Nassim Nicholas Taleb

AntiFragility

How to Live in a World

We Don't Understand

CONFIDENTIAL (v. preliminary) DRAFT

2011
 2

PROLOGUE in THREE CHAPTERS Chapter 1. How to Mishandle a Package

Please cut my head — How to beat up an economist (but not
too hard)—Where the philosophers' stone was Jensen's
inequality —Combining stupidity with wisdom rather than the
In Chapter 1, introduce the concept of antifragility —as well as opposite —Can a philosopher be called nouveau riche?
fragility, of course and provide the table of what is antifragile, robust
and fragile.
In Chapter 2, I discuss the magic property called Jensen's
inequality which makes antifragile systems gain from disorder. WHAT'S THE OPPOSITE OF FRAGILE?
In Chapter 3, I link antifragility with knowledge (or error)
Just as a package sent by mail can bear a stamp "fragile",
showing why it compensates, even transcends errors, and discuss the
"breakable" or "handle with care", consider the exact opposite: a
book's main purpose: how to live in a world we don't understand.
package that has stamped on it "please mishandle" or "please handle
carelessly". The contents of such package are not just unbreakable,
but benefit from shocks.
Let us coin the appellation "antifragile" for such a package; a
neologisms is necessary for there is no simple, noncompound word
in the Oxford English Dictionary that expresses the point of reverse
fragility. For the idea of antifragility is not part of our consciousness
—but, luckily, it is part of our ancestral behavior, and an ubiquitous
property of every system that has survived.
To see how alien the concept to our minds, ask around what's
the antonym of fragile (and specify insistently that you mean the
exact reverse). The likely answer will be: robust, unbreakable, solid,
well-built, resilient, strong, something-proof (say waterproof,
windproof, rustproof), etc — unless they've read this book. Wrong —
and it is not just individuals, but branches of knowledge that are
confused by it; this is a mistake made in every dictionary of
synonyms and antonyms I've foundi.
This error stems from a mental distortion, of the same category
of the mistakes we make without any self-awareness of the reasoning
process involved in them; ask the same person the opposite of cold,
they will answer hot, not room temperature; the opposite of pain is

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
What's the Opposite of Fragile? 3
generally considered pleasure, not absence of pain. Let's get closer to
fragility, and ask for the opposite of destruction, they will answer
construction. Clearly, therefore the opposite of unstable is not stable
or sturdy, but something that gains from unstability; likewise the
opposite of brittle is not solid —but antibrittle, or antifragile. Another
way to view it: since the opposite of positive is negative, not neutral,
the opposite of positive fragility should be negative fragility (hence
my appellation antifragility), not neutral which would jut convey
robustness, strength and unbreakability.
This blind spot seems universal. The expression designating
antifragility is absent from the vocabulary of the following
lingusistic families: Romance (Italian, French, Spanish, Portuguese),
classical (Latin, Greek), Semitic (Arabic, Hebrew, Aramaic), Slavic
(Russian, Polish, Serbian, Croatian), Aryan (Hindi, Urdu, Farsi),
Turkic (Turkish), and Germanic (German, Dutch, Africaans). For
instance, in French, incassable (unbreakable) and, sometimes,
robuste are held by the learned classes and dictionaries to be the
exact opposite of cassable (breakable) and fragile, respectively —the
very same persons who think that positif is opposite of negatif. In
Italian, I quizzed a scholarly audience at the beginning of one my
lectures in Genoa, formerly known as The Most Serene Republic of
Genoa: the opposite of fragile (or fragibile), they promptly said was
infragibile, (unbreakable) so they convincingly accepted my new
word, minted on the spot, antifragilita.
Hydra
Think of Hydra, in Greek mythology, the serpent of the
underworld, equipped with a collection of heads; upon severing one
of its heads two spring back in return. So obviously Hydra needs
some hostility, rather than peace, to thrive. Alas, there is no name for
such a property of vulnerability in reverse, and I know of very few
popular expressions other than persons who "make lemonade when
life gives them a lemon".
12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
Age Like Wine
Just look around you to see how ubiquitous this antifragility,
albeit in subtle forms. I spot a gift I just received, this good bottle of
1995 Bordeaux wine not too far away from my desk. Good wine
improves with age, under the right conditions; it benefits from the
disorder, the chemical disturbances caused by time (for a physicist,
time is increase in disorder, linked to a wonderful concept called
entropy that we will use to connect many dots). But it only benefits
up to some limit: it is not globally antifragile, just locally so. Putting
the bottle inside the crater of a volcano would not improve its quality
too much. Breaking the bottle with a hammer would not help the
drinking experience neither. Let me look around me some more: I
am wearing this leather shoe made in the town of Limoges, in
France, that the makers boast can last decades. Like most things
artisanal, they do. These shoes do indeed benefits from use, up to a
point, so long as you do not spent too much time wading in sulfuric
acid.
The difference between my robust, and even largely antifragile
artisanal shoes hints at the central disease we are facing, the fragility
of the modern version of stock-market capitalism —hence my allergy
for almost everything heavily industrialized. Goods made in more
ancient ways, mostly in days preceding the abnormality known as the
MBA security analyst, tended to be not fragile, usually robust, on the
occasion, antifragile. I am not just talking about the Acropolis in
Athens or the temple of Bacchus in Eastern Lebanon. Anything non-
consumable, such as books printed several hundred years ago,
classical furniture, saddles for your horse or camel, country house
near Pompeii. Incidentally, these items have the identity of the
maker invested in them which confers a certain measure of
robustnessii.
Evolution 4
EVOLUTION
Beyond my shoes and the mundane, consider the larger notion
of evolution. It works precisely because it is antifragile; it loves
randomness, uncertainty, and disorder —while individual organisms
are relatively fragile, the gene pool takes advantage of shocks to
enhance its fitness. The more noise and disturbances in the system,
up to a point, of course (baring those extreme shocks that lead to
extinction), the more the effect of the survival of the fittest will play a
role in defining the properties, of the next generation. Say an
organism produces ten offspring. If he environment is perfectly
stable, all ten will possibly reproduce. But if there is instability,
killing five (likely to be on average weaker than their surviving
siblings), then those evolution considers the better ones will
reproduce, making the gene undergo some improvement. Likewise, if
there is variability among the offspring, then the best will reproduce,
increasing the fitness of the species.
For an illustration of how, Hydra-style, families of organisms
like harm, up to a point, though not the organisms themselves,
consider the phenomenon of antibiotic resistance. The harder you try
to harm bacteria, the stronger the survivors will be —unless you can
manage to eradicate them completely. The same with cancer therapy:
quite often cancer cells that manage to survive the toxicity of
chemotherapy and radiation reproduce faster and take over.
The same love of disorder applies to economic entities,
individuals, firms, systems, etc. But except for a few comments here
and there in the economics literature—such as the one informally
described as "creative destruction" and such some notions on
innovations and similar ideas —the idea of antifragility is absent
from existing theories in social science. You can even see ideas
formulated in different branches, like innovation and the theories of
financial derivatives (which we will see discuss the notion options
that can gain large but lose small) with no connection of the dots. Not
only that, but there is a bias against it —the foundation of modern
economic sciences lie in creating fragility. But more interestingly,
12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
almost all human theories (and I have a long list) that have emerged
since the enlightenment fragilize; they both bring this blindness to
antifragility.
Thank You, Errors
Why? Because, ironically, aversion to uncertainty —rather than
loving it, stochatophilia — creates risk. By refusing to accept
randomness, you are vulnerable to illusions of certainties.
Antifragile systems have the perfect antiacademic attribute: they
love mistakes. They love absence of knowledge. They love disorder.
They love doing, not thinking. They don't care about being right or
wrong, looking bad in front of colleagues. So the reason we are here
is precisely because most of what has survived has this antifragile
property (the rest did not make it). It explains why humankind has
managed to get here not just in spite of mistakes, but because of
them.
Let me restate the motto, owing to both its importance and our
lack of awareness of it: thinking fragilizes and, furthermore, makes
us blind to antifragility. This is not really bad news —for those aware
of it. Such blindness is called "suckerdom" by Fat Tony, my antinerd
character whom we will meet in Chapter 1.
BLACK SWANS
I have named Black Swans events (capitalized) these large-scale
unpredictable and irregular events of massive consequence, and, in
The Black Swan, made the bold claim that most of history comes
from these events, while we worry about fine-tuning models made for
the ordinary that cannot possible track them or measure their
impact. These Black Swan events can be either beneficial or harmful
—but human-designed top-down systems tend to be exposed to harm
from Black Swans, almost never any benefit.
There is a Black Swan domain (also called the Fourth Quadrant)
where these events tend play a monstrous role; there reigns a type of
The Triad 5
intractable randomness. What is nonmeasurable and nonpredictable
will remain nonpredictable, no matter how many PhDs with Russian
and Indian names you put on it —or perhaps these contribute to
make them even more unpredictable. There is, in this zone (the
Fourth Quadrant) this limit to knowledge that could never been
reached, no matter how sophisticated science ever got. The problem
is that the rarer the event, the less tractable and the less we know
about how frequent its occurrence —yet the rarer the event, the more
confident these "scientists" were about it1. What I did was not so
much assert this impossibility to ever know anything about these
matters —this was a problem raised throughout history by a long
tradition of philosophers, including Sextus Empiricus, Algazel,
Hume, and many more. It was to produce a mechanism for decision-
making that would not suffer from these errors.
But it took about several million copies, a crisis, a dozen of
articles in scientific journals (by this author), several hundred more
(by others), several thousand pieces of hate mail by economists, six
smear campaigns, and a revamped second edition of The Black Swan
for the message to go through without distortion —no, we don't need
to spend time predicting Black Swans with complicated models
coming from chaos-complexity-catastrophe-fractal theory. The
answer is simpler: given that we know what is fragile to them, and to
model error, the solution is of course to build a world that is robust
to them, something mother nature has done admirably.
I used the word "robust". Then I realized that, well, mother
nature was not just "safe". When it comes to Black Swans, "robust"
might not be enough. In the long run everything fragile breaks given
the ruthlessness of time —yet our planet has been around for three
1 This probabilistic limit has been shown several ways, empirically in my
Fourth Quadrant paper (2008) —not a proof but an empirical argument —
and philosophically-mathematically with the then-doctoral student in
philosophy of science Avital Pilpel (2002) and the mathematician Raphael
Douady (2010).
12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
billion years and, convincingly, robustness can't just be it: you need
perfect robustness for a crack not to show up and crash the system,
in other words for the system to regenerate itself continuously by
using Black Swans. You need Black Swan-loving units.
Between Hydra and Damocles
In a Roman evolution of a Greek myth, the Sicilian tyrant
Dionysius II has the fawning courtier Damocles enjoy the luxury of a
fancy banquet, but with a sword hanging over his head, tied to the
ceiling with a single hair from a horse's tail. ( The original Greek
mythology was more ominous. Tantalus, the titan, who immolated
his own son Pelops and gave him as food to the godsiii, was punished
by the Gods who made him attend a banquet, and hung a rock to a
string above his head. )
The sword of Damocles was meant to illustrate the side-effect of
power and success: you cannot get it without this continuous danger,
this feeling of insecurity —someone out there will be wishing for you
to be toppled. This is true —Black Swans will be out there to get you.
Charles Tapiero and I later formalized the idea concerning company
size: we figured out that if success generates size, then companies
that grow are doomed since, effectively size brings disproportional
fragility to Black Swans. Further, sophistication brings fragility to
Black Swans (as has been brilliantly adumbrated by the archeologist
Charles Tainter). But, and that is clear, it does not have to be so. You
need offsetting antifragility; and a great dose of it.
THE TRIAD
I stop; so, for now, there are three different layers:
a) Fragile -can mostly suffer from shocks, disorder, etc.
b) Robust: in the sense of not fragile, unbreakable (or hard to
break), can resist shocks.
The Triad 6

c) Antifragile: I repeat, the exact opposite of fragile; mostly Table 1 The Triad2
benefits from uncertainty and disorder, gains from shocks, some (not
FRAGILE ROBUST ANTI-
all) shocks. FRAGILE
A qualifier is in order. I said some, not all shocks, as an item will
Mythology -Greek Sword of Phoenix Hydra
not be antifragile for every possible type of disorder, but only for
Damocles,
specific exposures, what is called a local, not global property. The Rock of
items in the package on which we wrote "please mishandle", would Tantalus
Mythology- New Dr John Nero Tulip Fat Tony,
certainly benefit from being brutalized by humans, but are likely to
York Yevgenia
suffer from a nuclear attack. So antifragility here is associated with a Krasnova
specific source of disorder —and with a specific intensity. A very
Ways of Thinking Modernity Medieval Ancient
small dose of arsenic might benefit me, a large one would prevent me Europe Mediterranean
from finishing this book.
Table 1, conveying the central idea of this book presents the Mathematics Concave Linear Convex

triplet of attributes, but with a warning. The robust here in the Knowledge Explicit Tacit Tacit with
middle column is not equivalent to Aristotle's "golden middle", such convexity
as, say, generosity being the middle between profligacy and
Epistemology True-False Sucker-
stinginess—it can be, but it is not necessarily so. Robustness is not Nonsucker
always good —you may want some things to break, and break early.
Life and Thinking Tourist Flâneur with a
Antifragile is desirable, in general, but not always as there are cases Personal and large private
in which antifragility will be costly, extremely so. Further, it is hard intellectual library
to consider fragility undesirable — as Nietzsche wrote, one can die Financial Corporate Niche worker, F** you money
dependence employment minimum wage
from being immortal. earner
Biological & Efficiency Redundancy Degeneracy
Economic Systems (functional
redundancy)
Science/Technology Directed Opportunistic Aggressive
Research research Tinkering
(convex
bricolage)
Errors Hates Mistakes are Loves mistakes

2 There is this ratchet-like property of fragility (i.e., irreversibility from

breaks) that is at the core of the nonlinearity: a package doesn't break, then
manage to fix itself. What matters is the route taken, not just the destination.
This makes the analysis much simpler: as it makes it easier to identify the
fragile and put it in the left column.

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The Triad 7

FRAGILE ROBUST ANTI- FRAGILE ROBUST ANTI-

FRAGILE FRAGILE

mistakes just consumption,

information say carbs, etc.)
Learning Classroom Real life, Real life and Philosophy/Science Rationalism Empiricism Skeptical,
pathemata library subtractive
mathemata empiricism
Separable Holistic
Human Body Mollification, Recovery Hypertrophy,
atrophy, Hormesis, Economic Life Owner operated
"aging", Mithridatism Finance Short Option Long Option
sarcopenia
Political Systems Nation-State; City-State; Knowledge Positive Negative Art
Centralized Decentralized Science Science
Post- Nomadic and Decision Making Acts of Acts of
agricultural hunter- commission omission
Modern gatherer tribes ("missed
Settlements opportunity")
Knowledge Academia Erudition
Ethics The weak The strong The Literature E-Reader Book Oral Tradition
(Aristotelian) Magnificent Business Industry Small Business Artisan
Decision Making Model-based Heuristic-based Convex Food Food Restaurants
probabilistic decision heuristics Companies
decision making Finance Debt Equity Venture
making Capital
Thinkers Plato, Menodotus, Nobody comes Finance Public Debt Private debt
Aristotle, Popper, Hayek, to mind with no bailout
Averroes Nietzsche, explicitly, General Large Small but Small but not
Wittgenstein, perhaps specialized specialized
John Gray Hegel's General Monomodal Barbell
sublation
Economic Life Economists Anthropologists Religion Finance Banks, Hedge Hedge Funds Hedge Funds
funds (some) (some)
Reputation Academic, Postal Artist, Writer managed by
(profession) Corporate employee, economists.
executive, Truck driver, Business Agency Principal
Pope, Bishop, train conductor Problem Operated
Politician
Reputation (class) Middle Class Minimum wage Bohemian,
persons aristocracy, old
money The book will navigate the triad in Table 1, straddling a variety
of disciplines and human activities. Of course the reader will gain
Medicine Additive Subtractive
some help with insights from the characters Nero Tulip, Fat Tony,
treatment treatment
(give (remove items and Yevgenia Krasnova. But let me give one entertaining application
medication) from for now.

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The Denigration of the Natural 8
A Word on Ethics
We can illustrate both reputational fragility and ethics of the
middle class with an example that is stretched to extreme —and
linking both seemingly independent concepts. Each person
understands the point in his own profession or domain, which is why
it pays to multiply examples around the central idea. I was in Milan
trying to explain antifragility to Luca Fromenton, my Italian
publisher. I was there partly for the Moscato desert wines, partly for
a convention in which the other main speaker was the economist xx.
I hold that xx models (and ideas), like many propagated by the
economics establishment, cause fragility, given that they build
systems vulnerable to Black Swans. So I presented Luca with the
following thought experiment: if I beat up the economist publicly,
what would happen to me (other than an ethnological experience in a
Milanese jail and a publicized trial causing great interest in
antifragilita). He thought for a second ...well, it would be great for
book sales. Nothing I can do as an author that makes it to the front
page of Il Corriere della Sera would hurt my book, to the opposite.
No scandal, not a single one (outside of disputes of authenticity)
hurts an artist or writer3.
Further, such spontaneous action would give my thinking the
stamp of heroic authenticity. And the physical workout regimen I
follow (based on the ideas of antifragility discussed in Chapter x)
would be also validated. It would be even better if I were put to death
by the members of the economics establishment. Socrates, by
proudly seeking death, enhanced his ideas because they were
antifragile —information often is.
Now let's say I were a middle executive employee of some
corporation listed on the London Stock Exchange. What would
happen to me after my immediate termination? My termination and
3 The French have a long series of authors who owe part of their status to
their criminal record —which includes the poet Ronsard, the writer Jean
Genet.
12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
arrest record would plague me forever. My downside is greater than
my upside, forcing me to play by certain rules. Someone earning
close to minimum wage, say a construction worker or a taxi driver,
does not overly depend on his reputation and is free to have his own
opinions. But he would be just robust compared to the artist who is
antifragile. A midlevel bank employee with a mortgage who would be
fragile to the extreme. In fact he would be completely prisoner of the
value-system, yet corrupt to the core — because of his dependence on
the annual vacation in the Barbados.
So I will show —what the Greeks knew but collected in
observations here and here from Xenophon to Aristotle without any
repository for this central ethical claim —that the middle class can be
corrupt, that is ethically fragile or nonrobust; it is not free with its
opinions (and its time). Things have gotten much worse since then.
This plagues academia; for instance I met so many economists who
agree that their publication system is wrong, their methods
nonsensical, but they need to publish within the system because of
the requirements for their careers (and corner office). They are
trapped. They get pretty angry when I call it prostitution (though
prostitutes are relatively the most robust persons in this planet and
free in their opinion as they face no reputational downside).
In the U.K. and France, someone from an aristocratic
background is generally less of a prisoner, particularly when he is
secure in his social status.
THE DENIGRATION OF THE NATURAL
The absence of such word and concept from main human
vocabularies is quite alarming. You can therefore see that the topic of
this book is not just antifragility, but also the defects leading to its
absence from human vocabulary: we humans have a natural,
seemingly innate, bias to think that systems do not improve on their
own, without our intervention or guidance —coupled with the
Aristotelian notion that we ourselves know where things should be
going, what I call the teleological fallacy.
The Denigration of the Natural 9
There is a mental defect psychologists call illusion of control
that was meant to show how "irrational" (according to some norm of
behavior) we humans can be by giving ourselves the illusion to
manage the uncontrollable around us: for instance gamblers cannot
resist the pressure to do something to improve the outcome, such as
throw the die with violence when they need a high number, or throw
it softly in order to get a low one. Traders wear the same "lucky" shirt
(often unwashed) to improve their day This mental bias leads to all
manner of patently "irrational" actions such as belief in paranormal,
alternative medicine, and many such actions often put under the
umbrella magical thinking. Now the irony is that while this bias was
devised to expose patently nonscientific fields, it largely affects many
things you learn in college, particularly in social science. Many
matters we deem scientific are just the emanation of that very
illusion of control masquerading as science.
Why is the scientific illusion of control worse than that of the
pedestrian version? Because, tout simplement, these gamblers
superstitions are benign, not much worse than doing nothing, but a
doctor tinkering with your system or an army playing with a complex
system with opaque causal links, say by invading Iraq or intervening
in the environment, is far worse than nothing.
For this illusion of control leads to the denigration of acts of
omission (not doing something, letting things run their own course,
leaving nature or the human body alone) as compared to doing
something (such as operating on a patient or prescribing
medication). This, we will see is the reason medicine used, until
recent history, to kill more patients than it saved (and did not even
get close to realizing it), and economists of the sophisticated
equation-carrying variety, I will hope to convince you, have been
particularly harmful to the economic health of societies —central
bankers , and finance ministers, by tinkering with economic life, have
caused massive instability.
It has taken medicine 2500 years to realize that, like
epistemology, healing and therapy are largely subtractive, not
additive: you can cure so many diseases by removing elements from
12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
peoples' lives (say nonnatural foods, carbohydrates, grains, heroin,
medications, nicotine, bosses, spouses, cars, rude secretaries, New
Jersey, etc), not just by adding (medication, computers,
technologies).
In the past we used to think that fate or the gods intervened to
repair, improve, or change things so we felt justified to leave things
to their own devices. But a switch took place close to two centuries
ago. Since the enlightenment, that so-lauded enlightenment, we have
been prone to the bias of thinking we were needed to intervene, or,
what's worse, that we humans are badly needed.
Aside from the illusion of control, there is another associated
disease, that of rationalism, which I do not use to imply "rationality"
but, rather, the need for visible (and understandable) "reasons": we
have a tendency to believe that we comprehend the logic of things
just a bit more than warranted from our empirical record —and our
epistemic arrogance, that difference between what we know and
what we think we know is particularly large in what is called a
complex domain, fraught with massive nonlinearities. Three fields
have been particularly infected with the destructive aspect of such
university-imported rationalism: nature, socio-economic life, and the
human body, matters in which we have historically combined a
degree of low competence with a high rate of intervention. Indeed we
will catalogue the effects of rationalism in both social science and
economic theory and pre-modern medicine— and this book will show
evidence that much of what we are told was derived from rational
top-down university driven or taxpayer funded discoveries were the
result of either unrelated trial and error, or, similarly, plain luck. In
other words, from the antifragility of systems in love with
randomness.
Accordingly, the theme of this book is first, antifragility (as the
source of many things in life), second, the denial of antifragility, and,
finally, how our top-down rationalism and intellectualization cause
fragility, dramatic fragility, while thinking it can "improve matters"
and which areas are infected.
... And a Certain Respect for the Natural 10

... AND A CERTAIN RESPECT FOR THE NATURAL mathematician envious of his success, but especially a human
defense mechanism against thinking we were that stupid to miss on
If our formal systems denigrate the natural, and don't have a the point. For, before he connected the dots, some mathematicians
name for fragility, it does not mean that our actions neglect it. I saw and scientist pointed out here and there some of the properties of
two applications of the problem. these "roughness" though nobody put them together as a general
First, in Through the Language Glass, the linguist Guy view of nature —it is, sadly, a property of academics to be unable to
Deutscher reports that many primitive populations, without being connect the dots.
color blind, use only two or three colors in their communications. Now the exact same intellectual blindness affects the property of
But they can match strings to their corresponding color, so they can antifragility; it appears here and there when people resort to
detect the differences between the various nuances of the rainbow, mathematical language, but is not part of the expressed
but they do not express these in their vocabularies. Ancient consciousness.
Mediterranean text, Greek and Semitic, also had a reduced Next, let us turn to the closest thing I know to the philosopher's
vocabulary of a small number of colors polarized around the dark stone, of which I will make a big deal in this book.
and the light —Homer and his contemporaries were limited to about
three colors in their expression: black, white, and some
indeterminate part of the rainbow, often subsumed as red. The
British prime minister, Gladstone, an erudite, who was first to make
this discovery (and was reviled for it), attributed our modern
sensitization to the different nuances of color to a cross-generational
training of the eye. But, nevertheless, regardless of the presence of
these variations of color in the culture of the time, people were
shown to be able to identify the nuances —unless physically color
blind.
Second, consider the following remark by the great
mathematician Benoit Mandelbrot who developed fractal geometry:
“Clouds are not spheres, mountains are not cones, and bark is not
smooth, nor does lightning travel in a straight line”, he has written,
contradicting more than 2000 years of misconceptions. Triangles,
squares, and circles seem to exist in our textbooks more than they do
in reality—and before Mandelbrot we hadn’t noticed that. The
problem, of course, is that few realized that they had not noticed it
before him. Do you realize that we spent 2000 years with the truth
staring at us without realizing it?iv. Mandelbrot subsequently
suffered quite a bit —initially from deniers, subsequently from people
who claimed that he said nothing new, typically from the

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
 11
Chapter 2. Jensen's Inequality, or The
Intelligence of Time
Grandmothers— How mathematicians can become bright —
Now the secret of life. There is a hidden —and very simple
mathematical property behind things, behind the reason things
survive and flourish —and manage to survive and flourish against
that inexorable debunker of fragility, time, time that smartest of all.
And what is this simple, very simple property?
The property had been heuristically known by practitioners for a
long time, but not by the formal bodies of knowledge. It is called
Jensen's inequality, by one Jensen, as we will see, but its first
modern use (and application) was by a man who got quite a bit
mishandling by history.
On March 29, 1900, a student at the Sorbonne who worked as a
stockbroker in order to support himself, Louis Bachelier, defended a
doctoral thesis in mathematics at the University of Paris, then known
as the Sorbonne. The idea was about how to value financial options,
these asymmetric contracts that give the right but not the obligation
to buy a stock at a specified price. The thesis was poorly received by
the head of the committee, and Bachelier received the grade
euphemistically called "honorable", not the "très honorable" that was
necessary to get a real academic position. It was said to lack in rigor
but there was also this unattractiveness of the financial topic for the
committee. Bachelier never managed to have a decent academic
career as he was plagued with the stigma, along with an additional
black ball when, in his fifties, he was about to get his first real
position of professor. Many people later rediscovered his results in
the pricing of derivatives, and two people Robert Merton and Myron
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Scholes received the Bank of Sweden Prize in Economic Sciences
(called the "Nobel" in economics) as the Swedish academy had the
illusion that they discovered his equation —ignoring the hordes of
predecessors who had more realistic equations, including Bachelier.
Merton and Sholes had just put their name on someone else's
equation. In addition, in that very same doctoral thesis, Louis
Bachelier discovered properties of random processes that were
rediscovered (and publicized) by Einstein five years later.
Note that he was an option trader (who disliked his career) —
and this book, which has almost nothing to do with finance, will be
driven by similar intuitions by yours truly, a former option trader
(who disliked his career). Now that I got the Bachelier story off my
chest, let's forget about options for now.
The more formal discovery took place as follows, five years later.
On 17 January 1905, one Johann Ludwig Jensen, said the following
(translated into the New Jersey version of English of Fat Tony, whom
we will meet —again— in Chapter x): there are many cases in which
average doesn't matter in the long run.4 For in some instances the
average underestimates the effect; in other cases the average
overestimates it. Jensen, in fact, was generalizing an earlier, almost
a century old result by the French mathematician Augustin-Louis
Cauchy. Neither he nor the audience realized how fundamental this
result was for about everything —no more than the audience in the
thesis committee of Monsieur Bachelier, knew the import of that
poor man's work. The paper by the Dane was published the
following year in French in the Swedish mathematical journal Acta
Mathematica with the eloquent title "sur les fonctions convexes et les
inégalités entre les valeurs moyennes" —and went unnoticed for a
long time, a very long time, as, 105 years later I can hardly find
people who can assess its consequences.
4 Jensen, J. L. W. V. (1906). "Sur les fonctions convexes et les inégalités
entre les valeurs moyennes". Acta Mathematica 30
 12
Jensen's result describes the following, well understood by
regular people, but almost always lost whenever someone does too
much mathematics (or perhaps people inclined to do mathematics
have some mental blindness to these things): you do not cross a
river that is on average four feet deep. More generally,
for some systems, the long run benefits or harm do not depend
on the average but on the dispersion around such average.
In other words, for anything nonlinear, which we will define,
variation can matter more, much more than the average (in
proportion to such linearity). And my very definition of fragility here
in this book is when the system does not like variability; antifragility
is the reverse.
Let's consider two examples.
Your Grandmother at 70 Degrees
First example, the fragile case. If you put your grandmother at
zero degrees Fahrenheit for an hour (around -18 Celsius), then at one
hundred and forty degrees for another hour (around 60º C), for an
average of the very desirable seventy degrees (21º C), you would most
certainly end up with no grandmother, a funeral and, possibly, an
inheritance. So the average here is of no significance when one is
fragile to variations. It is easy to see that the dispersion in possible
thermal outcomes here matters much more than the average.
Three Hours at the Gym
Second example, a situation that benefits from variation. Take
two individuals, persons A and B, who go to the same gym.
a) Person A spends over three hours lifting up and down over
his head a very small weight, of, say, 1 pound, for a total of 1000
times —making a total of 1000 pounds which we compute by
multiplying the weight by the number of times lifted.
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b) Person B spends three hours less five minutes lifting no
weights at all, just chatting with the otherwise bored gym employees,
then does an Olympic lift, from the floor until he holds over his head
for a few seconds close to 200 pounds of weights; he then puts it
down on the floor. He repeats the exercise five times, for a total of
1000 pounds, then goes home to drink tea with his brothers.
So both persons have lifted the exactly same total, and the
exactly same average over three hours. Over the long run, Person A
gets almost no benefit at all, for all the boredom encountered
counting to 1000, while person B, over time, will start looking like
someone who will be more motivated in removing his shirt at the
beach.
Let me add a couple of additional applications.
Traffic
Traffic highly nonlinear. When I take the day flight from New
York to London, and I leave my place around 5 AM (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. When I leave my place for
the later flight at 6 AM, there is almost no difference in travel time.
You can add more and more cars on the highway, with no or minimal
impact concerning time spent in traffic.
Then, mystery, you increase the number of cars by 10% and the
travel time jumps up by 50% (I am using approximate numbers).
Look at Jensens' inequality at work: the average number of cars does
not matter at all. If you have 90,000 cars for one hour, then 110,000
cars for another hour, traffic would be much, much slower than if you
had 100,000 cars for two hours5.
5
I have used this argument to try to make central banks avoid printing
money: you print and print with no effect, then a jump in inflation. We will
see how so many economic results are completely cancelled.
Procrustean Beds and Jensen's Inequality 13
So travel time is fragile to the volatility of the number of cars on
the highway, not to their total number.
How to be Stupid
Now how does Jensen's inequality work? The details (and
technical matters) will be relegated to Chapter x, but, take for now
the following complete principle:
If you gain more when you are right than you are hurt when
you are equally wrong, then Jensen's inequality will benefit
you in the long run; and the opposite.
There is no other principle, none, and we can re-express not
most, but all ideas on growth, evolution, and development, and
stability, using it —from Darwin-Wallace theories of evolution to the
very idea of epistemology, via of course risk management and
modern economics6. Accordingly, you don't have a need for much of
what is commonly called intelligence, knowledge, insights, skills, and
these complicated things that take place in the brain cells. For you
don't have to be right that often. All you need is wisdom to not do
foolish things to hurt yourself (some acts of omission) and know if an
outcome if fine (after its occurrence), not before. Otherwise, if
Jensen's inequality works against you, sorry, but you are doomed, no
matter how intelligent you are and how many PhDs from Harvard
are on your staff—for there may be a small thing that will escape you
and hurt you very badly. The hair holding the sword of Damocles will
eventually break, in time, with certainty.
6 This is a technical note for those who need it now. Jensen's inequality
translates into; the average of a convex function of a variable x is higher
than the function of the average of a variable x. Given that in probabilistic
terms, the average is the expectation of a random variable, we can already
see biases emerging. If you gain more than you lose, then you are convex,
otherwise concave. Anything nonlinear has local convexity or concavity.
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I learned about Jensen's inequality in class at Wharton, in the
lecture on financial options that determined my career, and
immediately realized that the professor did not understand it himself
—he understood it in spots, but not everywhere. It hides where we
don't want it to hide. The class was on financial options. Options
benefit from Jensen's inequality.
I will relegate ample details to Chapter x, but this inequality
implies the following: that there are some conditions in which
variability benefit, for the same average, the one who had more
extremes. And there are conditions under which the variability
destroys things —like the grandmother.
PROCRUSTEAN BEDS AND JENSEN'S INEQUALITY
Another way to deal with the notion of average is to look at it as
a Procrustean bed. Procrustes was a brigand who in order to make
the travelers fit in his bed, cut the limbs of those who were tall, and
stretched those who were short. But he had the bed fitting the visitor
with total perfection. I've used the Procrustean bed analogy to
describe situations where the simplification is not a simplification.
The average temperature of 70º Fahrenheit does not simplify the
situation for your grandmother. It is a Procrustean bed —and these
are often committed by economic modelers since a model by its very
nature is a simplification. You just don't want the simplification to
distort the situation to the point of being harmful.
Why Planes Don't Arrive Early
To see how Jensen's inequality works with estimation and
model error, consider the following. I've taken the very same Paris-
New York flight most of my life, from the days when luggage did not
have wheels. The flight is about 8 hours. I recall many instances in
which I arrived early, about twenty minutes, no more. But there have
been instances in which I got there more than 2 hours late, and, in
one instance, more two days to get home.
Procrustean Beds and Jensen's Inequality 14
So uncertainty causes flying time to increase, not decrease. Or to
just decrease by minutes, and increase by hours. Anything
unexpected is likely to increase flying time. This comes from the
same effect of Jensen's inequality.
This also explains the irreversibility of time, in a way, if you
consider the passage of time as an increase in disorder.
Some Errors Go One Way
These examples showing that under nonlinearities, the average
is meaningless illustrate the type of errors stemming from a
reduction: in situations of fragility, a simplification goes in one
direction, typically causing Procrustean bed-style the
underestimation of randomness and fragilizes (or ignores
antifragility). And remarkably, as I said earlier, those we deem
intelligent, as they tend to succeed in classes (particularly
mathematics) and do well on SAT-style exams, then make it to, say,
MIT, in other words, the nerds, are even more vulnerable to this
mental distortion, since the very definition of intelligence we use is
grounded on their ability to focus, hence contract and simplify, deal
with the average instead of a richer set, and become blind to these
small nuances. And the core of things —of life— can reside in these
nuances.
Do not cross a river if it is six feet deep, goes the adage. Let me
repeat. Simply whenever you are estimating something that depends
on a nonlinear variable, the average does not matter, and the
information gotten from it may be irrelevant. So "for simplification",
telling your grandmother that she can expect "70 degrees" will
certainly kill her. And a model, a mathematical model, is precisely
what does simplifications. Yet this estimation —and use— of the
average is what economists do for a living. We will see why modeling
is doomed in many cases whenever you hear "optimal" owing to such
sensitivity to error.
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I said that the average does not matter in some situations. It
overestimates the benefits (underestimates the dangers) in the event
of fragility; it overestimates it in the case of antifragility.
Social Fairness
The same phenomena explains very vicious incentives by the
pseudocapitalistic system we currently have in place, with managers
having incentives without disincentives —which the general public
doesn't quite get. There is a difference between a manager running a
company that is not his and the owner-operated business in which
the manager does not need to report numbers to anyone but himself.
At the time of writing the stock market is lower between 25%
and 50% over the last decade, so retirees are poorer in the aggregate
(particularly that they were expecting the exact opposite outcome)
while managers of the companies composing the stock market,
thanks to the asymmetry of the stock option, are richer in the
aggregate. Even more outrageous is the fate of the banking industry:
banks have lost more than they ever made in their histories, with
their managers being paid trillions in compensation.
Now let me use the sense of outrage of the reader to give a sense
of how Jensen's inequality works: these managers get much more
upside than downside. They have the opposite of "don't cross the
river if it is on average four feet deep": volatility benefits them since
they only get one side of the payoffs. They too benefit from variations
—the more variations, the more value to this asymmetry. 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: markets does not move.
Visibly Path 1 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.
Thales of Miletus 15

And of course society —here the retirees —has the exact

opposite payoff. Retirees get less upside than downside. Society pays Chapter 3. Thales' Secret
for the losses of the bankers, but gets no bonuses from them. If you
don't see this as theft, you have a problem.

Next, let us see how all of Jensen's inequality links with THALES OF MILETUS v
knowledge.
An anecdote appears in Aristotle's Politics concerning the story
of the presocratic philosopher and mathematician Thales of Miletus.
It is the center of both this entire idea of antifragility and its
denigration. And the remarkable aspect of this story is that Aristotle,
arguably the most influential thinker of all times, got the central
point of his own anecdote backwards. I am not saying that to
denigrate Aristotle, but to assert the main idea of this book:
intelligence makes you denigrate antifragility. And, as we said,
knowledge is less important than its payoff.
Thales was a Greek-speaking Ionian-Phoenician philosopher
from the coastal town of Miletus in Asia Minor, and like some
philosophers, enjoyed what he was doing. Miletus was a trading post
and had a mercantile spirit. But Thales, as a philosopher, was
characteristically poor. So he got tired of his buddies with more
transactional lives telling him that "those who can, do, and others
philosophize". He set to prove that he could both “do” and
philosophize, and that he chose to philosophize out of love and
respect for the occupation, not because he had no other option. So he
performed the following prowess: he put a down payment on every
olive press in the vicinity of Miletus and Chios which he got at low
rent. The harvest turned out to be extremely bountiful and there was
demand for olive presses, so he let the owners of olive presses on his
own terms, realizing large sums of money. He did indeed collect very
large, perhaps not enough to become massively wealthy, but enough
to make the point that he could talk the talk and was truly above, not
below, wealth.
The story has many morals, all of which permeate this book.
But the central one is Aristotle's accountvi: "But from his knowledge

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On Innovation and Intelligence 16
of astronomy he had observed while it was still winter that there
was going to be a large crop of olives..." So for Aristotle, the reason
was Thales' superior knowledge.
If we look at it with the eyes of antifragility, the story is
altogether different. Thales was in a position to take advantage of
Jensen's inequality. The key to this book is that he did not need to
understand too much the messages from the stars.
Simply, he had an asymmetric payoff, like a financial option,
which he bought cheap: there was no need to be right on average —so
long as you pay a low price that allows you to have greater upside
than downside. His payoff was so large that it afforded him to be
wrong very, very often and still make a bundle in the long run.
This is the center of my ideas about knowledge. We don't need
to know what's going on when we buy cheap.
The giant of rationalism, the Medieval philosopher Averroes
(Ibn Rushd) considered Aristotle the supreme expression of human
intellect —rationalism, reason. And visibly this is the very reason
Aristotle missed the point, because he overestimated human
rationalism—the reason of Thales' success was imparted to
knowledge about the stars, or about the future coming from the stars,
not from the nature of the bet.vii
Which brings me to how we got to be where we are today.
ON INNOVATION AND INTELLIGENCE
To see how overvalued our notion of human intelligence as a
director of human activities, consider the story of the wheeled
suitcase. I carry a large wheeled suitcase filled with books in all my
travels. It is heavy (books that interest me when I travel are always
hardcover —I don't use eReaders for hedonic and intellectual reasons
as I remember much better what I read in books).
In March 200x, I was rolling that generic, heavy, book filled,
suitcase outside the JFK international terminal and, looking at the
small wheels at the bottom of the case and the metal handle that
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helps pulling it, I suddenly remembered the days when I had to haul
my book-stuffed luggage through the very same terminal, with
regular stops to rest and let the lactic acid flow out of my sore arms. I
could not afford a porter and, even if I did, I would not have felt
comfortable doing so. I have been going through the same terminal
for three decades, with and without wheels, and the contrast was
eerie. It struck me how lacking in imagination we are: we had been
putting our suitcases on top of a cart with wheels, but nobody
thought of putting tiny wheels directly under the suitcase.
Can you imagine that it took close to six thousand years between
the invention of the wheel ( by, we assume, the Mesopotamians) and
this brilliant implementation (by some luggage maker in a drab
industrial suburb). And billions of hours spent by travelers like
myself lifting luggage through corridors full of rude custom officers
(often French).
Worse, this took place three decades after we put a man on the
Moon. And consider all this sophistication used in sending someone
on the Moon, and its totally negligible impact on my life, and
compare it to this lactic acid in my arms, pains in my lower back, and
sense of helplessness in front of a long corridor. Indeed, though
extremely consequential, we are talking about something trivial: a
very simple technology.
But it is only trivial retrospectively –not prospectively. All those
brilliant minds you see at conferences who discuss Gödel, Shmodel,
Riemann’s conjecture, quarks, shmarks, had to carry their suitcases
through airport terminals, without thinking about applying their
brain to such an insignificant transportation problem. And even if
they did, they probably would not have gotten anywhere. So just by
intelligence we cannot go very far. You need action, antifragile action.
This tells us something about our mapping of the future. We
humans lack imagination, to the point of not even knowing where
tomorrow’s important things look like. We use randomness to spoon-
feed us with discoveries —which is why antifragility is necessary.
Creative and Uncreative Destructions 17
The story of the wheel is even more humbling than that of the
suitcase: we keep being reminded that the Mesoamericans did not
invent the wheel. They did. They had wheels. But the wheels were on
small toys for children. It was just like the story of the suitcase: the
Mayans and Zapotecs did not make the leap to the application. They
used vast quantities of human labor, corn maize, and lactic acid to
move these gigantic slabs of stone in the flat spaces ideal for
pushcarts and chariots where they build their pyramids. They even
rolled them on logs of wood. Meanwhile, their small children were
rolling their toys on the stucco floors (or, perhaps, not even doing
that as the toys might have been solely used for mortuary purposes).
Something sneaky in the process of discovery and
implementation –something people usually call evolution. We are
managed by small little (or large) accidental changes, more
accidental than we admit. We talk big but hardly have any
imagination, except for a few visionaries. We need some randomness
to help us out —with a double dose of antifragility. And randomness
plays a role at two levels: the invention and the implementation. The
first point is not overly surprising, though we play down the role of
chance, especially when it comes to our own discoveries. But I was
shocked that it took me a lifetime to figure out the latter:
implementation does not necessarily proceed from invention. It too
requires luck and circumstances. The history of medicine is littered
with the strange sequence of discovery of a cure followed, much later,
with the implementation –as if the two were completely separate
ventures. Just taking something to market requires struggling
against a collection of naysayers, bureaucrats, empty-suits,
mountains of details that invite you to drown, and one’s own
discouraged mood on the occasion. This is where all you need is
wisdom to realize what you have on your hand.
Another element to retain for now: the simplest "technologies",
or perhaps not even technologies but tools, such as the wheel, are the
ones that seem to run the world — what we call technologies have a
very high mortality rate. Just consider that of all the means of
transportations that have been designed in the past 3000 years since
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the attack weapons of Hyksos and the drawings of Philo of
Alexandria, individual transportation is limited to bicycles and cars.
CREATIVE AND UNCREATIVE DESTRUCTIONS
Another one who got a version of the point, but without
understanding the nature of the process is the economist Joseph
Schumpeter. He vaguely understood that some things need to break
for the system to improve —what is labeled as creative destruction —
a term coined by Karl Marx. But a reading of Schumpeter shows that
both he and his detractors (the Harvard economists who thought that
he did not know mathematics) missed both the notions of
antifragility as convex, the consequences of Jensen's inequality, and
the opposition between tinkering and top-down planning. Indeed
there is a pattern: whenever you hear some economist accusing
another for being not mathematical enough, you can be sure of the
sweet irony that he himself got into a Procrustean bed. He most
probably missed the central point of Jensen's inequality because of
his simplification.
The Fallacy Of Aggregation
Let me report a paradox. Business life, that is the economy, is
antifragile when left on its own. But, for that, a single business is
necessarily fragile, exposed to breaking —evolution needs organisms
(or their gene) to die when supplanted by others. But a businessman
is not too interested in suicide; he is therefore necessarily interested
in seeking antifragility or, at least, some level of robustness.
So there is a problem of aggregation, in which the property of
the sum (the aggregate) varies from that of each one of the parts.
Now what is the solution? There is none. People come to me for
advice that is local to them, that is their own career; they go to
business school to learn how to survive while taking low risks —but
the economy wants them to take a lot, a lot of risks themselves.
The Charlatan, the Academic, and the Showman 18
Government interventions to save companies fragilizes. But wait,
there is a solution: overconfidence on the part of individual economic
agents, the overestimation of their chances of success and
underestimation of risks in their businesses. In other words, foolish
risk taking is healthy for the economy —provided people don't take
the same risks —and foolish for the person involved.
Now, a bit of history to tie matters together.
THE CHARLATAN, THE ACADEMIC, AND THE SHOWMAN
Our misunderstanding of tinkering, antifragility and how to
tame randomness is weaved into our institutions --though not
consciously and explicitly.
There has been a conflict between two classes of people and
methods, two opposite ways of doing things and attaining
knowledge: those who rely on thinking and theorizing and those who
rely on experience, with or without thinking and theorizing –and use
that option. The first category include those called the rationalists,
the Platonists, the classicists, the Weberian rationalists and
rationalo-bureaucratists, the top-down social engineers, the
orthodox economists, the social planners, the venerable members of
the various academies of sciences, etc. The second one includes 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, and their memories have been treated very badly by
history. Formal thinkers and theorizing theorizers tend to write
books; seats-of-the-pants people tend to be practitioners who are
often content to make the money and make discourses at the bar.
Their experiences are often formalized by the academics. So
surviving history has been written by the rationalists because of a
mental disease –our search for order and thirst for theories-- that
gives us the illusion of design. Take the discovery of chemotherapy
for the treatment of cancer. People do not realize that it came out of
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the side effects of mustard gas, not the “progress of medicine”. The
rationalists –all academics tend to be – want you to believe that
reasoning has a monopoly on the production of knowledge.
So the final point here is about those called charlatans. For a
long time official medicine had to compete with the crowd of the
flashy showmen, mountebanks, quacks, sorcerers and sorceresses
and all manner of unlicensed practitioners. Some were itinerant
showmen, going from town to town, in which they carried out their
curative acts in front of a large gathering. They could perform
surgery on the occasion while repeating incantations.
This category included doctors who did not subscribe to the
dominant Graeco-Arabic school of rational medicine, developed in
the Hellenistic world of Asia Minor and later grown by the Arabic
language school. The Romans were anti-theoretical pragmatic
bunch; the Arabs loved everything philosophical and “scientific” and
put Aristotle, about whom nobody seemed to have cared until then,
on a pedestal. Medicine, for the Arabs, was a scholarly pursuit and
founded on the logic of Aristotle and the methods by Galen. The
medical practitioners were the Other.
The medical establishment, whenever we see them regulated,
worried about the empirics for economic reasons as competition
made their incomes drop. So wonder they were bundled with the
thieves, to wit this long title for an Elizabethan treatise: A short
discourse, or, Discouery of certaine stratagems, whereby our
London-empericks, haue bene obserued strongly to oppugne, and
oft times to expugne their poore patients purses.
Charlatan was held to be a synonym of empirick. 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 in the
Summing Up 19
literature because they were not academics. But they left a huge
imprint on medicine.
Now, I agree that most nonacademically vetted medical
practitioners were scoundrels, mountebanks, showmen, quacks. But
let’s hold off jumping to the wrong consequences. Formalists, to
protect their turf, have always played on the logical fallacy that if
quacks are found among nonacademics, nonacademics are all
quacks. They keep doing it: all what is nonrigorous is nonacademic –
yet it does not imply that all that is nonacademic is nonrigorous. 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 Other. They had to do so for economic reasons.
Also, formal academics, seen in the light of history, were not
better than those they called charlatans –they just hid their fraud
under a weight of more convincing rationalization. They were just
organized quacks.
This closes the loop with the three stories: thinking, particularly
formal thinking, has always been the archenemy of trial and error –
hence a severe handicap for innovation and advancement. I hold that
what has been done by academic life is rather dress up random
discoveries with rationalizations, and claim credit for inventions of
others. In other words, I will show how academia and official sources
are more of a public relations machine rather than a source of
knowledge. Ex cura nascitur teoria, no contra.
SUMMING UP
I have four implications here. that will be explored in the rest of
the book
a) The Importance of Trial and Error. The first thing to comes
to mind is trial-and-error, tinkering, stochastic search, an activity
conducted by an agent who patently does not fully understand what
is going on, but is fully aware of the incompleteness of his grasp of
things. It costs you so little to search; all you need to know is whether
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what you found is acceptable to keep (hence, once again, a modicum
of this thing called wisdom). You can do so individually (you have the
option, we will see), or using a set criterion of survivability, as nature
does. We said that nature likes randomness: it is because it sees
various outcomes in the diversity among offspring, picks those it
likes best and discards the rest by dispatching them into genetic
oblivion. The great French biologist Francois Jacob who introduced
the notion of tinkering (under a variant called bricolage) into
science, argued that even within the womb, nature knows how to
select: about half the embryos undergo a spontaneous abortion –
easier to do so than dream of the perfect baby by design. Nature
understands options vastly better than humans, and certainly better
than Aristotle.
b) The Defects of Designed Systems. If trial and error is superior
to knowledge, then a) what you learn in the university lecture is less
valuable than claimed; and what you learn in the streets is
underestimated; b) as we said earlier, academics contributions to
knowledge might be grossly overhyped —as is the role of
"intelligence" (though not what we call "wisdom"). This, we will see,
is overly trivial to show and back-up with reverse evidence, which
tears apart claims of use of taxpayer money and monies directed to
the bureaucrats of the National Cancer Institute. This I've called the
"lecturing birds on how to fly" effect (academics lecturing birds on
flying, then showing you "evidence" of their contribution to the
welfare of the birds).
c) Epistemology (theory of knowledge) is ancillary to decision-
theory (what we should do). In other words whether something is
true of false is irrelevant and academic in the worst sense of the
word; what matters is the payoff, the benefits. Being wrong is not
important if it is harmless —or if it benefits us by Jensen's inequality.
Interestingly, that was the ancient's positions (Cicero, Seneca,
Marcus Aurelius, Zeno, the Roman poets, the Greek tragedians —
This Book 20

almost all except those ancients we focus on today such as Aristotle
which incidentally only penetrated the West through Arabic
thought). The reader can see that this book, by going to the very root
of the problem, becomes more a subject of philosophy —what where
it should go, as a field —rather than a discourse on innovation.
d) Primacy of heuristic (rule of thumb) knowledge embedded in
traditions. Simply, just as evolution operates on individuals, so it
does act on these tacit, unexplainable rules of thumb transmitted
through generations (or preferences expressed in your genome) —
what Karl Popper has called, in his most brilliant works, evolutionary
epistemology. But my take is that this is not because the idea
survived, but because the person who has it has survived! I will show
evidence that what finance you learn from your grandmother is
vastly superior (empirically, hence scientifically) and to what you get
from a finance class in Business School (and, of course, considerably
cheaper) and what you learn from an old trader is vastly superior —
scientifically— to scientific risk models.
I’ve been dying to vindicate the unreasonable mavericks, free-
lance entrepreneurs, innovative artists, and the anti-nerd thinkers
that have been reviled by history. Some of them had great courage –
not just courage for their ideas, but the courage to accept to live in a
world they knew they did not understand. And they enjoyed it.
My books are not standalone essays on specific topics, with a
beginning, an end, and an expiration date; they are rather chapters of
a main corpus focused on uncertainty, randomness, disorder, and
what to do in a world we don't understand, that is, decision making
under opacity. They are designed to be accessed in any order. So
while my previous work was mostly on uncertainty and the errors —
and gains— that come from such an environment we don't
understand, this one is about a more central notion: how we should
decide.

THIS BOOK

This book is about the lack of explicit knowledge in real life,

tinkering, the antifragile process of trial and error, our inhibitions in
accepting chance, optionality and the role of cheap options, and the
costs of rationalization –all in one theme: how to live in a world we
don't understand. Tinkering and trial and error is not just the
process by which the process of medical discoveries, technical
innovation, and personal knowledge grow. It is how everything in
cultural life has developed –and will continue to develop. It is
prevalent everywhere: languages, foods on the table, wines from
Chile, chips in California, ideas, even religious beliefs. This book is
about the difference between knowing, in which we are not good at
all, and doing, in which we are rather good –but in which we could be
better.

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.