more people on the left column, inverse heroes, so to say. So many professions, most arising from modernity, are affected, becoming more anti-fragile at the expense of our fragility, tenured government employees, academic researchers, journalists of the non-myth-busting variety, the medical establishment, big pharma, and many more. Now, how do we solve the problem? As usual, with some great help from the ancients. Hammurabi's Code, now about 3,800 years old, identifies the need to re-establish a symmetry of fragility, spelled out as follows. If a builder builds a house and the house collapses and causes the death of the owner of the house, the builder shall be put to death. If it causes the death of the son of the owner of the house, a son of that builder shall be put to death. If it causes the death of a slave of the owner of the house, he shall give to the owner of the house a slave of equal value. It looks like they were much more advanced 3,800 years ago than we are today. The entire idea is that the builder knows more, a lot more, than any safety inspector, particularly about what lies hidden in the foundations, making it the best risk management rule ever, as the foundation, with delayed collapse, is the best place to hide risk. Hammurabi and his advisors understood small probabilities. Now, clearly the object here is not to punish retrospectively, but to save lives by providing upfront disincentive in case of harm to others during the fulfillment of one's profession. These asymmetries are particularly severe when it comes to small probability extreme events, that is, black swans, as these are the most misunderstood and their exposure is easiest to hide. Fat Tony has two heuristics. First, never get on a plane if the pilot is not on board. Second, make sure there is also a co-pilot. The first heuristic addresses the asymmetry in rewards and punishment or transfer of fragility between individuals. Ralph Nader has a simple rule. People voting for war need to have at least one descendant, child or grandchild, exposed to combat. For the Romans, engineers needed to spend some time under the bridge they built, something that should be required of financial engineers today. The English went further and had the families of the engineers spend time with them under the bridge after it was built. To me, every opinion maker needs to have skin in the game in the event of harm caused by reliance on his information or opinion. Not having such persons as, say, the people who helped cause the criminal Iraq invasion come out of it completely unscathed. Further, anyone producing a forecast or making an economic analysis needs to have something to lose from it, given that others rely on those forecasts. To repeat, forecasts induce risk-taking. They are more toxic to us than any other form of human pollution. We can derive plenty of sub-heuristics from Fat Tony's rules, particularly to mitigate the weaknesses of predictive systems. Predicting, any prediction, without skin in the game, can be as dangerous for others as unmanned nuclear plants without the engineer sleeping on the premises. Pilots should be on the plane. The second heuristic is that we need to build redundancy, a margin of safety, avoiding optimization, mitigating even removing asymmetries in our sensitivity to risk. The rest of this chapter will present a few syndromes with, of course, some ancient remedies. The talker's free option. We closed book one by arguing that we need to put entrepreneurs and risk-takers, failed or not, on top of the pyramid and, unless they take personal risks when they expose others, academizing academics, talkers, and political politicians at the bottom. The problem is that society is currently doing the exact opposite, granting mere talkers a free option. The idea that Fat Tony milked suckers when they ran to the exit door seemed at first quite inelegant to Nero. Benefiting from the misfortune of others, no matter how hideous these are and can be, is not the most graceful approach to life. But Tony had something at risk and would have been personally harmed by an adverse outcome. Fat Tony had no agency problem. This makes it permissible. For there is an even worse problem associated with the opposite situation. People who just talk, prognosticate, theorize. In fact, speculative risk-taking is not just permissible, it is mandatory. No opinion without risk, and of course, no risk without hope for return. If Fat Tony had an opinion, he felt he needed, for ethical reasons, to have a corresponding exposure. As they say in Bensonhurst, you gotta do so if you have an opinion. Otherwise you do not really have an opinion at all. You need to be earmarked as someone who has no downside for his opinion, with a special status in society, perhaps something below that of ordinary citizen. Citizens need to have a status below ordinary citizen. Regular citizens, at least, face the downside of their statements. So counter to the entire idea of the intellectual and commentator as a detached and protected member of society, I am stating here that I find it profoundly unethical to talk without doing, without exposure to harm, without having one's skin in the game, without having something at risk. To express your opinion, it can hurt others who rely on it, yet you incur no liability. Is this fair? But this is the information age. The effect of transferring fragility might have been present throughout history, but it is much more acute now, under modernity's connectivity and the newfound invisibility of causal chains. The intellectual today is vastly more powerful and dangerous than before. The knowledge world causes separation of knowing and doing within the same person and leads to the fragility of society. How? In the old days, privilege came with obligations, except for the small class of intellectuals who served a patron or, in some cases, the state. You want to be a feudal lord? You will be first to die. You want war? First in battle. Let us not forget something embedded in the U.S. Constitution. The president is commander-in-chief. Caesar, Alexander, and Hannibal were on the battlefield. The last, according to Livy, was first in, last out of combat zones. George Washington, too, went to battle, unlike Ronald Reagan and George W. Bush, who played video games while threatening the lives of others. Even Napoleon was personally exposed to risks. His showing up during a battle was the equivalent of adding 25,000 troops. Churchill showed an impressive amount of physical courage. They were in it. They believed in it. Status implied you took physical risks. Note that in traditional societies, even those who fail, but have taken risks, have a higher status than those who are not exposed. Now again, the idiocy of predictive systems making me emotional. We may have more social justice today than before the Enlightenment, but we also have more, a lot more, transfers of optionality, more than ever, a patent setback. Let me explain. This knowledge-knowledge business necessarily means shifting to talk. Talk by academics, consultants, and journalists, when it comes to predictions, can be just talk, devoid of embodiment and stripped of true evidence. As in anything with words, it is not the victory of the most correct, but that of the most charming, or the one who can produce the most academic-sounding material. We mentioned earlier how the political philosopher, Raymond Aron, sounded uninteresting in spite of his predictive abilities, while those who were wrong about Stalinism survived beautifully. Aron was about as colorless as they come. In spite of his prophetic insights, he looked, wrote, and lived like a tax accountant, while his enemy, say, Jean-Paul Sartre, who led a flamboyant lifestyle, got just about everything wrong, and even put up with the occupying Germans in an extremely cowardly manner. Sartre, the coward, looked radiant, impressive, and alas, his book survived. Please stop calling him a Voltaire. He was no Voltaire. I got nauseous in Davos, making eye contact with the fragilista journalist Thomas Friedman, who, thanks to his influential newspaper op-eds, helped cause the Iraq War. He paid no price for the mistake. The real reason for my malaise was perhaps not just that I saw someone I consider vile and harmful. I just get disturbed when I see wrong and do nothing about it. It is biological. It is guilt for Ball's sake, and guilt is what I do not have to put up with. There is another central element of ancient Mediterranean ethics, factum tecendo cremend facius acrius. For Publius Cyrus, he who does not stop a crime is an accomplice. I've stated my own version of this in the prologue, which needs to be reiterated. If you see fraud and don't say fraud, you are a fraud. Thomas Friedman was a bit responsible for the Iraq invasion of 2003, and not only paid no penalty for it, but continues to write for the op-ed page of the New York Times, confusing innocent people. He got and kept the upside. Others get the downside. A writer with arguments can harm more people than any serial criminal. I am singling him out here because, at the core, the problem is his promotion of the misunderstanding of iatrogenics in complex systems. He promoted the earth-is-flat idea of globalization without realizing that globalization brings fragilities, causes more extreme events as a side effect, and requires a great deal of redundancies to operate properly. And the very same error holds with the Iraq invasion. In such a complex system, the predictability of the consequences is very low, so invading was epistemologically irresponsible. Natural and ancestral systems work by penalties, no perpetual free option given to anyone. So does society in many things, with visible effects. If someone drives a school bus blindfolded and has an accident, he either exits the gene pool the old-fashioned way, or, if for some reason he is not harmed by the accident, he will incur enough penalties to be prevented from driving other people ever again. The problem is that the journalist Thomas Friedman is still driving the bus. There is no penalty for opinion makers who harm society, and this is a very bad practice. The Obama administration was, after the crisis of 2008, populated with people who drove the bus blindfolded. The iatrogenists got promoted. Postdicting. Words are dangerous. Postdictors who explain things after the fact, because they are in the business of talking, always look smarter than predictors. Because of the retrospective distortion, people who of course did not see an event coming will remember some thought to the effects that they did, and will manage to convince themselves that they predicted it before proceeding to convince others. There will be, after every event, many more postdictors than true predictors, people who had an idea in the shower without taking it to its logical conclusion, and, given that many people take a lot of showers, say, nearly twice a day, if you include the gym or the episode with the mistress, they will have a large repertoire to draw from. They will not remember the numerous bath-generated ideas they had in the past that were either noise, or that contradicted the observed present, but as humans crave self-consistency, they will retain those elements of what they thought in the past that cohere with their perception of the present. So opinion-makers who are so proudly and professionally providing idle babble will eventually appear to win an argument, since they are the ones writing, and suckers who got in trouble from reading them will again look to them for future guidance, and will again get in trouble. The past is fluid, marred with selection biases, and constantly revised memories. It is a central property of suckers that they will never know they were the suckers, because that's how our minds work. Even so, one is struck with the following fact. The fragilista crisis that started in 2007-2008 had many, many fewer near-predictors than random. The asymmetry, antifragility of postdictors. Fragilistas can cherry-pick and produce instances in which their opinions played out, and discard mispredictions into the bowels of history. It is like a free option to them. We pay for it. Since they have the option, the fragilistas are personally antifragile. Volatility tends to benefit them. The more volatility, the higher the illusion of intelligence. But evidence of whether one has been a sucker or a non-sucker is easy to ferret out by looking at actual records, actions. Actions are symmetric, do not allow cherry-picking, remove the free option. When you look at the actual history of someone's activities, instead of what thoughts he will deliver after the facts, things become crystal clear. The option is gone. Reality removes the uncertainty, the imprecision, the vagueness, the self-serving mental biases that make us appear more intelligent. Checks are costly, no longer free, but being right brings actual rewards. Of course, there are other checks one can do to assess the bullshit component of life. Investigate people's decisions as expressed through their own investments. You would discover that many people who claim to have foreseen the collapse of the financial system had financial companies in their portfolios. Indeed, there was no need to profit from events like Tony and Nero to show non-suckerness. Just avoiding being hurt by them would have been sufficient. I want predictors to have visible scars on their body from prediction errors, not distribute these errors to society. You cannot sit and moan about the world. You need to come out on top. So Tony was right to insist that Nero take a ritual look at the physical embodiment of the spoils, like a bank account statement. As we said, it had nothing to do with financial value, nor purchasing power, just symbolic value. We saw in chapter 9 how Julius Caesar needed to incur the cost of having Vrsingotaurus brought to Rome and paraded. An intangible victory has no value. Verbo volent, words fly. Never have people who talk and don't do been more visible and played a larger role than in modern times. This is the product of modernism and division of tasks. Recall that I said that America's strength was risk-taking and harboring risk-takers, the right kind, the Thalesian king of high-failure-long-optionality type. Sorry, but we have been moving away from this model. The Stiglit Syndrome There is something more severe than the problem with Thomas Friedman, which can be generalized to represent someone causing action while being completely unaccountable for his words. The phenomenon I will call the Stiglit Syndrome, after an academic economist of the so-called intelligent variety called Joseph Stiglit, is as follows. Remember the fragility detection in chapter 19 and my obsession with Fannie Mae? Luckily, I had some skin in the game for my opinions, be it through exposure to a smear campaign. And in 2008, no surprise, Fannie Mae went bust, I repeat, costing the U.S. taxpayer hundreds of billions and counting. Generally, the financial system, with similar risks, exploded. The entire banking system had similar exposures. But around the same period, Joseph Stiglit, with two colleagues, the Orsag brothers, Peter and Jonathan, looked at the very same Fannie Mae. They asserted in a report that, on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero. GSE is Fannie Mae and Freddie Mac. They both blew up. Supposedly they ran simulations, but didn't see the obvious. They also said that the probability of a default was found to be so small that it is difficult to detect. It is statements like these, and to me, only statements like these, intellectual hubris and the illusion of understanding of rare events that cause the buildup of these exposures to rare events in the economy. This is the black swan problem that I was fighting. This is Fukushima. Now the culmination is that Stiglit writes in 2010, in his I Told You So book, that he claims to have predicted the crisis that started in 2007-2008. Look at this aberrant case of anti-fragility provided to Stiglit and his colleagues by society. It turns out that Stiglit was not just a non-predictor, by my standards, but was also part of the problem that caused the events, these accumulations of exposures to small probabilities. But he did not notice it. An academic is not designed to remember his opinions because he doesn't have anything at risk from them. At the core, people are dangerous when they have that strange skill that allows their papers to be published in journals, but decreases their understanding of risk. So the very same economist who caused the problem then postdicted the crisis, and then became a theorist on what happened. No wonder we will have larger crises. The central point. Had Stiglit been a businessman with his own money on the line, he would have blown up, terminated. Or had he been in nature, his genes would have been made extinct, so people with such misunderstanding of probability would eventually disappear from our DNA. What I found nauseating was the government hiring one of his co-authors. I find it truly disgusting that one of the Orszag brothers, Peter, after the crisis got a job with the Obama administration, another rehiring of blindfolded bus drivers. Then he became vice chairman of Citibank, which explains why Citibank will blow up again, and we taxpayers will end up subsidizing his high salary. I am reluctantly calling the syndrome by Stiglit's name because I find him the smartest of economists, one with the most developed intellect for things, on paper, except that he has no clue about the fragility of systems. And Stiglit symbolizes harmful misunderstanding of small probabilities by the economics establishment. It is a severe disease, one that explains why economists will blow us up again. The Stiglit syndrome corresponds to a form of cherry picking, the nastiest variety because the perpetrator is not aware of what he is doing. It is a situation in which someone doesn't just fail to detect a hazard, but contributes to its cause while ending up convincing himself, and sometimes others, of the opposite, namely that he predicted it and warned against it. It corresponds to a combination of remarkable analytical skills, blindness to fragility, selective memory, and absence of skin in the game. Stiglit syndrome equals fragilista, with good intentions, plus ex post cherry picking. There are other lessons here related to the absence of penalty. This is an illustration of the academics-who-write-papers-and-talk syndrome in its greatest severity, unless, as we will see, they have their soul in it. So many academics propose something in one paper, then the opposite in another paper, without penalty to themselves from having been wrong in the first paper, since there is a need only for consistency within a single paper, not across one's career. This would be fine, as someone may evolve and contradict earlier beliefs, but then the earlier results should be withdrawn from circulation and superseded with a new one, with books, the new edition supersedes the preceding one. This absence of penalty makes them anti-fragile at the expense of the society that accepts the rigor of their results. Further, I am not doubting Stiglitz's sincerity, or some weak form of sincerity. I believe he genuinely thinks he predicted the financial crisis. So let me rephrase the problem. The problem with people who do not incur harm is that they can cherry pick from statements they've made in the past, many of them contradictory, and end up convincing themselves of their intellectual lucidity on the way to the World Economic Forum at Davos. There is the iatrogenics of the medical charlatan and snake oil salesperson causing harm, but he sort of knows it and lies low after he is caught. And there is the far more vicious form of iatrogenics by experts, who use their more acceptable status to claim later that they warned of harm. As these did not know they were causing iatrogenics, they cure iatrogenics with iatrogenics. Then things explode. Finally, the cure to many ethical problems maps to the exact cure for the Stiglitz effect, which I state now. Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have, or don't have, in their portfolio. We now know that many innocent retirees have been harmed by the incompetence of the rating agencies. It was a bit more than incompetence. Many subprime loans were toxic waste dressed as AAA, meaning near government grade in safety. People were innocently led into putting their savings into them. And further, regulators were forcing portfolio managers to use the assessment of the rating agencies. But rating agencies are protected. They present themselves as press without the noble mission of the press to expose frauds. And they benefit from the protection of free speech, the First Amendment so ingrained in American habits. My humble proposal? One should say whatever he wants, but one's portfolio needs to line up with it. And of course, regulators should not be fragilistas by giving their stamp to predictive approaches, hence junk science. The psychologist Gerd Gigerenzer has a simple heuristic. Never ask the doctor what you should do. Ask him what he would do if he were in your place. You would be surprised at the difference. The problem of frequency, or how to lose arguments. Recall that Fat Tony was in favor of just making a buck as opposed to being proven right. The point has a statistical dimension. Let us return to the distinction between Thalassian and Aristotelian for a minute and look at evolution from the following point of view. The frequency, that is, how often someone is right, is largely irrelevant in the real world. But alas, one needs to be a practitioner, not a talker, to figure it out. On paper, the frequency of being right matters, but only on paper. Typically fragile payoffs have little, sometimes no, upside. And anti-fragile payoffs have little downside. This means that one makes pennies to lose dollars in the fragile case, makes dollars to lose pennies in the anti-fragile one. So the anti-fragile can lose for a long time with impunity, so long as he happens to be right once. For the fragile, a single loss can be terminal. 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 anti-fragile. 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 feckles like failies because betting against the fragile is anti-fragile. 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 a 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 of 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, non-suckers try to make the buck, or suckers try to win arguments, non-suckers try to win. To put it again in other words, it is rather a good thing to lose arguments. The right decision for the wrong reason. 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, talk, 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. My suggestion to deter too big to fail and prevent employers from taking advantage of the public is as follows. A company that is classified as potentially bailable out should it fail, should not be able to pay anyone more than a corresponding civil servant, otherwise people should be free to pay each other what they want, since it does not affect the taxpayer. Such limitation would force companies to stay small enough that they would not be considered for a bailout in the event of their failure. We mentioned earlier Karl Popper's ideas on evolutionary epistemology. Without 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 Thalassian 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. The ancients and the Stiglitz syndrome. 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 Orzog 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 soldier's 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, ten 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 ten percent to death would lead to weakening of the army. Too little and cowardice would be a dominant strategy. 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 Bing was court-martialed and sentenced to death as he was found guilty of failing to do his utmost to prevent Menorca from falling to the French following the Battle of Menorca in 1757. To burn one's vessels. Playing on one's inner agency problem can go beyond symmetry. Give soldiers no options and see how anti-fragile they can get. On April 29th, 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 Cortes in Mexico 800 years later to Agathocles of Syracuse 800 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 enemies back to the wall. How Poetry Can Kill You Ask a polyglot who knows Arabic who he considers the best poet in any language, and odds are that he would answer al-Mutanebi, 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 al-Mutanebi 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, al-Mutanebi was that rare case of a poet with skin in the game, dying for his poetry. For in the same egotistical poem, al-Mutanebi 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 knight, 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 al-Mutanebi 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 knight, back at him. He turned around and confronted the tribe to his certain death. Thus, al-Mutanebi 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 PROBLEM OF INSULATION 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 and go party with his friends in Edinburgh, though his idea of partying was rather too Edinburgh. The philosopher Miles Bernier 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 Bernier, the philosopher insulates his ordinary first-order judgment from the effects of his philosophizing. Sorry, Professor Dr. Bernier, 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 Riksbank 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 blow-ups. Well, Dr. Professor Fragilista Markowitz does not use his method for his own portfolio. He has recourse to more sophisticated, and simpler to implement, cab drivers methodologies, closer to the one Mondelbrot 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 Trifat-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. Champagne Socialism Another blatant case of insulation. Sometimes the divorce between one's talk 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, the 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 Francois Mitterrand of France, who, coming in on a socialist platform, emulated the pomp of French monarchs. Even more ironic, his traditional arch-enemy, the conservative General de Gaulle, led a life of old-style austerity and had his wife sew his socks. I have witnessed even worse. A former client of mine, a rich fellow with what appeared to be a social mission, tried to pressure me to write a check to a candidate in an election on a platform of higher taxes. I resisted on ethical grounds. But I thought that the fellow was heroic, for, should the candidate win, his own taxes would increase by a considerable amount. A year later, I discovered that the client was being investigated for his involvement in a very large scheme to be shielded from taxes. He wanted to be sure that others paid more taxes. I developed a friendship over the past few years with the activist Ralph Nader and saw contrasting attributes. Aside from an astonishing amount of personal courage and total indifference toward smear campaigns, he exhibits absolutely no divorce between what he preaches and his lifestyle. None. Just like saints who have soul in their game. The man is a secular saint. Soul in the Game There is a class of people who escape bureaucrato-journalistic talk. Those who have more than their skin in the game. They have their soul in the game. Consider prophets. Prophecy is a pledge of belief, little else. A prophet is not someone who first had an idea. He is the one to first believe in it and take it to its conclusion. Chapter 20 discussed prophecy, when done right, as subtraction and detection of fragility. But if having skin in the game and accepting downside is what distinguishes a genuine thinker from ex-post talk, there is one step beyond needed to reach the rank of prophet. It is a matter of commitment, or what philosophers call doxastic commitment, a type of belief pledged that the factonian Nero needed to be translated into deeds, the reverse Stiglitz. Doxa in Greek used to mean belief, but distinguished from knowledge, episteme. To see how it involves a commitment of sorts beyond just words, consider that in church Greek it took the meaning of glorification. Incidentally, this notion applies to all manner of ideas and theories. The main person behind a theory, the person to be called the originator, is someone who believed in it in a doxastic way, with a costly commitment to take it to its natural conclusion, and not necessarily the first person to mention it over dessert wine or in a footnote. Only he who has true beliefs will avoid eventually contradicting himself and falling into the errors of post-dicting. Options, antifragility, and social fairness. The stock market, the greatest industrial-sized transfer of antifragility in history due to a vicious form of asymmetric skin in the game. I am not talking about investment here, but the current system of packaging investments into shares of public corporations, with managers allowed to game the system, and of course getting more prestige than the real risk-takers, the entrepreneurs. A blatant manifestation of the agency problem is the following. There is a difference between a manager running a company that is not his own, and an owner-operated business in which the manager does not need to report numbers to anyone but himself, and for which he has a downside. Corporate managers have incentives without disincentives, something the general public doesn't quite get, as they have the illusion that managers are properly incentivized. Somehow these managers have been given free options by innocent savers and investors. I am concerned here with managers of businesses that are not owner-operated. As I am writing these lines, the United States stock market has cost retirees more than $3 trillion in losses over the past dozen years, compared to leaving money in government money market funds. I am being generous, the difference is even higher. While managers of the companies composing the stock market, thanks to the asymmetry of the stock option, are richer by close to $400 billion. They pull the failies on these poor savers. Even more outrageous is the fate of the banking industry. Banks have lost more than they ever made in their history, with their managers being paid billions in compensation. Managers take the downside, bankers get the upside. And the policies aiming at correcting the problem are hurting innocent people, while bankers are sipping the rosé de Provence brand of summer wine on their yachts in Saint-Tropez. The asymmetry is visibly present. Volatility benefits managers, since they only get one side of the payoffs. The main point, alas missed by almost everyone, is that they stand to gain from volatility. The more variations, the more value to this asymmetry, hence they are anti-fragile. To see how transfer of anti-fragility works, consider two scenarios in which the market does the same thing on average, but following different paths. Path 1, market goes up 50% then goes back down to erase all gains. Path 2, market does not move at all. Visibly, path 1, the more volatile, is more profitable to the managers, who can cash in their stock options, so the more jagged the route, the better it is for them. And of course society, here the retirees, has the exact opposite payoff, since they finance bankers and chief executives. Retirees get less upside than downside. Society pays for the losses of the bankers, but gets no bonuses from them. If you don't see this transfer of anti-fragility as theft, you certainly have a problem. What is worse, this system is called incentive-based and supposed to correspond to capitalism. Supposedly, managers' interests are aligned with those of the shareholders. What incentive? There is upside and no downside. No disincentive at all. The Robert Rubin free option. Robert Rubin, former treasury secretary, earned $120 million from Citibank in bonuses over about a decade. The risks taken by the institution were hidden, but the numbers looked good, until they didn't look good, upon the turkey's surprise. Citibank collapsed, but he kept his money. We taxpayers had to compensate him retrospectively, since the government took over the bank's losses and helped them stand on their feet. This type of payoff is very common. Thousands of other executives had it. This is the same story as the one of the architect hiding risks in the basement for delayed collapse and cashing big checks while protected by the complexities of the legal system. Some people suggest enforcing a clawback provision as a remedy, which consists of making people repay past bonuses in cases of subsequent failure. It would be done as follows. Managers cannot cash their bonuses immediately. They can only do so three or five years later if there are no losses. But this does not solve the problem. The managers still have a net upside and no net downside. At no point is their own net worth endangered. So the system still contains a high degree of optionality and transfer of fragility. The same applies to the funds manager involved in managing a pension fund. He too has no downside. But bankers used to be subjected to Hammurabi's rule. The tradition in Catalonia was to behead bankers in front of their own banks. Bankers tended to skip town before failure was apparent. But that was the fate of at least one banker, Francesco Castello in 1360. In modern times, only the mafia executes these types of strategies to remove the free option. In 1980, the Vatican banker Roberto Calvi, the chief executive of Banco Ambrosiano that went bust, ran to take refuge in London. There he supposedly committed suicide, as if Italy was no longer a good place for acts of drama such as taking one's own life. It was recently discovered that it was not quite suicide. The mafia killed him for losing their money. The same fate befell the Las Vegas pioneer Bugsy Siegel, who ran an unprofitable casino in which the mafia had investments. And in some countries such as Brazil, even today, top bankers are made unconditionally liable to the extent of their own assets. Which Adam Smith? Many right-wingers in love with large corporations keep citing Adam Smith, famous patron saint of capitalism, a word he never uttered, without reading him, using his ideas in a self-serving selective manner, ideas that he most certainly did not endorse in the form they are presented. 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 others 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. In book four of The Wealth of Nations, Smith was extremely cherry of the idea of giving someone upside without downside, and had doubts about the limited liability of joint stock companies, the ancestor of the modern limited liability corporation. He did not get the idea of transfer of anti-fragility, but he came close enough, and he detected, the problem that comes with managing other people's business, the lack of a pilot on the plane. The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private co-partnery frequently watch over their own. Further, Smith is even suspicious of their economic performance, as he writes. Joint stock companies for foreign trade have seldom been able to maintain the competition against private adventurers. Let me make the point clearer. The version of capitalism, or whatever economic system you need to have, is with the minimum number of people in the left column of the triad. Nobody realizes that the central problem of the Soviet system was that it put everyone in charge of economic life in that nasty, fragilizing left column. The anti-fragility and ethics of large corporations. Have you noticed that while corporations sell you junk drinks, artisans sell you cheese and wine? And there is a transfer of anti-fragility from the small in favor of the large, until the large goes bust. The problem of the commercial world is that it only works by addition, via positiva, not subtraction, via negativa. Pharmaceutical companies don't gain if you avoid sugar. The manufacturer of health club machines doesn't benefit from your deciding to lift stones and walk on rocks without a cell phone. Your stockbroker doesn't gain from your decision to limit your investments to what you see with your own eyes, say your cousin's restaurant or an apartment building in your neighborhood. All these firms have to produce growth in revenues to satisfy the metric of some slow-thinking or, at best, semi-slow-thinking NBA analyst sitting in New York. Of course, they will eventually self-destruct, but that's another conversation. Now consider companies like Coke or Pepsi, which I assume are, as the listener is pouring over these words, still in existence, which is unfortunate. What business are they in? Selling you sugary water or substitutes for sugar, putting into your body stuff that messes up your biological signaling system, causing diabetes and making diabetes vendors rich thanks to their compensatory drugs. Large corporations certainly can't make money selling you tap water and cannot produce wine. Wine seems to be the best argument in favor of the artisanal economy. But they dress their products up with a huge marketing apparatus, with images that fool the drinker and slogans such as 125 years of providing happiness or some such. I fail to see why the arguments we've used against tobacco firms don't apply, to some extent, to all other large companies that try to sell us things that may make us ill. The historian Neil Ferguson and I once debated the chairperson of Pepsi-Cola as part of an event at the New York Public Library. It was a great lesson in anti-fragility, as neither Neil nor I cared about who she was. I did not even bother to know her name. Authors are anti-fragile. Both of us came totally unprepared, not even a single piece of paper, and she showed up with a staff of aides who, judging from their thick files, had probably studied us down to our shoe sizes. I saw in the speaker's lounge an aide perusing a document with an ugly picture of yours truly in my pre-bone obsession, pre-weightlifting days. We could say anything we wanted with total impunity, and she had to hew to her party line, lest the security analysts issue a bad report that would cause a drop of $2.30 in the stock price before the year-end bonus. In addition, my experience of company executives, as evidenced by their appetite for spending thousands of hours in dull meetings or reading bad memos, is that they cannot possibly be remarkably bright. They are no entrepreneurs, just actors, slick actors. Business schools are more like acting schools. Someone intelligent or free would likely implode under such a regimen. So Neil immediately detected her weak point and went straight for the jugular. Her slogan was that she contributed to employment by having 600,000 persons on her staff. He immediately exposed her propaganda with the counter-argument, actually developed by Marx and Engels, that large bureaucratic corporations seize control of the state just by being a big employer and can then extract benefits at the expense of small businesses. So a company that employs 600,000 persons is allowed to wreck the health of citizens with impunity and to benefit from the implied protection of bailouts, just like American car companies, whereas artisans like hairdressers and cobblers do not get such immunity. A rule then hit me. With the exception of, say, drug dealers, small companies and artisans tend to sell us healthy products, ones that seem naturally and spontaneously needed. Larger ones, including pharmaceutical giants, are likely to be in the business of producing wholesale iatrogenics, taking our money and then, to add insult to injury, hijacking the state thanks to their army of lobbyists. Further, anything that requires marketing appears to carry such side effects. You certainly need an advertising apparatus to convince people that Coke brings them happiness. And it works. There are, of course, exceptions. Corporations with the soul of artisans, some with even the soul of artists. Rohan Silva once remarked that Steve Jobs wanted the inside of the Apple products to look aesthetically appealing, although they are designed to remain unseen by the customer. This is something only a true artisan would do. Carpenters with personal pride feel fake when treating the inside of cabinets differently from the outside. Again, this is a form of redundancy, one with an aesthetic and ethical payoff. But Steve Jobs was one of the rare exceptions in the highly talked-about, completely misunderstood, said-to-be-efficient corporate global economy. Artisans, marketing, and the cheapest to deliver. Another attribute of the artisanal. There is no product that I particularly like that I have discovered through advertising and marketing. Cheeses, wine, meats, eggs, tomatoes, basil leaves, apples, restaurants, barbers, art, books, hotels, shoes, shirts, eyeglasses, pants, my father and I have used three generations of Armenian tailors in Beirut, olives, olive oil, etc. The same applies to cities, museums, art, novels, music, painting, sculpture. I had at some point an obsession with ancient artifacts and Roman heads. These may have been marketed in some sense by making people aware of their existence, but this isn't how I came to use them. Word of mouth is a potent naturalistic filter. Actually the only filter. 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 can still be called a book. This is optimization at work in maximizing image and packaging or minimizing costs and efforts. I said about marketing by soft drink companies that it is meant to maximally confuse the drinker. Marketing one needs to market heavily is necessarily either an inferior product or an evil one and it is highly unethical to portray something in a more favorable light than it actually is. One may make others aware of the existence of a product, say a new belly dancing belt, but I wonder why people don't realize that by definition what is being marketed is necessarily inferior otherwise it would not be advertised. Marketing is bad manners and I rely on my naturalistic and ecological instincts. Say you run into a person during a boat cruise. What would you do if he started boasting of his accomplishments telling you how great, rich, tall, impressive, skilled, famous, muscular, well-educated, efficient and good in bed he is plus other attributes? You would certainly run away or put him in contact with another talkative bore to get rid of both of them. It is clearly much better if others, preferably someone other than his mother, are the ones saying good things about him and it would be nice if he acted with some personal humility. Actually this is not at all far-fetched. As I was writing this book I overheard on a British air flight a gentleman explain to the flight attendant less than two seconds into the conversation, meant to be about whether he liked cream and sugar in his coffee, that he won the Nobel Prize in Medicine and Physiology in addition to being the president of a famous monarchical academy. The flight attendant did not know what the Nobel was but was polite so he kept repeating the Nobel Prize, hoping that she would wake up from her ignorance. I turned around and recognized him and the character suddenly deflated. As the saying goes, it is hardest to be a great man to one's chambermaid and marketing beyond conveying information is insecurity. We accept that people who boast are boastful and turn people off. How about companies? Why aren't we turned off by companies that advertise how great they are? We have three layers of violations. First layer, a mild violation. Companies are shamelessly self-promotional, like the man on the British air flight, and it only harms them. Second layer, the more serious violation. Companies try to represent themselves in the most favorable light possible, hiding the defects of their products, still harmless as we tend to expect it and rely on the opinion of users. Third layer, the even more serious violation. Companies are trying to misrepresent the product they sell by playing with our cognitive biases, our unconscious associations, and that's sneaky. The latter is done by, say, showing a poetic picture of a sunset with a cowboy smoking and forcing an association between great romantic moments and some given product that, logically, has no possible connection to it. You seek a romantic moment and what you get is cancer. It seems that the corporate system pushes companies progressively into the third layer. At the core of the problem with capitalism, again, please do not invoke Adam Smith, lies the problem of units that are different from individuals. A corporation does not have natural ethics. It just obeys the balance sheet. The problem is that its sole mission is the satisfaction of some metric imposed by security analysts themselves very prone to charlatanism. A publicly listed corporation does not feel shame. We humans are restrained by some physical natural inhibition. A corporation does not feel pity. A corporation does not have a sense of honor, while, alas, marketing documents mention pride. A corporation does not have generosity. Only self-serving actions are acceptable. Just imagine what would happen to a corporation that decided to unilaterally cancel its receivables just to be nice. Yet societies function thanks to random acts of generosity between people, even sometimes strangers. All of these defects are the result of the absence of skin in the game, cultural or biological, an asymmetry that harms others for their benefit. Now, such systems should tend to implode, and they do. As they say, you can't fool too many people for too long a period of time. But the problem of implosion is that it does not matter to the managers. Because of the agency problem, their allegiance is to their own personal cash flow. They will not be harmed by subsequent failures. They will keep their bonuses, as there is currently no such thing as negative manager compensation. In sum, corporations are so fragile long-term that they eventually collapse under the weight of the agency problem, while managers milk them for bonuses and ditch the bones to taxpayers. They would collapse sooner if not for the lobby machines. They start hijacking the state to help them inject sugary drinks into your esophagus. In the United States, large corporations control some members of Congress. All this does is delay the corporation's funeral at our expense. There seems to be a survival advantage to small or medium-sized, owner-operated or family-owned companies. Lawrence of Arabia or Meyer Lansky? Finally, if you ever have to choose between a mobster's promise and a civil servant's, go with the mobster, anytime. Institutions do not have a sense of honor. Individuals do. During the Great War, T. E. Lawrence, nicknamed Lawrence of Arabia, struck a deal with the Arab Desert Tribes to help the British against the Ottoman Empire. His promise? In return, to deliver to them the tribes and Arab state. As they did not know better, they made good on their side of the bargain. But it turned out the French and British government had made a secret agreement, the Sykes-Picot Agreement, to divide the area in question between themselves. After the war, Lawrence went back to live in the UK, supposedly in a state of frustration, but of course, not much more. But he left us with a good lesson. Never trust the words of a man who is not free. Now, on the other hand, a mobster's greatest asset is that his word is gold. It was said that a handshake from the famous mobster, Meyer Lansky, was worth more than the strongest contracts that a battery of lawyers could put together. In fact, he held in his mind the assets and liabilities of the Sicilian Mafia, and was their bank account, without a single record. Just his honor. As a trader, I never trusted transactions with representatives of institutions. Fit traders are bound by their bonds, and I've never known a single self-employed trader over a two-decade-long career who did not live up to his handshake. Only a sense of honor can lead to commerce. Any commerce. Next. We saw how, thanks to the misunderstanding of anti-fragility and asymmetry or convexity, some classes of people use hidden options and harm the collective without anyone realizing. We also saw the solution in forcing skin in the game. Next we will look at another form of optionality, how people can cherry pick ethical rules to fit their actions, or how they use public office as a means to satisfy personal greed. Chapter 24. Ethical Inversion. The collective can be wrong while individuals know it. How people are trapped into an opinion and how to set them free. Fitting ethics to a profession. How the slaves can snatch control, squeezing the sissies. The tantalized class, permanently tantalized. At no time in the history of mankind has the following situation been seen in such an acute form. Say Mr. John Smith, Jr., J.D., is employed as lobbyist for the tobacco industry in Washington, D.C., which, as we all know, is engaged in the business of killing people for profit. We saw with the powers of subtraction that if we stopped the industry from existing by, say, banning cigarettes, then everything else done by medicine becomes a footnote. Ask any of his relatives or friends why they can tolerate it and don't just ostracize him or harass him to tears, avoid him at the next family funeral. The answer is likely to be, everyone needs to make a living, as they are hedging the possibility of their falling into the same situation someday. We need to test the direction of the arrow, using the same logic as in our discussion of lecturing birds on flying. Ethics and beliefs lead to profession or profession leads to ethics and beliefs. Prior to Fat Tony's debate with Socrates, Nero was curious about the first minute of encounter since there is a gap of about twenty-five centuries. It is not a simple matter to identify the elements of our physical environment that would surprise Socrates the most. Questioned on the point by Fat Tony, who had some grudging respect for Nero's knowledge of history, Nero's speculative reply was, it would most certainly be the absence of slaves. These people never did small domestic things themselves, so imagine Socrates' sorry figure of a bulging belly, spindly legs, wondering, Opuoi douloi! But Nero Tulip, there are still slaves around, Fat Tony blurted out. They often distinguish themselves by wearing this intricate device called a necktie. Nero, Signore Ingenieri Tony, some of these tie-wearers are very rich, even richer than you. Tony, Nero, you sucker, don't be fooled by money. These are just numbers. Being self-owned is a state of mind. Wealth without independence. There is a phenomenon called the treadmill effect, similar to what we saw with neomania. You need to make more and more to stay in the same place. Greed is anti-fragile, though not its victims. Back to the sucker problem in believing that wealth makes people more independent. We need no more evidence for it than what is taking place now. Recall that we have never been richer in the history of mankind, and we have never been more in debt. For the ancients, someone in debt was not free, he was in bondage. So much for economic growth. At the local level, it looks like we get socialized in a certain milieu, hence exposed to a treadmill. You do better, move to Greenwich, Connecticut, then become a pauper next to a twenty million dollar mansion and million dollar birthday parties. And you become more and more dependent on your job, particularly as your neighbors get big tax-sponsored Wall Street bonuses. This class of persons is like Tantalus, who was subjected to an eternal punishment. He stood in a pool of water underneath a fruit tree, and whenever he tried to grab the fruit, it moved away, and whenever he tried to drink, the water receded. And such a permanently tantalized class is a modern condition. The Romans circumvented these social treadmill effects. Much of social life took place between a patron and his less fortunate clients, who benefited from his largesse and ate at his table, and relied on his assistance in times of trouble. There was no welfare at the time, and no church to distribute or recommend charity. Everything was private. Seneca's book De Beneficis, I mentioned earlier, was exactly about which obligations one had in such situations. There was little exposure to the other wealthy biggies, just as mafiadons don't socialize with other mafiadons, but with their constituents. To a large extent, that's how my grandfather and great-grandfather lived, as they were local landowners and politicians. Power was accompanied by a coterie of dependents. Provincial landowners were required to maintain an occasional open house, with an open table for people to come help themselves to the fruits of the wealth. Public life, on the other hand, leads to corruption. The nobleman comes from the provinces, where he is now brought down to size. He faces more flamboyant, wittier persons, and feels pressure to prop up his self-esteem. People who would have lost their status in the cities can serve it in the provinces. You cannot possibly trust someone on a treadmill. The Professionals and the Collective It is a fact that one can rapidly, after a phase of indoctrination, become enslaved to a profession, to the point of having one's opinions on any subject become self-serving, hence unreliable for the collective. This is the bone that Greeks had to pick with professionals. One of my first jobs was for a Wall Street firm. After a few months of employment, the managing director called us up and told us that we needed to contribute to a few politicians' campaigns with a recommended payment of a certain proportion of our income. These politicians were said to be good. By good was meant good for their business of investment banking, as these politicians would help with legislation that would protect their business. Had I done that, I would no longer have been eligible ethically to voice a political opinion, for the sake of the public. In a story well argued throughout the centuries, Demades the Athenian condemned a man who traded in funeral goods on the grounds that he could only derive profits by the death of the great many people. Montaigne, rephrasing the argument made by Seneca in his De Beneficis, argued that we would then be obligated to condemn every single professional. According to him, the merchant only thrives by the debauchery of youth, the farmer by the dearness of grain, the architect by the ruin of buildings, lawyers and officers of justice by the suits and contentions of men. A physician takes no pleasure in the health of even his friends, a soldier does not wish for the peace of his country, etc. And even worse, should we go into people's inner and private thoughts and motivations, we would see that their wishes and hopes are almost invariably at someone else's expense. But Montaigne and Seneca were a bit too indulgent toward self-interest and missed something quite central. They clearly got the point that economic life does not necessarily depend on altruistic motives, and that the aggregate works differently from the individual. Remarkably, Seneca was born about eighteen centuries before Adam Smith, and Montaigne about three, so we should be quite impressed with their thinking while retaining a certain abhorrence of the fundamental dishonesty of men. We have known since Adam Smith that the collective does not require the benevolence of individuals, as self-interest can be the driver of growth. But all this does not make people less unreliable in their personal opinions about the collective, for they are involving the skin of others, so to speak. What Montaigne and Seneca missed, in addition to the notion of skin in the game, was that one can draw the line with public affairs. They missed the agency problem, although the problem was known heuristically, Hammurabi, golden rules. It was not part of their consciousness. The point isn't that making a living in a profession is inherently bad, rather it's that such a person becomes automatically suspect when dealing with public affairs, matters that involve others. The definition of the free man, according to Aristotle, is one who is free with his opinions, as a side effect of being free with his time. Freedom in this sense is only a matter of sincerity and political opinions. The Greeks saw the world in three professions, the banasiketekne, the artisans, the craft of war, polemiketekni, and that of farming, georgia. The last two professions, war and farming, were worthy of a gentleman, mainly because they were not self-serving and were free of conflicts of interest with the collective. But the Athenians despised the banasoi, the artisans who worked for a living in dark rooms making objects, generally sitting down. For Xenophon, such crafts degraded the craftsman's bodily strength, softened his spirit, and left him no time for his friends and city. The illiberal arts confined one to the workshop and narrow one's interests to his own welfare. The crafts of war and farming give one a wider scope, so that he can attend to his friends and city. To Xenophon, farming is the mother and nurse of the other tekne. The ancients did not have corporations. If Xenophon were alive today, he would transfer his distrust from artisans to corporate employees. There are Arabic and Hebrew sayings, yad el hurmizan, yad ben hurin mos naim, the hand of the free is a scale. It is just that the definition of the free is not well understood. He is free who owns his own opinion. For Metternich, humanity started at the rank of barren. For Aristotle, as well as, though in a separate form, the English up until the twentieth century, it started at the rank of idle freeman, unpreoccupied with work. It never meant not working. It just meant not deriving your personal and emotional identity from your work, and viewing work as something optional, more like a hobby. In a way, your profession does not identify you so much as other attributes, here your birth, but it could be something else. This is the fuck you money that allowed Thales of Miletus to gauge his own sincerity. For the Spartans, it was all about courage. For Fat Tony, humanity started at the level of self-ownership. Now self-ownership for our horizontal friend was vastly more democratic than for his thinking predecessors. It simply meant being the owner of your opinion, and it has nothing to do with wealth, birth, intelligence, looks, shoe size, rather with personal courage. In other words, for Fat Tony, it was a very, very specific definition of a free person, someone who cannot be squeezed into doing something he would otherwise never do. Consider this leap in sophistication from Athens to Brooklyn. If for the Greeks, only he who is free with his time is free with his opinion, for our horizontal friend and advisor, only he who has courage is free with his opinion. Sissies are born, not made. They stay sissies no matter how much independence you give them, no matter how rich they get. Another facet of the difference between abstract modernistic nation-states and local government. In an antique city-state, or a modern municipality, shame is the penalty for the violation of ethics, making things more symmetric. Banishment and exile, or worse, ostracism, were severe penalties. People did not move around voluntarily and considered uprooting a horrible calamity. In larger organisms like the mega-holy nation-state, with a smaller role for face-to-face encounters and social roots, shame ceases to fulfill its duty of disciplinarian. We need to re-establish it. And aside from shame, there is friendship, socialization in a certain milieu, being part of a group of people that have diverging interests from the collective. Cleon, the hero of the Peloponnesian War, advocated the public renouncement of friends upon taking up public affairs. He paid for it with some revilement by historians. A simple solution, but quite drastic. Anyone who goes into public service should not be allowed to subsequently earn more from any commercial activity than the income of the highest-paid civil servant. It is like a voluntary cap. It would prevent people from using public office as a credential bill in temporary accommodation, and going to Wall Street to earn several million dollars. This would get priestly people into office. Just as Cleon was reviled, in the modern world there seems to be an inverse agency problem for those who do the right thing. You pay for your service to the public with smear campaigns and harassment. The activist and advocate Ralph Nader suffered numerous smear campaigns as the auto industry went after him. The ethical and the legal. I felt ashamed not having exposed the following scam for a long time. As I said, if you see fraud, let us call it the Alan Blinder problem. The story is as follows. At Davos, during a private coffee conversation that I thought aimed at saving the world from, among other things, moral hazard and agency problems, I was interrupted by Alan Blinder, a former vice chairman of the Federal Reserve Bank of the United States, who tried to sell me a peculiar investment product that aims at legally hoodwinking taxpayers. It allowed the high net worth investor to get around the regulations limiting deposit insurance, at the time $100,000, and benefit from coverage for near unlimited amounts. The investor would deposit funds in any amount, and Professor Blinder's company would break it up into smaller accounts and invest in banks, thus escaping the limit. It would look like a single account, but would be insured in full. In other words, it would allow the super rich to scam taxpayers by getting free government sponsored insurance. Yes, scam taxpayers, legally, with the help of former civil servants who have an insider edge. I blurted out, isn't this unethical? I was then told in response, it is perfectly legal. Adding the even more incriminating, we have plenty of former regulators on the staff. A, implying that what was legal was ethical, and B, asserting that former regulators have an edge over citizens. It took a long time, a couple of years, before I reacted to the event and did my public j'accuse. Alan Blinder is certainly not the worst violator of my sense of ethics. He probably irritated me because of the prominence of his previous public position, while the Davos conversation was meant to save the world from evil. I was presenting to him my idea of how bankers take risks at the expense of taxpayers. But what we have here is a model of how people use public office to, at some point, legally profit from the public. Tell me if you understand the problem in its full simplicity. Former regulators and public officials who were employed by the citizens to represent their best interests can use the expertise and contacts acquired on the job to benefit from glitches in the system upon joining private employment, law firms, etc. Think about it a bit further. The more complex the regulation, the more bureaucratic the network, the more a regulator who knows the loops and glitches would benefit from it later, as his regulator edge would be a convex function of his differential knowledge. This is a franchise, an asymmetry one has at the expense of others. Note that this franchise is spread across the economy. The car company Toyota hired former U.S. regulators and used their expertise to handle investigations of its car defects. Now stage two, things get worse. Blinder and the dean of Columbia University Business School wrote an op-ed opposing the government's raising the insurance limit on individuals. The article argued that the public should not have the unlimited insurance that Blinder's clients benefit from. A few remarks. First, the more complicated the regulation, the more prone to arbitrages by insiders. This is another argument in favor of heuristics. Twenty-three hundred pages of regulation, something I can replace with Hammurabi's rule, will be a goldmine for former regulators. The incentive of a regulator is to have complex regulation. Again, the insiders are the enemies of the less is more rule. Second, the difference between the letter and the spirit of regulation is harder to detect in a complex system. The point is technical, but complex environments with nonlinearities are easier to game than linear ones with a small number of variables. The same applies to the gap between the legal and the ethical. Third, in African countries, government officials get explicit bribes. In the United States, they have the implicit, never mentioned, promise to go work for a bank at a later date with a sign-a-cure offering, say five million dollars a year, if they are seen favorably by the industry. And the regulations of such activities are easily skirted. What upset me the most about the Allen-Blinder problem is the reactions by those with whom I discussed it. People found it natural that a former official would try to make money thanks to his former position at our expense. Don't people like to make money, goes the argument. Casuistry as optionality. You can always find an argument or an ethical reason to defend an opinion ex post. This is a dicey point, but, as with cherry picking, one should propose an ethical rule before an action, not after. You want to prevent fitting a narrative to what you are doing, and for a long time, casuistry, the art of arguing the nuances of decisions, was just that, fitting narratives. Let me first define a fraudulent opinion. It is simply one with vested interests generalized to the public good, in which, say, a hairdresser recommends haircuts for the health of people, or a gun lobbyist claims gun ownership is good for America, simply making statements that benefit him personally, while the statements are dressed up to look as if they were made for the benefit of the collective. In other words, is he in the left column of graphic seven in your PDF? Likewise, Allen-Blinder wrote that he opposed generalized deposit insurance, not because his company would lose business, but because of the public good. But the heuristic is easy to implement with a simple question. I was in Cyprus at a conference dinner in which another speaker, a Cypriot professor of petrochemical engineering in an American university, was ranting against the climate activist Lord Nicholas Stern. Stern was part of the conference, but absent from the dinner. The Cypriot was extremely animated. I had no idea what the issues were, but saw the notion of absence of evidence mixed with evidence of absence, and pounced on him in defense of Stern, whom I had never met. The petrochemical engineer was saying that we had no evidence that fossil fuels caused harm to the planet, turning his point semantically into something equivalent in decision-making to the statement that we had evidence that fossil fuels did not harm. He made the mistake of saying that Stern was recommending useless insurance, causing me to jump to ask him if he had car, health, and other insurance for events that did not take place, that sort of argument. I started bringing up the idea that we are doing something new to the planet, that the burden of evidence is on those who disturb natural systems, that Mother Nature knows more than he will ever know, not the other way around. But it was like talking to a defense lawyer, sophistry and absence of convergence to truth. Then a heuristic came to mind. I surreptitiously asked a host sitting next to me if the fellow had anything to gain from his argument. It turned out that he was deep into oil companies, as an advisor, an investor, and a consultant. I immediately lost interest in what he had to say and the energy to debate him in front of others. His words were nugatory, just babble. Note how this fits into the idea of skin in the game. If someone has an opinion, like, say, a banking system is fragile and should collapse, I want him invested in it so he is harmed if the audience for his opinion are harmed. As a token that he is not an empty suit. But when general statements about the collective welfare are made, instead, absence of investment is what is required, via negativa. I've just presented the mechanism of ethical optionality by which people fit their beliefs to actions rather than fit their actions to their beliefs. Table 8 compares professions with respect to such ethical backfitting. Table 8, comparing professions and activities. Invited to be an opportunist fits ethics to profession versus protected from playing the pseudo-ethics game. Gold digger versus prostitute. Networker versus social person. Compromises versus doesn't compromise. Someone here to help versus erudite, dilettante, amateur. Employment, professional in the classical period versus landowner in the classical period. Employee versus artisan. Academic at a research university, researcher depending on grants versus lens maker, philosophy teacher in a college or Lisey High School, independent scholar. There exists an inverse Allen-Blinder problem called evidence against one's interest. One should give more weight to witnesses and opinions when they present the opposite of a conflict of interest. A pharmacist or an executive of big pharma who advocates starvation and via negativa methods to cure diabetes would be more credible than another one who favors the ingestion of drugs. Big data and the researcher's option. Optionality is everywhere and here is a place to discuss a version of cherry picking that destroys the entire spirit of research and makes the abundance of data extremely harmful to knowledge. More data means more information, perhaps, but it also means more false information. We are discovering that fewer and fewer papers replicate. Textbooks in, say, psychology need to be revised. As to economics, forget about it. You can hardly trust many statistically oriented sciences, especially when the researcher is under pressure to publish for his career, yet the claim will be to advance knowledge. Recall the notion of epiphenomena as a distinction between real life and libraries. Someone looking at history from the vantage point of a library will necessarily find many more spurious relationships than one who sees matters in the making, in the usual sequences one observes in real life. He will be duped by more epiphenomena, one of which is the direct result of the excess of data as compared to real signals. We discussed the rise of noise in chapter 7. Here it becomes a worse problem because there is an optionality on the part of the researcher no different from that of a banker. The researcher gets the upside. Truth gets the downside. The researcher's free option is in his ability to pick whatever statistics can confirm his belief or show a good result and ditch the rest. He has the option to stop once he has the right result, but beyond that he can find statistical relationships. The spurious rises to the surface. There is a certain property of data. In large data sets, large deviations are vastly more attributable to noise or variance than to information or signal. It is a property of sampling. In real life, if you are observing things in real time, then large deviations matter a lot. But when a researcher looks for them, then they are likely to be bogus. In real life, there is no cherry-picking, but on the researcher's computer, there is. There is a difference in medical research between a. observational studies, in which the researcher looks at statistical relationships on his computer, and b. the double-blind cohort experiments that extract information in a realistic way that mimics real life. The former, that is, observation from a computer, produces all manner of results that tend to be, as last computed by John Ioannidis, now more than 8 times out of 10 spurious. Yet these observational studies get reported in the papers and in some scientific journals. Thankfully, these observational studies are not accepted by the Food and Drug Administration, as the agency's scientists know better. The great Stan Young, an activist against spurious statistics, and I found a genetics-based study in the New England Journal of Medicine, claiming significance from statistical data, while the results to us were no better than random. We wrote to the journal, to no avail. There is a swelling number of potential spurious relationships. The idea is as follows. If I have a set of 200 random variables, completely unrelated to each other, then it would be near impossible not to find in it a high correlation of sorts, say 30%, but that is entirely spurious. There are techniques to control the cherry-picking, one of which is known as the Bonferroni Adjustment. But even then, they don't catch the culprits, much as regulation doesn't stop insiders from gaming the system. This explains why in the 12 years or so since we've decoded the human genome, not much of significance has been found. I am not saying that there is no information in the data. The problem is that the needle comes in a haystack. Even experiments can be marred with bias. The researcher has the incentive to select the experiment that corresponds to what he was looking for, hiding the failed attempts. He can also formulate a hypothesis after the results of the experiment, thus fitting the hypothesis to the experiment. The bias is smaller, though, than in the previous case. The fooled-by-data effect is accelerating. There is a nasty phenomenon called Big Data, in which researchers have brought cherry-picking to an industrial level. Modernity provides too many variables, but too little data per variable, and the spurious relationships grow much, much faster than real information, as noise is convex and information is concave. Increasingly, data can only truly deliver via negativa-style knowledge. It can be effectively used to debunk, not confirm. The tragedy is that it is very hard to get funding to replicate and reject existing studies. And even if there were money for it, it would be hard to find takers. Trying to replicate studies will not make anyone a hero. So we are crippled with a distrust of empirical results, except for those that are negative. To return to my romantic idea of the amateur and tea-drinking English clergyman, the professional researcher competes to find relationships. Science must not be a competition. It must not have rankings. We can see how such a system will end up blowing up. Knowledge must not have an agency problem. Mistakes made collectively, not individually, are the hallmark of organized knowledge, and the best argument against it. The argument, because everyone is doing it, or that's how others do it, abounds. It is not trivial. People who on their own would not do something because they find it silly, now engage in the same thing, but in groups. And this is where academia in its institutional structure tends to violate science. One doctoral student at the University of Massachusetts, Chris S., once came to me to tell me that he believed in my ideas of fat tails and my skepticism of current methods of risk management, but that it would not help him get an academic job. It's what everybody teaches and uses in papers, he said. Another student explained that he wanted a job at a good university so he could make money testifying as an expert witness. They would not buy my ideas on robust risk management because everyone uses these textbooks. Likewise, I was asked by the administration of a university to teach standard risk methods that I believe are pure charlatanism. I refused. Is my duty as a professor to get students a job at the expense of society, or to fulfill my civic obligations? Well, if the former is the case, then economics and business schools have a severe ethical problem. For the point is generalized, and that's why economics hasn't collapsed yet in spite of the obvious nonsense in it and scientifically proven nonsense in it. In my fourth quadrant paper, available at fooledbyrandomness.com, I show how these methods are empirically invalid in addition to being severely mathematically inconsistent. In other words, a scientific swindle. Recall that professors are not penalized when they teach you something that blows up the financial system, which perpetuates the fraud. Departments need to teach something so students get jobs, even if they are teaching snake oil. This got us trapped in a circular system in which everyone knows that the material is wrong, but nobody is free enough or has enough courage to do anything about it. The problem is that the last place on the planet where the other people think so argument can be used is science. Science is precisely about arguments standing on their own legs, and something proven to be wrong empirically or mathematically is plain wrong, whether a hundred experts or three trillion disagree with a statement. And the very use of other people to back up one's claims is indicative that the person, or the entire collective that composes the other, is a wimp. But the good news is that I am convinced that a single person with courage can bring down a collective composed of wimps. And here, once again, we need to go back into history for the cure. The scriptures were quite aware of the problem of the diffusion of responsibility and made it a sin to follow the crowd in doing evil, as well as to give false testimony in order to conform to the multitude. I close book seven with a thought. Whenever I hear the phrase, I am ethical, uttered, I get tense. When I hear about classes and ethics, I get even more tense. All I want is to remove the optionality, reduce the anti-fragility of some at the expense of others. It is simple via negativa. The rest will take care of itself. Chapter 25 Conclusion As usual at the end of the journey, while looking at the entire manuscript on a restaurant table, someone from a Semitic culture asked me to explain my book standing on one leg. This time it was Chez Pilpel, a probabilist with whom I've had a two decades long calm conversation without a single episode of small talk. It is hard to find people knowledgeable and confident enough to like to extract the essence of things instead of nitpicking. With the previous book, one of his compatriots asked me the same question, but I had to think about it. This time I did not even have to make an effort. It was so obvious that Chez summed it up himself in the same breath. He actually believes that all real ideas can be distilled down to a central issue that the great majority of people in a given field, by dint of specialization and empty suitedness, completely miss. Everything in religious law comes down to the refinements, applications and interpretations of the golden rule. Don't do unto others what you don't want them to do to you. This we saw was the logic behind Hammurabi's rule, and the golden rule was a true distillation, not a procrustean bet. A central argument is never a summary. It is more like a generator. Chez's extraction was everything gains or loses from volatility. Fragility is what loses from volatility and uncertainty. The glass on the table is short volatility. In the novel The Plague by Albert Camus, a character spends part of his life searching for the perfect opening sentence for a novel. Once he had that sentence, he had the full book as a derivation of the opening. But the reader, to understand and appreciate the first sentence, will have to read the entire book. I glanced at the manuscript with a feeling of commulation. Every sentence in the book was a derivation, an application or an interpretation of the short maxim. Some details and extensions can be counterintuitive and elaborate, particularly when it comes to decision making under opacity, but at the end everything flows from it. The listener is invited to do the same. Look around you, at your life, at objects, at relationships, at entities. You may replace volatility with other members of the disorder cluster here and there for clarity, but it is not even necessary. When formally expressed, it is all the same symbol. Time is volatility. Education in the sense of the formation of character, personality, and acquisition of true knowledge, likes disorder. Label-driven education and educators abhor disorder. Some things break because of error, others don't. Some theories fall apart, not others. Innovation is precisely something that gains from uncertainty, and some people sit around waiting for uncertainty and using it as raw material, just like our ancestral hunters. Prometheus is long disorder. Epimetheus is short disorder. We can separate people and the quality of their experiences based on exposure to disorder and appetite for it. Spartan hoplites contra bloggers, adventurers contra copy editors, Phoenician traders contra Latin grammarians, and pirates contra tango instructors. It so happens that everything non-linear is convex or concave, or both, depending on the intensity of the stressor. We saw the link between convexity and liking volatility, so everything likes or hates volatility, up to a point. Everything. We can detect what likes volatility thanks to convexity or acceleration and higher orders, since convexity is the response by a thing that likes disorder. We can build black swan protected systems thanks to detection of concavity. We can take medical decisions by understanding the convexity of harm and the logic of Mother Nature's tinkering, on which side we face opacity, which error we should risk. Ethics is largely about stolen convexities and optionality. More technically, we may never get to know X, but we can play with the exposure to X, barbell things to defang them. We can control a function of X, f at X, even if X remains vastly beyond our understanding. We can keep changing f at X until we are comfortable with it by a mechanism called convex transformation, a fancier name for the barbell. This short maxim also tells you where fragility supersedes truth, why we lie to children, and why we humans got a bit ahead of ourselves in this large enterprise called modernity. Distributed randomness, as opposed to the concentrated type, is a necessity, not an option. Everything big is short volatility. So is everything fast. Big and fast are abominations. Modern times don't like volatility. And the triad gives us some indication of what should be done to live in a world that does not want us to understand it, a world whose charm comes from our inability to truly understand it. The glass is dead. Living things are long volatility. The best way to verify that you are alive is by checking if you like variations. Remember that food would not have a taste if it weren't for hunger. Results are meaningless without effort, joy without sadness, convictions without uncertainty. And an ethical life isn't so when stripped of personal risks. And once again, listener, thank you for listening to my book. Epilogue What happens when Nero leaves to go to the Levant to observe the rite of Adonis? From resurrection to resurrection. It was an aortic aneurysm. Nero was in the Levant for his annual celebration of the death and rebirth of Adonis. It was a period of mourning with wailing women followed by a celebration of resurrection. He watched nature waking up from the mild Mediterranean winter when the rivers are full of reddish water, the blood of the Phoenician god wounded by the boar as the melted snow from the mountains swelled the rivers and rivulets. Things in nature move ahead from resurrection to resurrection. That was when Tony's driver called. His name was also Tony, and while identified as Tony the driver, he pretended he was a bodyguard when in fact it looked like, given the comparative size, he was the one bodyguarded by Tony. Nero never liked him, always had that strange feeling of distrust, so the moment of sharing the news was odd. During his silence on the line, he felt sympathy for Tony the driver. Nero was designated as the executor of Tony's will, which made him initially nervous. He had somehow a fear that Tony's wisdom would have a gigantic Achilles heel somewhere. But, it turned out, there was nothing serious. A flawless estate, of course debt-free, conservative, fairly distributed. There were some funds to discreetly provide to a woman likely to be a prostitute for whom Tony had some anti-fragile obsessive love, of course helped by the fact that she was both older and much less attractive than Tony's wife, that sort of thing. So, nothing serious. Except for the posthumous prank. Tony bequeathed to Nero a sum of twenty million dollars to spend at his discretion on... it was to be a secret mission. Noble, of course, but secret. And, of course, vague. And dangerous. It was the best compliment Nero ever got from Tony, trusting that Nero would be able to read his mind. Which he did. This is Joe Ackman. We hope you have enjoyed this unabridged production of Anti-Fragile, Things That Gain From Disorder by Nassim Nicholas Taleb. This program was directed by Christina Rooney, executive producer Aaron Blank. Produced, copyright 2012, by Nassim Nicholas Taleb. Production, copyright 2012, Random House, Inc. All rights reserved. This audio program is presented by Audible.com. Audible, audio that speaks to you wherever you are.