Nassim Taleb

Skin in the Game – Nassim Taleb

Skin in the Game – by Nassim Taleb
Date read: 3/21/19. Recommendation: 9/10.

True to form, Taleb challenges standard conventions and long-held beliefs about a range of topics including uncertainty, symmetry, risk sharing, and rationality in complex systems. Skin in the game means having exposure to the real world and paying a price for consequences, good or bad. He explains that it’s necessary for fairness, commercial efficiency, and risk management. But most importantly, it’s necessary to understand the world. Taleb digs into real-world applications of his ideas and explains important heuristics like the Lindy effect. This will give you an entirely new lens to view the world and open your eyes to things you might never have questioned before. I cannot recommend his books enough, this is as great of a starting place as any. Love him or hate him, he’s one of the most original minds of our time.

See my notes below or Amazon for details and reviews.


My Notes:

The core of the book focuses on four topics: a) uncertainty and the reliability of knowledge, b) symmetry in human affairs (fairness, justice, responsibility, reciprocity), c) information sharing in transactions, d) rationality in complex systems and the real world. 

Importance of skin in the game:
Necessary for fairness, commercial efficiency, risk management, but most importantly, it’s necessary to understand the world. It’s about the things that existential for humans (justice, honor, sacrifice).

Skin in the game means having exposure to the real world and paying a price for consequences, good or bad. Keeps human hubris in check.

Soul in the game: “If you do not take risks for your opinions, you are nothing.” NT

Natural filter: if you can’t put your soul into something, leave it for someone else. 

No skin in the game (keep upside, transfer downside to others): Bureaucrats, consultants, administrators, politicians, corporate executives.
*See diagram on page 47 for list of asymmetries.

Asymmetries in life come from agency problems – absence of skin in the game contaminates fields and produces distortions. Skin in the game demands symmetry. 

Modernity:
“The curse of modernity is that we are increasingly populated by a class of people who are better at explaining than understanding, or better at explaining than doing.” NT 

“Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.” NT

Thinking in high, not low, dimensions:
Many people struggle to understand multidimensional problems – cholesterol reading is a single-dimensional representation that isn’t necessarily representative of complex system of multidimensional health. Another extension of this problem, comparing actions of dictators in war torn countries to the prime minster of Norway, not the local alternative. 

The Silver Rule:
“Do not treat others the way you would not like them to treat you.” NT

Mind your own business, don’t try to decide what’s good for others (The Golden Rule). 

Via negativa:
Via negativa (acting by removing) is more powerful and less error-prone than via positive (acting by addition).” NT

Don’t ever allow yourself to have an assistant, it hinders your natural filtering system. Without one you’ll only be able to do the things you truly enjoy. “You want maximal free time, not maximal activity, and you can assess your own ‘success’ according to such a metric.”

“Assistance moves you one step away from authenticity.” NT - for example, using Google Translate as opposed to learning the language through interactions with locals. 

Decentralization:
Decentralization and fragmentation help stability and improve people’s connection to their work. In a way, preserves a deep sense self-sufficiency that we all crave.

Minorities, not majorities, rule:
All it takes to get a book banned is a few intolerant activists who create a fuss. In a way, the most intolerant minority rules.

Revolutions aren’t always favored by the majority, in fact they’re often driven by an obsessive minority. 

It’s okay to be intolerant with intolerant minorities. They’re violating the Silver Rule (see above). Can’t use “American values” when treating intolerant extremists who deny people’s right to their own religion. 

Humility:
Cato’s injunction: he preferred to be asked why he didn’t have a statue than why he had one. One of the most important lessons I learned early on in life and helps demand far greater respect than people who overshare/overpromote and are focused on “personal brand.”

“A free person does not need to win arguments – just win.” NT

The Lindy effect:
Heuristic explaining that time removes the fragile and keeps the robust. If something is “Lindy” then it ages in reverse, life expectancy lengthens with time, conditional on survival. E.g., book with life expectancy of 100 years and has a future life expectancy of 100 more. 

There’s only one effective judge of things: time. 

“Burn old logs. Drink old wine. Read old books. Keep old friends.” Alfonso X

Summarizing Wittgenstein: knowledge is the reverse of an athletic contest. In philosophy, the winner is the one who finished last. 

An idea will survive the test of time not only if it does not harm, but also if it favors one’s survival. 

Paradox of Progress: Story of New York banker vacationing in Greece, talking to a fisherman. Consider Robert Green’s insight from The 48 Laws of Power, “In victory, learn when to stop.

“When the beard (or hair) is black, heed the reasoning, but ignore the conclusion. When the beard is gray, consider both reasoning and conclusion. When the beard is white, skip the reasoning, but mind the conclusion.” NT

The Gordian Knot:
Greek story about Alexander the Magnus untying a wagon with dozens of knots (oracle predicted that whoever did it would rule over all of Asia). Instead of overcomplicating the solution, drew his sword and cut the knot. Theme: what matters is not complexity of presentation but results.

Modern dilemma - patient shows up with a headache, much better to give him aspirin or tell him to get a full night of sleep than do brain surgery (even though it might appear more scientific)

Disagreements:
You can criticize what a person said (more sensational) or what a person meant. Figuring out what a person meant requires you have a better grasp of the idea. Charlatan’s can be identified by their criticism of specific statements. 

Virtue:
Virtue signaling: exploiting virtue for personal gain, image, career, status. Immoral to claim virtue without living with its consequences. 

“Courage is the only virtue you cannot fake.” NT 

The Law of the Jungle:
The world belongs to the collaborative. Consider how few predators there are in comparison to collaborative animals (think of a watering hole). 

Rationality:
What you do, not what you think or what you believe. At it’s core, it’s rationality is about survival.

The Black Swan – Nassim Taleb

The Black Swan: The Impact of the Highly Improbable – by Nassim Taleb
Date read: 1/28/18. Recommendation: 9/10.

A strong case could be made that Nassim Taleb is one of the most original minds of our time. It's well worth reading every book of his Incerto series, which includes: Antifragile, The Black Swan, The Bed of Procrustes, and Fooled by Randomness. Taleb defines Black Swans as events with the following three attributes: rarity, extreme impact, and retrospective (though not prospective) predictability. He discusses how the root of our inability to understand Black Swans lies in mistaking a naive observation of the past to be representative of the future. The book details specific themes that arise from our blindness to the Black Swan, including: confirmation bias, narrative fallacy, human nature, silent evidence, and tunneling. Taleb sets out to make us more aware of the biases in our logic as it relates to Black Swans so that we might better embrace our own humanity (that's part of it!) and avoid large-scale harmful predictions that might hurt our future. He advocates the "barbell" strategy and positioning ourselves to take advantage of positive Black Swans (lose small to win big) and situations where favorable consequences are much larger than unfavorable ones.

See my notes below or Amazon for details and reviews.

 

My Notes:

Black Swan–an event with the following three attributes: rarity, extreme impact, and retrospective (though not prospective) predictability.

The reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or "incentives" for skill.

The problem lies in the structure of our minds: we don't learn rules, just facts, and only facts. Metarules (such as the rule that we have a tendency to not learn rules) we don't seem to be good at getting.

The bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty. Its nickname in this book is GIF, Great Intellectual Fraud.

History is opaque. You see what comes out, not the script that produces events, the generator of history.

Financial distress could be more demoralizing than war (just consider that financial problems and the accompanying humiliations can lead to suicide, but war doesn't appear to do so directly).

"F*** you money" is a psychological buffer: the capital is not so large as to make you spoiled-rich, but large enough to give you the freedom to choose a new occupation without excessive consideration of the financial rewards. It shields you from prostituting your mind and frees you from outside authority.

It is hard for us to accept that people do not fall in love with works of art for their own sake, but also in order to feel that they belong to a community. By imitating, we get closer to others–that is, other imitators. It fights solitude.

There are traps built into any kind of knowledge gained from observation. A turkey before and after Thanksgiving. The history of a process over a thousand days tells you nothing about what is to happen next. This naive projection of the future from the past can be applied to anything.

Mistaking a naive observation of the past as something definitive or representative of the future is the one and only cause of our inability to understand the black swan.

Other themes arising from our blindness to the Black Swan:
-Error of confirmation: focus on the seen and generalize to the unseen
-Narrative fallacy: thirst for distinct patterns
-Behave as if the Black Swan does not exist: human nature is not programmed for Black Swans
-Distortion of silent evident: history hides Black Swans
-Tunnel: focus on a few well-defined sources of uncertainty

The sources of Black Swans today have multiplied beyond measurability. In the primitive environment they were limited to newly encountered wild animals, new enemies, and abrupt weather changes. These events were repeatable enough for us to have built an innate fear of them.

Narrative fallacy: vulnerability to over-interpretation and our predilection for compact stories over raw truths. It severely distorts our mental representation of the world; it is particularly acute when it comes to the rare event.

The more random information is, the greater the dimensionality, and thus the more difficult to summarize. The more you summarize, the more order you put in, the less randomness. Hence the same condition that makes us simplify pushes us to think that the world is less random than it actually is.

Myths impart order to the disorder of human perception and the perceived "chaos of human experience."

We continuously renarrate past events in the light of what appears to make what we think of as logical sense after these events occur.

Events that are nonrepeatable are ignored before their occurrence, and overestimated after (for a while).

The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories.

Our intuitions are not cut out for nonlinearities...We think that if, say, two variables are casually linked, then a steady input in one variable should always yield a result in the other one. Our emotional apparatus is designed for linear causality.

In a primitive environment, the relevant is the sensational...Somehow the guidance system has gone wrong in the process of our coevolution with our habitat–it was transplanted into a world in which the relevant is often boring, nonsensational.

The nonlinear relationships are ubiquitous in life. Linear relationships are truly the exception; we only focus on them in classrooms and textbooks because they are easier to understand.

The problem of silent evidence: tablets with portraits of worshippers who prayed then survived a shipwreck. Where were the pictures of those who prayed, then drowned? They would have a lot of trouble advertising their experiences from the bottom of the sea. This can fool the casual observer into believing in miracles.

My biggest problem with the educational system lies precisely in that it forces students to squeeze explanations out of subject matters and shames them for withholding judgment, for uttering the "I don't know." Why did the Cold War end? Why did the Persians lose the battle of Salamis?

I am not saying causes do not exist; do not use this argument to avoid trying to learn from history. All I am saying is that it is not so simple; be suspicious of the "because" and handle it with care–particularly in situations where you suspect silent evidence.

Gambling = sterilized and domesticated uncertainty.

In real life you do not know the odds; you need to discover them, and the sources of uncertainty are not defined.

Train your reasoning abilities to control your decisions; nudge System 1 (the heuristic or experiential system) out of the important ones.

Our human race is affected by a chronic underestimation of the possibility of the future straying from the course initially envisioned.

The more information you give someone, the more hypotheses they will formulate along the way, and the worse off they will be. They see more random noise and mistake it for information...Once we produce a theory, we are not likely to change our minds–so those who delay developing their theories are better off.

Remember that we are swayed by the sensational. Listening to the news on the radio every hour is far worse for you than reading a weekly magazine, because the longer interval allows information to be filtered a bit.

We attribute our successes to our skills, and our failures to external events outside our control, namely to randomness. We feel responsible for the good stuff, but not for the bad.

Anchoring: lower your anxiety about uncertainty by producing a number, then you "anchor" on it, like an object to hold on to in the middle of a vacuum.

Epistemic arrogance: tendency to tunnel and think "narrowly."

Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making.

In order to predict historical events you need to predict technological innovation, itself fundamentally unpredictable. (Karl Raimund Popper's central argument)

Someone with a low degree of epistemic arrogance is not too visible, like a shy person at a cocktail party. We are not predisposed to respect humble people, those who try to suspend judgment.

Prediction error: buy a new car but do not anticipate that the effect of the new car will eventually wane and that you will revert to the initial condition, as you did last time. If you had expected this, you probably would not have bought it. You are about to commit a prediction error that you have already made. Yet it would cost so little to introspect!

Overestimate the effects of both pleasant and unpleasant future events.

We cannot teach people to withhold judgment; judgements are embedded in the way we view objects. I do not see a "tree"; I see a pleasant or an ugly tree. It is not possible without great, paralyzing effort to strip these small values we attach to matters. Likewise, it is not possible to hold a situation in one's head without some element of bias.

Be human! Accept that being human involves some amount of epistemic arrogance in running your affairs.

What you should avoid is unnecessary dependence on large-scale harmful predictions. Avoid the big subjects that may hurt your future: be fooled in small matters, not the large. Do not listen to economic forecasters or to predictors in social science (they are mere entertainers), but do make your own forecast for the picnic.

American culture encourages the process of failure, unlike the cultures of Europe and Asia where failure is met with stigma and embarrassment.

"Barbell" strategy: be as hyperconservative and hyperagressive as you can be instead of being mildly aggressive or conservative.
-85-90% in extremely safe investments
-10-15% in extremely speculative bets (venture-capital style)

Negative Black Swan businesses: military, insurance, homeland security–face only downside.
Positive Black Swan businesses: movies, publishing, scientific research, venture capital–lose small to make big.

Seize any opportunity, or anything that looks like an opportunity. They are rare, much rarer than you think.

Put yourself in situations where favorable consequences are much larger than unfavorable ones.

The 80/20 rule is only metaphorical...in the U.S. book business, the proportions are more like 97/20.

Although unpredictable large deviations are rare, they cannot be dismissed as outliers because, cumulatively, their impact is so dramatic.

I worry less about advertised and sensational risks, more about the vicious and hidden ones. I worry less about terrorism than about diabetes.

You have far more control over you life if you decide on your criterion by yourself...It is more difficult to be a loser in a game you set up yourself. In Black Swan terms, this means that you are exposed to the improbable only if you let it control you. You always control what you do; so make this your end.

We are quick to forget that just being alive is an extraordinary piece of good luck, a remote event, a chance occurrence of monstrous proportions...So stop sweating the small stuff. Don't be like the ingrate who got a castle as a present and worried about the mildew in the bathroom.

Reducing volatility and ordinary randomness increases exposure to Black Swans–it creates an artificial quiet.

Living organisms need variability and randomness...Organisms need, to use the metaphor of Marcus Aurelius, to turn obstacles into fuel–just as fire does.

Black Swan events are largely caused by people using measures way over their heads, instilling false confidence based on bogus results.

A Black Swan for the turkey is not a Black Swan for the butcher.

Do not confuse absence of volatility with absence of risk. Trend towards lower volatility but greater risk of big jumps. It has fooled entire banking system and will fool again.

Using leverage to cure the problems of too much leverage is not homeopathy, it's denial. The debt crisis is not a temporary problem, it's a structural one. We need rehab.

For Seneca, Stoicism is about dealing with loss, and finding ways to overcome our loss aversion–how to become less dependent on what you have.

The man had reached the Stoic self-sufficiency, the robustness to adverse events, called apatheia in Stoic jargon. In other words, nothing that might be taken from him did he consider to be a good.

Seneca ended his essays with vale. It has the same root as "value" and "valor" and means both "be strong (i.e., robust)" and "be worthy."

Fooled by Randomness – Nassim Nicholas Taleb

Fooled by Randomness – by Nassim Nicholas Taleb
Date read: 8/28/17. Recommendation 8/10.

Deep dive into the role of luck in the financial markets and life. Taleb emphasizes how we tend to only accept randomness in our failures, never in our successes. He discusses concepts like Monte Carlo math, Russian roulette, the Pólya process, nonlinearity and the human brain, and Buridan's donkey. Our tendency to favor the visible, narrated, and neat models, leads us to being fooled by randomness. He summarizes best by suggesting we are all idiots who are mistake prone, but only a handful of us have the rare privilege of knowing it.

See my notes below or Amazon for details and reviews.

 

My Notes:

That which came with the help of luck could be taken away by luck (and often rapidly and unexpectedly at that). The flipside, which deserves to be considered as well (in fact it is even more of our concern), is that things that come with little help from luck are more resistant to randomness.

Lucky fools do not bear the slightest suspicion that they may be lucky fools–by definition, they do not know that they belong to such a category. They will act as if they deserved the money. Their strings of successes will inject them with so much serotonin (or some similar substance) that they will even fool themselves about their ability to outperform markets.

Had Nero had to relive his professional life a few million times, very few sample paths would be marred by bad luck– but, owing to his conservatism, very few as well would be affected by extreme good luck.

I thus view people distributed across two polar categories: One one extreme, those who never accept the notion of randomness; on the other, those who are tortured by it.

When I started on Wall Street in the 1980s, trading rooms were populated with people with a "business orientation," that is, generally devoid of any introspection, flat as a pancake, and likely to be fooled by randomness. Their failure rate was extremely high, particularly when financial instruments gained in complexity.

Such a tendency to make and unmake prophets based on the fate of the roulette wheel is symptomatic of our ingrained inability to cope with the complex structure of randomness prevailing in the modern world.

We are not wired in a way to understand probability.

MBAs tend to blow up in financial markets, as they are trained to simplify matters a couple of steps beyond their requirement. (I beg the MBA reader not to take offense; I am myself the unhappy holder of the degree.)

Journalism may be the greatest plague we face today–as the world becomes more and more complicated and our minds are trained for more and more simplification.

I remind myself of Einstein's remark that common sense is nothing but a collection of misconceptions acquired by age eighteen.

Any reading of the history of science would show that almost all the smart things that have been proven by science appeared like lunacies at the time they were first discovered.

Learning from history does not come naturally to us humans, a fact that is so visible in the endless repetitions of identically configured booms and busts in modern markets. By history I refer to the anecdotes, not the historical theorizing...

For me, history is of use merely at the level of my desired sensibility, affecting the way I would wish to think by reference to past events, by being able to better steal ideas of others and leverage them, correct the mental defect that seems to block my ability to learn from others.

In some respects we do not learn from our own history...For example, people fail to learn that their emotional reactions to past experiences (positive or negative) were short lived–yet they continuously retain the bias of thinking that the purchase of an object will bring long-lasting, possibly permanent, happiness or that a setback will cause severe and prolonged distress.

Our minds are not quite designed to understand how the world works, but, rather to get out of trouble rapidly and have progeny.

A mistake is not something to be determined after the fact, but in the light of the information until that point.

It takes a huge investment in introspection to learn that the thirty or more hours spent "studying" the news last month neither had any predictive ability during your activities of that month nor did it impact your current knowledge of the world.

A preference for distilled thinking implies favoring old investors and traders, that is, investors who have been exposed to markets the longest.

Over a short time increment, one observes the variability of the portfolio, not the returns.

Our emotions are not designed to understand the point. The dentist did better when he dealt with monthly statements rather than more frequent ones.

My problem is that I am not rational and I am extremely prone to drown in randomness and to incur emotional torture. I am aware of my need to ruminate on park benches and in cafes away from information, but I can only do so if I am somewhat deprived of it.

At any point in time, the richest traders are often the worst traders. This, I will call the cross-sectional problem: At a given time in the market, the most successful traders are likely to be those that are best fit to the latest cycle.

Recall that someone with only casual knowledge about the problems of randomness would believe that an animal is at the maximum fitness for the conditions of its time. This is not what evolution means; on average, animals will be fit, but not every single one of them, and not at all times.

One vicious attribute is that the longer these animals can go without encountering the rare event, the more vulnerable they will be to it.

Studying the European markets of the 1990s will certainly be of great help to a historian; but what kind of inference can we make now that the structure of the institutions and the markets has changed so much?

There is no point searching for patterns that are available to everyone with a brokerage account; once detected, they would be self-canceling.

Economics: you can disguise charlatanism under the weight of equations, and nobody can catch you since there is no such thing as a controlled experiment.

Nowhere is the problem of induction more relevant than in the world of trading–and nowhere has it been as ignored!

No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.

Markets (and life) are not simple win/lose types of situations, as the cost of the losses can be markedly different from that of the wins.

The virtue of capitalism is that society can take advantage of people's greed rather than their benevolence, but there is not need to, in addition, extol such greed as a moral (or intellectual) accomplishment.

The survivorship bias implies that the highest performing realization will be the most visible. Why? Because the losers do not show up.

Remember that nobody accepts randomness in his own success, only in his failures.

Medical researchers are rarely statisticians; statisticians are rarely medical researchers. Many medical researchers are not even remotely aware of this data mining bias.

Assume you are standing in 1900 with hundreds of investments to look at. There are stock markets of Argentina, Imperial Russia, the United Kingdom, Unified Germany, and plenty of others to consider. A rational person would have bought not just the emerging country of the United States, but those of Russia and Argentina as well. The rest of the story is well-known; while many of the stock markets like those of the United Kingdom and the United States fared extremely well, the investor in Imperial Russia would have no better than medium-quality wallpaper in his hands. The countries that fared well are not a large segment of the initial cohort; randomness would be expected to allow a few investment classes to fare extremely well. I wonder if those "experts" who make foolish (and self-serving) statements like "markets will always go up in a any twenty-year period" are aware of this problem.

This chapter is about how a small advantage in life can translate into a highly disproportionate payoff, or, more viciously, how no advantage at all, but a very, very small help from randomness, can lead to a bonanza.

Nonlinearities = straw that broke the camel's back, drop that caused the water to spill.

These nonlinear dynamics has a bookstore name, "chaos theory," which is a misnomer because it has nothing to do with chaos. Chaos theory concerns itself primarily with functions in which a small input can lead to a disproportionate response.

Say you played roulette and won. Would this increase your chances of winning again? No. In a Polya process case, it does (probability of winning increases after past wins, and vice versa). Why is this so mathematically hard to work with? Because the notion of independence (i.e., when the next draw does depend on past outcomes) is violated. Independence is a requirement for working with the (known) math of probability.

Our brain is not cut out for nonlinearities. People think that if, say, two variables are casually linked, then a steady input in one variable should always yield a result in the other one...But reality rarely gives us the privilege of a satisfying linear positive progression: You may have to study for a year and learn nothing, then, unless you are disheartened by the empty results and give up, something will come to you in a flash...Most people give up before the rewards.

There are routes to success that are nonrandom, but few, very few people have the mental stamina to follow them.

Buridan's Donkey: Nonlinearity in random outcomes is sometimes used as a tool to break stalemates. *Randomness is not always unwelcome.

You stop when you get a near-satisfactory solution. Otherwise it may take you an eternity to reach the smallest conclusion or perform the smallest act. We are therefore rational, but in a limited way: "boundedly rational." [Herbert Simon] believed that our brains were a large optimizing machine that had built-in rules to stop somewhere.

There are two possible ways for us to reason:
Heuristics: effortless, automatic, associative, rapid, parallel process, opaque (i.e. we are not aware of using it), emotional, concrete, specific, social, and personalized.
Rationality: effortful, controlled, deductive, slow, serial, self-aware, neutral, abstract, sets, asocial, and depersonalized.

1) We do not think when making choices but use heuristics. 2) We make serious probabilistic mistakes in today's world.

Causality can be very complex. It is very difficult to isolate a single cause when there are plenty around. This is called multivriate analysis.

Unless something moves by more than its usual daily percentage change, the event is deemed to be noise. Percentage moves are the size of the headlines. In addition, the interpretation is not linear; a 2% move is not twice as significant as an event as 1%, it is rather like four to ten times. A 7% move can be several billion times more relevant than a 1% move!

My lesson from Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it.

People confuse science and scientists. Science is great, but individual scientists are dangerous. They are human; they are marred by the biases humans have.

Recall that epic heroes were judged by their actions, not by the results. No matter how sophisticated our choices, how good we are at dominating the odds, randomness will have the last word.

There is nothing wrong and undignified with emotions–we are cut to have them. What is wrong is not following the heroic or, at least, the dignified path. That is what stoicism truly means. It is the attempt by man to get even with probability.

Our attribution of heroism to those who took crazy decisions but were lucky enough to win shows the aberration–we continue to worship those who won battles and despise those who lost, no matter the reason.

Some degree of unpredictability (or lack of knowledge) can be beneficial to our defective species. A slightly random schedule prevents us from optimizing and being exceedingly efficient, particularly in the wrong things.

We know that people of a happy disposition tend to be of the satisficing (blend of satisfying and maximizing) kind, with a set idea of what they want in life and an ability to stop upon gaining satisfaction...They do not tend to experience the internal treadmill effects of constantly trying to improve on their consumption of goods by seeking higher and higher levels of sophistication. In other words, they are neither avaricious nor insatiable. *Optimizers = unhappy and always seeking a better deal.

We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract. Everything good (aesthetics, ethics) and wrong (Fooled by Randomness) with us seems to flow from it.

The Bed of Procrustes – Nassim Nicholas Taleb

The Bed of Procrustes: Philosophical and Practical Aphorisms – by Nassim Nicholas Taleb
Date read: 8/18/17. Recommendation: 9/10.

Great introduction to Taleb's take on uncertainty, which he discusses in detail in his other books that make up the Incerto series: Antifragile, Fooled by Randomness, and The Black Swan. This book offers a succinct look into how we deal with what we don't know. Taleb examines our tendency to package and reduce ideas into neat narratives that fit within the constraints of our limited knowledge.

See my notes below or Amazon for details and reviews.

 

My Notes:

Every aphorism here is a about a Procrustean bed of sorts–we humans, facing limits of knowledge, and things we do not observe, the unseen and the unknown, resolve the tension by squeezing life and the world into crisp commoditized ideas, reductive categories, specific vocabularies, and prepackaged narratives.

These aphorisms are standalone compressed thoughts revolving around my main idea of how we deal, and should deal, with what we don't know.

The person you are most afraid to contradict is yourself.

An idea starts to be interesting when you get scared of taking it to its logical conclusion.

To bankrupt a fool, give him information.

An erudite is someone who displays less than he knows; a journalist or consultant, the opposite.

Your brain is most intelligent when you don't instruct it on what to do–something people who take showers discover on occasion.

In nature we never repeat the same motion; in captivity (office, gym, commute, sports), life is just repetitive-stress injury. No randomness.

If you know, in the morning, what your day looks like with any precision, you are a little bit dead–the more precision, the more dead you are.

When we want to do something while unconsciously certain to fail, we seek advice so we can blame someone else for the failure.

The most painful moments are not those we spend with uninteresting people; rather, they are those spent with uninteresting people trying hard to be interesting.

The characteristic feature of the loser is to bemoan, in general terms, mankind's flaws, biases, contradictions, and irrationality–without exploiting them for fun and profit.

You exist if and only if you are free to do things without a visible objective, with no justification and, above all, outside the dictatorship of someone else's narrative.

To be completely cured of newspapers, spend a year reading the previous week's newspapers.

The opposite of success isn't failure; it is name-dropping.

Modernity needs to understand that being rich and becoming rich are not mathematically, personally, socially, and ethically the same thing.

The fastest way to become rich is to socialize with the poor; the fastest way to become poor is to socialize with the rich.

You will be civilized on the day you can spend a long period doing nothing, learning nothing, and improving nothing, without feeling the slightest amount of guilt.

Someone who says "I am busy" is either declaring incompetence (and lack of control of his life) or trying to get rid of you.

To see if you like where you are, without the chains of dependence, check if you are as happy returning as you were leaving.

Modernity: we created youth without heroism, age without wisdom, and life without grandeur.

People focus on role models; it is more effective to find antimodels–people you don't want to resemble when you grow up.

People usually apologize so they can do it again.

It is those who use others who are the most upset when someone uses them.

The three most harmful addictions are heroin, carbohydrates, and a monthly salary.

My only measure of success is how much time you have to kill.

With terminal disease, nature lets you die with abbreviated suffering; medicine lets you suffer with prolonged dying.

Only in recent history has "working hard" signaled pride rather than shame for lack of talent, finesse, and, mostly, sprezzatura.

We are hunters; we are only truly alive in those moments when we improvise; no schedule, just small surprises and stimuli from the environment.

You are alive in inverse proportion to the density of cliches in your writing.

We unwittingly amplify commonalities with friends, dissimilarities with strangers, and contrasts with enemies.

True humility is when you can surprise yourself more than others; the rest is either shyness or good marketing.

For the robust, an error is information; for the fragile an error is an error.

Games were created to give nonheroes the illusion of winning. In real life, you don't know who really won or lost (except too late), but you can tell who is heroic and who is not.

Knowledge is subtractive, not additive–what we subtract (reduction by what does not work, what not to do), not what we add (what to do).

The best way to spot a charlatan: someone (like a consultant or a stock broker) who tells you what to do instead of what not to do.

They think that intelligence is about noticing things that are relevant (detecting patterns); in a complex world, intelligence consists in ignoring things that are irrelevant (avoiding false patterns).

The curious mind embraces science; the gifted and sensitive, the arts; the practical, business; the leftover becomes an economist.

The only definition of an alpha male: if you try to be an alpha male, you will never be one.

At any stage, humans can thirst for money, knowledge, or love; sometimes for two, never for three.

Love without sacrifice is like theft.

Our overreactive brains are more likely to impose the wrong, simplistic narrative than no narrative at all.

The mind can be a wonderful tool for self-delusion–it was not designed to deal with complexity and nonlinear uncertainties.

Counter to common discourse, more information means more delusions: our detection of false patterns is growing faster and faster as a side effect of modernity and the information age.

Thus my classical values make me advocate the triplet of erudition, elegance, and courage; against modernity's phoniness, nerdiness, and philistinism.

Antifragile – Nassim Nicholas Taleb

Antifragile: Things That Gain from Disorder – by Nassim Nicholas Taleb
Date read: 4/1/17. Recommendation: 10/10.

Taleb introduces his concept of antifragility, which explains that certain things (including us) benefit from a degree of randomness, chaos, and disorder. While comfort, convenience, and predictability, breed the opposite–fragility. He presents this as part of what he calls 'the central triad' which ranges from fragile to robust to antifragile. As he explains antifragility, he discusses the value systems that hold us prisoner, ancestral vs. modern life, and Seneca's version of Stoicism. It's a dense read, but worth it for a glimpse into the originality of Taleb's ideas.

See my notes below or Amazon for details and reviews.

 

My Notes:

With randomness, uncertainty, chaos: you want to use them, not hide from them. You want to be the fire and wish for the wind.

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty.

Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.

If about everything top-down fragilizes and blocks antifragility and growth, everything bottom-up thrives under the right amount of stress and disorder. The process of discovery (or innovation, or technological progress) itself depends on antifragile tinkering, aggressive risk bearing rather than formal education.

Yet simplicity has been difficult to implement in modern life because it is against the spirit of a certain brand of people who seek sophistication so they can justify their profession.

But simplicity is not so simple to attain. Steve Jobs figured out that "you have to work hard to get your thinking clean to make it simple."

The record shows that, for society, the richer we become, the harder it gets to live within our means. Abundance is harder for us to handle than scarcity.

If tired after an intercontinental flight, go to the gym for some exertion instead of resting. Also, it is a well known trick that if you need something urgently done, give the task to the busiest (or second busiest) person in the office. Most humans manage to squander their free time, as free time makes them dysfunctional, lazy, and unmotivated - the busier they get, the more active they are at other tasks.

Layers of redundancy are the central risk management property of natural systems. We human have two kidneys, extra spare parts, and extra capacity in many, many things (say, lungs, neural system, arterial apparatus). *debt is the opposite of redundancy

Information is antifragile; it feeds more on attempts to harm it than it does on efforts to promote it.

Criticism, for a book, is a truthful, unfaked badge of attention, signaling that it is not boring; and boring is the only very bad thing for a book...Almost no scandal would hurt an artist or writer. *Jobs/professions fragile to reputational harm aren't worth having.

A midlevel bank employee with a mortgage would be fragile to the extreme. In fact he would be completely a prisoner of the value system that invites him to be corrupt to the core - because of his dependence on the annual vacation in Barbados.

Much of aging comes from a misunderstanding of the effect of comfort - a disease of civilization: make life longer and longer, while people are more and more sick. In a natural environment, people die without aging - or after a very short period of aging. For instance, some markers, such as blood pressure, that tend to worsen over time for moderns do not change over the life of hunter-gatherers until the very end.

Typically, the natural–the biological–is both antifragile and fragile, depending on the source (and the range) of variation. A human body can benefit from stressors (to get stronger), but only to a point.

"Machines: use it and lose it; organisms: use it or lose it." -Frano Barovic

Language acquisition: You pick up language best thanks to situational difficulty, from error to error, when you need to communicate under more or less straining circumstances...One learns new words, mostly by being forced to read the mind of the other person - suspending one's fear of making mistakes.

Touristification: systematic removal of uncertainty and randomness from things, trying to make maters highly predictable in their smallest details. All that for the sake of comfort, convenience, and efficiency.

If you are alive - something deep in your soul likes a certain measure of randomness and disorder.

Also consider how easy it is to skip a meal when the randomness in the environment causes us to do so.

Ancestral life had no homework, no boss, no civil servants, no academic grades, no conversation with the dean, no consultant with an MBA, no table of procedure...all life was random stimuli and nothing, good or bad, ever felt like work. Dangerous, yes, but boring, never.

An environment with variability (hence randomness) does not expose us to chronic stress injury, unlike human-designed systems. If you walk on uneven, not man-made terrain, no two steps will ever be identical - compare that to the randomness-free gym machine offering the exact opposite: forcing you into endless repetitions of the very same movement.

Much of modern life is a preventable chronic stress injury.

So organisms need to die for nature to be antifragile - nature is opportunistic, ruthless, and selfish.

If nature ran the economy, it would not continuously bail out its living members to make them live forever.

Further; my characterization of a loser is someone who, after making a mistake, doesn't introspect, doesn't exploit it, feels embarrassed and defensive rather than enriched with a new piece of information, and tries to explain why he made the mistake rather than moving on. These types often consider themselves the "victims" of some large plot, a bad boss, or bad weather.

He who has never sinned is less reliable than he who has only sinned once. And someone who has made plenty of errors - though never the same error more than one - is more reliable than someone who has never made any.

Buridan's Donkey Metaphor: A donkey equally famished and thirsty caught at an equal distance between food and water would unavoidably die of hunger and thirst. But he can be saved thanks to a random nudge one way or the other.

When some systems are stuck in a dangerous impasse, randomness and only randomness can unlock them and set them free. You can see here that absence of randomness equals guaranteed death.

Consider the life of the lion in the comfort and predictability of the Bronx Zoo (with Sunday afternoon visitors flocking to look at him in a combination of curiosity, awe, and pity) compared to that of his cousins in freedom. We, at some point, had free-range humans and free-range children before the advent of the golden period of the soccer mom.

If you want to accelerate someone's death, give him a personal doctor....access to data increases intervention, causing us to behave like the neurotic fellow.

It is almost impossible for someone rational, with a clear, uninfected mind, someone who is not drowning in data, to mistake a vital signal, one that matters for his survival, for noise - unless he is overanxious, oversensitive, and neurotic, hence distracted and confused by other messages. Significant signals have a way to reach you.

Our track record in figuring out significant rare events in politics and economics is not close to zero; it is zero.

Curiosity is antifragile, like an addiction, and is magnified by attempts to satisfy it - books have a secret mission and ability to multiply as everyone who has wall-to-wall bookshelves knows well.

A man is honorable in proportion to the personal risks he takes for his opinion - in other words, the amount of downside he is exposed to.

What we learn from reading Seneca directly, rather than through the commentators, is a different story. Seneca's version of that Stoicism is antifragility from fate. No downside from Lady Fortuna, plenty of upside.

Seneca fathomed that possessions make us worry about downside, thus acting as punishment as we depend on them.

Seneca's practical method to counter such fragility was to go through mental exercises to write off possessions, so when losses occurred he would not feel the sting - a way to wrest one's freedom from circumstances.

Seen this way, Stoicism is about the domestication, not necessarily the elimination, of emotions. It is not about turning humans into vegetables. My idea of the modern Stoic sage is someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking.

Seneca also provides us a catalogue of social deeds: invest in good actions. Things can be taken away from us - not good deeds and acts of virtue.

Seneca said that wealth is the slave of the wise man and the master of the fool. Thus he broke a bit with the purported Stoic habit: he kept the upside.

This kind of sum I've called in my vernacular "fuck you money"–a sum large enough to get most, if not all, of the advantages of wealth (the most important one being independence and the ability to only occupy your mind with matters that interest you) but not its side effects, such as having to attend a black-tie charity event and being forced to listen to a polite exposition of the details of a marble-rich house renovation. The worst side effect of wealth is the social associations it forces on its victims, as people with big houses tend to end up socializing with other people with big houses.

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 the structured, fake, and ineffective life on an empty-suit CEO with a preset schedule and alarm clock.

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.

Another fooled-by-randomness-style mistake is to think that because life expectancy at birth used to be thirty until the last century, that people lived just thirty years. The distribution was massively skewed, with the bulk of deaths coming from birth and childhood mortality.

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 the bark of a dog.

Anything 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.

If you ever have to choose between a mobster's promise and a civil servant's, go with the mobster. Any time. Institutions do not have a sense of honor, individuals do.