COVID-19 has definitely made life unpredictable. If there was one thing that has been the feature of our lives, it is the uncertainty that surrounds everything. It’s in these circumstances that I happened across a book title called Antifragile in my Goodreads feed. The title was catchy so I opened the book description and one line in the description really caught my attention. It said “how to gain from disorder and chaos”. I immediately bought the book because it did seem a bit impossible to be true. I wondered how can anything gain from chaos?

Anti-Fragility

The word fragile means something that is easily damaged or broken. However when we try to consider what opposite of fragile would mean, we generally think of robust or resilient. Something that can survive damage or chaos. However that’s not really opposite of fragile. If fragile is negative, resilient is neutral. Nassim Taleb (the author of Antifragile) defines anti-fragile as opposite of fragile, meaning systems that can gain and thrive and become better due to disorder and chaos.

Fragility; Not probability

We tend to use probability to determine the chance of events happening. But it’s not just the chance we need to worry about but the impact of something happening. So if there is an event that is unlikely to happen but if it does happen, can cause significant harm, then we need to worry about it. COVID is a prime example of an extremely unlikely event that did occur and is causing significant harm.

Hence it is important to not just assess the probability of events but the fragility of events. Fragility can be thought of as the probability taken along with the potential impact of an event.

We actually use this mindset in a lot of places. For example, we build nuclear reactors with high safety bars because though a failure is unlikely to happen, if it does happen it can be catastrophic. Hence spending billions of $$ to safeguard nuclear reactors seem worthwhile. But if we build a grain storage in the middle of a random field, we probably don’t spend too much money in safeguarding it because the potential damage of the structure breaking is fairly low.

Fragile systems

The idea of fragility then is related to how much change a system can withstand. Most systems can withstand some variation, some disorder, some uncertainty, some chaos. The more fragile the system the lower the threshold it can withstand. Our bodies for example can withstand certain amount of temperature change. Most systems can withstand changes but only up till a limit. Past that point, the system breaks.

Redundancy

One distinguishing feature between nature and humans is our love for efficiency. Nature does not care about efficiency. If anything, it builds many redundancies into its systems so that the systems can withstand various changes and fragile events. Even after extinction level events, we still are around. Individual components of the system may not survive but natural systems as a whole have been able to withstand major upheavals and even gain from the resulting disorder. When there are redundant pathways and some of them are destroyed due to a fragile or chaotic change, the others become destroyed due to a fragile or chaotic change, the others become more prominent and get supercharged. Our evolution has actually thrived from major events.

Efficiency

Human systems are built around efficiency. We are always trying to optimize for cost which means building as little redundancy as possible. To assess the need for this, we tend to forecast the future and determine probability of adverse scenarios and protect for that. We try to make our world as predictable and stable so systems keep working together in perfect harmony. However in this process we actually do a very poor job of forecasting high impact , very low probability events like COVID or Tsunamis. When they do happen, it’s because of the very efficiency and lack of redundancy that we have higher impact catastrophe.

For example, our supply chains were highly tuned processes across the global world to ensure just in time manufacturing and logistics. When COVID hit, we suddenly found humans unable to go out and so many places did not have the things they needed because they had no redundancy or backups built in. The reason for this is because it adds to cost and usually cost minimization is one of the important maxims of our capitalistic world.

In our quest to smooth our world out and make it more predictable, we sometimes end up hiding the small fractures that develop in response to changes. So on the outside things seem stable while cracks develop underneath. When the black-swan event (high impact, low probability) occurs it actually leads to higher impact.

The goal of trying to avoid small mistakes, inevitably makes the larger mistake more dangerous.

Takeaways

Barbell strategy: Your future planning should always involve barbell strategies. This would involve always having a plan for black swan events so that you prosper even in that scenario. For example in stock market investing, putting aside 10% of your investment that’s bet in favor of catastrophes occurring and rest 90% in favor of world moving forward might be a good way to plan.

Building redundancy: If something is super important, there needs to be redundancies built into that system. If you have 1 income stream, try to diversify it so that if your job goes away, you still have another income stream. If you 1 home and no insurance, probably have an insurance so that if for whatever reason that home is destroyed, you have a backup.

Don’t prop up failed systems: By investing in failed systems or to keep failing systems propped up, we are sometimes just setting the ground for bigger failures. By just patching half broken walls after a disaster, we are not really preventing the next big disaster. Most natural systems let parts of the system fail and perish to allow for newer systems to evolve. Paying for certain industries and companies to be propped up after an economic crisis may only makes things worse in the long run. Rather it might be more relevant to invest in the future and help the industries transition to that future.