Antifragile

Nassim Nicholas Taleb spent about two decades as a derivatives trader before writing Fooled by Randomness and The Black Swan, and Antifragile carries the options trader's habit of thinking about payoffs rather than predictions. His claim is that some things are harmed by volatility (fragile), some resist it (robust), and some benefit from it (antifragile), and that the difference comes down to whether the response to shocks is concave or convex. The book ranges across medicine, urban planning, education, political structure and ethics, with the street-smart Brooklyn trader Fat Tony as a recurring foil to academic experts.

Reviews were divided. Michael Shermer found it worth reading but argued that Taleb's examples suffer from hindsight bias and ignore large companies that thrive. Michiko Kakutani in the New York Times was harsh, David Runciman in the Guardian disputed its treatment of government debt, and Boyd Tonkin in the Independent called the style infuriating while agreeing that the ideas mattered. At more than 500 pages it is discursive and combative.

Risk managers, portfolio managers and anyone who sells or buys optionality will get the most from it.

1. Measure exposure, not forecasts. You cannot predict rare events, but you can determine whether a position gains or loses more from large moves, which is the question that matters.
2. Use the barbell. Keeping most capital extremely safe and a small part in high-upside bets limits ruin while preserving exposure to positive surprises, unlike a portfolio of middling risk.
3. Convexity is the edge. Positions where gains from volatility exceed losses, such as long options or cheap trials with open-ended payoffs, benefit from disorder.
4. Suppressing volatility builds fragility. Bailouts, smoothed earnings and stabilization policies hide risk until it surfaces at once, so calm conditions can be a warning sign.
5. Insist on skin in the game. Be wary of advisers, managers and bankers who collect the upside of risk while others carry the downside.

The book moves from definition to diagnosis to prescription.

1. The triad. Introduces the fragile, robust and antifragile categories, with hormesis and the way systems that are deprived of stressors become weaker.
2. Modernity's mistake. Argues that efforts to smooth out volatility, from central planning to overprotective parenting to bailouts, store up larger blowups, and contrasts decentralized Switzerland and city-states with large nation-states.
3. A nonpredictive view. Uses Fat Tony to show how to act without forecasts by focusing on exposure, and introduces the barbell of very safe and very speculative positions.
4. Optionality and tinkering. Argues that technology and wealth come more from trial and error with limited downside than from directed research, and that options let you profit without needing to understand everything.
5. The mathematics of convexity. Explains why nonlinear responses make size, speed and concentration dangerous, and how to detect fragility by measuring how harm accelerates with shocks.
6. Via negativa. Makes the case for subtraction, in medicine, diet and decision making, and for the Lindy effect as a guide to what will last.
7. Ethics. Closes with skin in the game, condemning those who keep the upside of risk while passing the downside to others.

Shares insights into how adversity can bring out the best in individuals and communities, drawing on multiple disciplines to consider such topics as the superiority of city states over nation states and the drawbacks of debt.