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Nassim Nicholas Taleb


How to Live in a World

We Don't Understand

CONFIDENTIAL (v. preliminary) DRAFT


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 Age Like Wine
fragility, and ask for the opposite of destruction, they will answer
construction. Clearly, therefore the opposite of unstable is not stable Just look around you to see how ubiquitous this antifragility,
or sturdy, but something that gains from unstability; likewise the albeit in subtle forms. I spot a gift I just received, this good bottle of
opposite of brittle is not solid —but antibrittle, or antifragile. Another 1995 Bordeaux wine not too far away from my desk. Good wine
way to view it: since the opposite of positive is negative, not neutral, improves with age, under the right conditions; it benefits from the
the opposite of positive fragility should be negative fragility (hence disorder, the chemical disturbances caused by time (for a physicist,
my appellation antifragility), not neutral which would jut convey time is increase in disorder, linked to a wonderful concept called
robustness, strength and unbreakability. entropy that we will use to connect many dots). But it only benefits
This blind spot seems universal. The expression designating up to some limit: it is not globally antifragile, just locally so. Putting
antifragility is absent from the vocabulary of the following the bottle inside the crater of a volcano would not improve its quality
lingusistic families: Romance (Italian, French, Spanish, Portuguese), too much. Breaking the bottle with a hammer would not help the
classical (Latin, Greek), Semitic (Arabic, Hebrew, Aramaic), Slavic drinking experience neither. Let me look around me some more: I
(Russian, Polish, Serbian, Croatian), Aryan (Hindi, Urdu, Farsi), am wearing this leather shoe made in the town of Limoges, in
Turkic (Turkish), and Germanic (German, Dutch, Africaans). For France, that the makers boast can last decades. Like most things
instance, in French, incassable (unbreakable) and, sometimes, artisanal, they do. These shoes do indeed benefits from use, up to a
robuste are held by the learned classes and dictionaries to be the point, so long as you do not spent too much time wading in sulfuric
exact opposite of cassable (breakable) and fragile, respectively —the acid.
very same persons who think that positif is opposite of negatif. In The difference between my robust, and even largely antifragile
Italian, I quizzed a scholarly audience at the beginning of one my artisanal shoes hints at the central disease we are facing, the fragility
lectures in Genoa, formerly known as The Most Serene Republic of of the modern version of stock-market capitalism —hence my allergy
Genoa: the opposite of fragile (or fragibile), they promptly said was for almost everything heavily industrialized. Goods made in more
infragibile, (unbreakable) so they convincingly accepted my new ancient ways, mostly in days preceding the abnormality known as the
word, minted on the spot, antifragilita. MBA security analyst, tended to be not fragile, usually robust, on the
occasion, antifragile. I am not just talking about the Acropolis in
Hydra Athens or the temple of Bacchus in Eastern Lebanon. Anything non-
consumable, such as books printed several hundred years ago,
Think of Hydra, in Greek mythology, the serpent of the classical furniture, saddles for your horse or camel, country house
underworld, equipped with a collection of heads; upon severing one near Pompeii. Incidentally, these items have the identity of the
of its heads two spring back in return. So obviously Hydra needs maker invested in them which confers a certain measure of
some hostility, rather than peace, to thrive. Alas, there is no name for robustnessii.
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.
Evolution 4

EVOLUTION almost all human theories (and I have a long list) that have emerged
since the enlightenment fragilize; they both bring this blindness to
Beyond my shoes and the mundane, consider the larger notion antifragility.
of evolution. It works precisely because it is antifragile; it loves
randomness, uncertainty, and disorder —while individual organisms Thank You, Errors
are relatively fragile, the gene pool takes advantage of shocks to
enhance its fitness. The more noise and disturbances in the system, Why? Because, ironically, aversion to uncertainty —rather than
up to a point, of course (baring those extreme shocks that lead to loving it, stochatophilia — creates risk. By refusing to accept
extinction), the more the effect of the survival of the fittest will play a randomness, you are vulnerable to illusions of certainties.
role in defining the properties, of the next generation. Say an Antifragile systems have the perfect antiacademic attribute: they
organism produces ten offspring. If he environment is perfectly love mistakes. They love absence of knowledge. They love disorder.
stable, all ten will possibly reproduce. But if there is instability, They love doing, not thinking. They don't care about being right or
killing five (likely to be on average weaker than their surviving wrong, looking bad in front of colleagues. So the reason we are here
siblings), then those evolution considers the better ones will is precisely because most of what has survived has this antifragile
reproduce, making the gene undergo some improvement. Likewise, if property (the rest did not make it). It explains why humankind has
there is variability among the offspring, then the best will reproduce, managed to get here not just in spite of mistakes, but because of
increasing the fitness of the species. them.
For an illustration of how, Hydra-style, families of organisms Let me restate the motto, owing to both its importance and our
like harm, up to a point, though not the organisms themselves, lack of awareness of it: thinking fragilizes and, furthermore, makes
consider the phenomenon of antibiotic resistance. The harder you try us blind to antifragility. This is not really bad news —for those aware
to harm bacteria, the stronger the survivors will be —unless you can of it. Such blindness is called "suckerdom" by Fat Tony, my antinerd
manage to eradicate them completely. The same with cancer therapy: character whom we will meet in Chapter 1.
quite often cancer cells that manage to survive the toxicity of
chemotherapy and radiation reproduce faster and take over. BLACK SWANS
The same love of disorder applies to economic entities,
I have named Black Swans events (capitalized) these large-scale
individuals, firms, systems, etc. But except for a few comments here
unpredictable and irregular events of massive consequence, and, in
and there in the economics literature—such as the one informally
The Black Swan, made the bold claim that most of history comes
described as "creative destruction" and such some notions on
from these events, while we worry about fine-tuning models made for
innovations and similar ideas —the idea of antifragility is absent
the ordinary that cannot possible track them or measure their
from existing theories in social science. You can even see ideas
impact. These Black Swan events can be either beneficial or harmful
formulated in different branches, like innovation and the theories of
—but human-designed top-down systems tend to be exposed to harm
financial derivatives (which we will see discuss the notion options
from Black Swans, almost never any benefit.
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 There is a Black Swan domain (also called the Fourth Quadrant)
economic sciences lie in creating fragility. But more interestingly, where these events tend play a monstrous role; there reigns a type of

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
The Triad 5

intractable randomness. What is nonmeasurable and nonpredictable billion years and, convincingly, robustness can't just be it: you need
will remain nonpredictable, no matter how many PhDs with Russian perfect robustness for a crack not to show up and crash the system,
and Indian names you put on it —or perhaps these contribute to in other words for the system to regenerate itself continuously by
make them even more unpredictable. There is, in this zone (the using Black Swans. You need Black Swan-loving units.
Fourth Quadrant) this limit to knowledge that could never been
reached, no matter how sophisticated science ever got. The problem Between Hydra and Damocles
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 In a Roman evolution of a Greek myth, the Sicilian tyrant
confident these "scientists" were about it1. What I did was not so Dionysius II has the fawning courtier Damocles enjoy the luxury of a
much assert this impossibility to ever know anything about these fancy banquet, but with a sword hanging over his head, tied to the
matters —this was a problem raised throughout history by a long ceiling with a single hair from a horse's tail. ( The original Greek
tradition of philosophers, including Sextus Empiricus, Algazel, mythology was more ominous. Tantalus, the titan, who immolated
Hume, and many more. It was to produce a mechanism for decision- his own son Pelops and gave him as food to the godsiii, was punished
making that would not suffer from these errors. by the Gods who made him attend a banquet, and hung a rock to a
string above his head. )
But it took about several million copies, a crisis, a dozen of
articles in scientific journals (by this author), several hundred more The sword of Damocles was meant to illustrate the side-effect of
(by others), several thousand pieces of hate mail by economists, six power and success: you cannot get it without this continuous danger,
smear campaigns, and a revamped second edition of The Black Swan this feeling of insecurity —someone out there will be wishing for you
for the message to go through without distortion —no, we don't need to be toppled. This is true —Black Swans will be out there to get you.
to spend time predicting Black Swans with complicated models Charles Tapiero and I later formalized the idea concerning company
coming from chaos-complexity-catastrophe-fractal theory. The size: we figured out that if success generates size, then companies
answer is simpler: given that we know what is fragile to them, and to that grow are doomed since, effectively size brings disproportional
model error, the solution is of course to build a world that is robust fragility to Black Swans. Further, sophistication brings fragility to
to them, something mother nature has done admirably. 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
I used the word "robust". Then I realized that, well, mother
need offsetting antifragility; and a great dose of it.
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

I stop; so, for now, there are three different layers:

1 This probabilistic limit has been shown several ways, empirically in my
a) Fragile -can mostly suffer from shocks, disorder, etc.
Fourth Quadrant paper (2008) —not a proof but an empirical argument —
b) Robust: in the sense of not fragile, unbreakable (or hard to
and philosophically-mathematically with the then-doctoral student in
break), can resist shocks.
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.
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
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
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
Science/Technology Directed Opportunistic Aggressive
Research research Tinkering
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.

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
The Triad 7



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
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
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
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.

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
The Denigration of the Natural 8

A Word on Ethics arrest record would plague me forever. My downside is greater than
my upside, forcing me to play by certain rules. Someone earning
We can illustrate both reputational fragility and ethics of the close to minimum wage, say a construction worker or a taxi driver,
middle class with an example that is stretched to extreme —and does not overly depend on his reputation and is free to have his own
linking both seemingly independent concepts. Each person opinions. But he would be just robust compared to the artist who is
understands the point in his own profession or domain, which is why antifragile. A midlevel bank employee with a mortgage who would be
it pays to multiply examples around the central idea. I was in Milan fragile to the extreme. In fact he would be completely prisoner of the
trying to explain antifragility to Luca Fromenton, my Italian value-system, yet corrupt to the core — because of his dependence on
publisher. I was there partly for the Moscato desert wines, partly for the annual vacation in the Barbados.
a convention in which the other main speaker was the economist xx. So I will show —what the Greeks knew but collected in
I hold that xx models (and ideas), like many propagated by the observations here and here from Xenophon to Aristotle without any
economics establishment, cause fragility, given that they build repository for this central ethical claim —that the middle class can be
systems vulnerable to Black Swans. So I presented Luca with the corrupt, that is ethically fragile or nonrobust; it is not free with its
following thought experiment: if I beat up the economist publicly, opinions (and its time). Things have gotten much worse since then.
what would happen to me (other than an ethnological experience in a This plagues academia; for instance I met so many economists who
Milanese jail and a publicized trial causing great interest in agree that their publication system is wrong, their methods
antifragilita). He thought for a second ...well, it would be great for nonsensical, but they need to publish within the system because of
book sales. Nothing I can do as an author that makes it to the front the requirements for their careers (and corner office). They are
page of Il Corriere della Sera would hurt my book, to the opposite. trapped. They get pretty angry when I call it prostitution (though
No scandal, not a single one (outside of disputes of authenticity) prostitutes are relatively the most robust persons in this planet and
hurts an artist or writer3. free in their opinion as they face no reputational downside).
Further, such spontaneous action would give my thinking the In the U.K. and France, someone from an aristocratic
stamp of heroic authenticity. And the physical workout regimen I background is generally less of a prisoner, particularly when he is
follow (based on the ideas of antifragility discussed in Chapter x) secure in his social status.
would be also validated. It would be even better if I were put to death
by the members of the economics establishment. Socrates, by THE DENIGRATION OF THE NATURAL
proudly seeking death, enhanced his ideas because they were
antifragile —information often is. The absence of such word and concept from main human
Now let's say I were a middle executive employee of some vocabularies is quite alarming. You can therefore see that the topic of
corporation listed on the London Stock Exchange. What would this book is not just antifragility, but also the defects leading to its
happen to me after my immediate termination? My termination and 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
3 The French have a long series of authors who owe part of their status to
Aristotelian notion that we ourselves know where things should be
their criminal record —which includes the poet Ronsard, the writer Jean
going, what I call the teleological fallacy.

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
The Denigration of the Natural 9

There is a mental defect psychologists call illusion of control peoples' lives (say nonnatural foods, carbohydrates, grains, heroin,
that was meant to show how "irrational" (according to some norm of medications, nicotine, bosses, spouses, cars, rude secretaries, New
behavior) we humans can be by giving ourselves the illusion to Jersey, etc), not just by adding (medication, computers,
manage the uncontrollable around us: for instance gamblers cannot technologies).
resist the pressure to do something to improve the outcome, such as In the past we used to think that fate or the gods intervened to
throw the die with violence when they need a high number, or throw repair, improve, or change things so we felt justified to leave things
it softly in order to get a low one. Traders wear the same "lucky" shirt to their own devices. But a switch took place close to two centuries
(often unwashed) to improve their day This mental bias leads to all ago. Since the enlightenment, that so-lauded enlightenment, we have
manner of patently "irrational" actions such as belief in paranormal, been prone to the bias of thinking we were needed to intervene, or,
alternative medicine, and many such actions often put under the what's worse, that we humans are badly needed.
umbrella magical thinking. Now the irony is that while this bias was Aside from the illusion of control, there is another associated
devised to expose patently nonscientific fields, it largely affects many disease, that of rationalism, which I do not use to imply "rationality"
things you learn in college, particularly in social science. Many but, rather, the need for visible (and understandable) "reasons": we
matters we deem scientific are just the emanation of that very have a tendency to believe that we comprehend the logic of things
illusion of control masquerading as science. just a bit more than warranted from our empirical record —and our
Why is the scientific illusion of control worse than that of the epistemic arrogance, that difference between what we know and
pedestrian version? Because, tout simplement, these gamblers what we think we know is particularly large in what is called a
superstitions are benign, not much worse than doing nothing, but a complex domain, fraught with massive nonlinearities. Three fields
doctor tinkering with your system or an army playing with a complex have been particularly infected with the destructive aspect of such
system with opaque causal links, say by invading Iraq or intervening university-imported rationalism: nature, socio-economic life, and the
in the environment, is far worse than nothing. human body, matters in which we have historically combined a
For this illusion of control leads to the denigration of acts of degree of low competence with a high rate of intervention. Indeed we
omission (not doing something, letting things run their own course, will catalogue the effects of rationalism in both social science and
leaving nature or the human body alone) as compared to doing economic theory and pre-modern medicine— and this book will show
something (such as operating on a patient or prescribing evidence that much of what we are told was derived from rational
medication). This, we will see is the reason medicine used, until top-down university driven or taxpayer funded discoveries were the
recent history, to kill more patients than it saved (and did not even result of either unrelated trial and error, or, similarly, plain luck. In
get close to realizing it), and economists of the sophisticated other words, from the antifragility of systems in love with
equation-carrying variety, I will hope to convince you, have been randomness.
particularly harmful to the economic health of societies —central Accordingly, the theme of this book is first, antifragility (as the
bankers , and finance ministers, by tinkering with economic life, have source of many things in life), second, the denial of antifragility, and,
caused massive instability. finally, how our top-down rationalism and intellectualization cause
It has taken medicine 2500 years to realize that, like fragility, dramatic fragility, while thinking it can "improve matters"
epistemology, healing and therapy are largely subtractive, not and which areas are infected.
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.
... 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
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.

Chapter 2. Jensen's Inequality, or The Scholes received the Bank of Sweden Prize in Economic Sciences
(called the "Nobel" in economics) as the Swedish academy had the
Intelligence of Time
illusion that they discovered his equation —ignoring the hordes of
predecessors who had more realistic equations, including Bachelier.
Grandmothers— How mathematicians can become bright —
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) —
Now the secret of life. There is a hidden —and very simple and this book, which has almost nothing to do with finance, will be
mathematical property behind things, behind the reason things driven by similar intuitions by yours truly, a former option trader
survive and flourish —and manage to survive and flourish against (who disliked his career). Now that I got the Bachelier story off my
that inexorable debunker of fragility, time, time that smartest of all. chest, let's forget about options for now.
And what is this simple, very simple property? The more formal discovery took place as follows, five years later.
The property had been heuristically known by practitioners for a On 17 January 1905, one Johann Ludwig Jensen, said the following
long time, but not by the formal bodies of knowledge. It is called (translated into the New Jersey version of English of Fat Tony, whom
Jensen's inequality, by one Jensen, as we will see, but its first we will meet —again— in Chapter x): there are many cases in which
modern use (and application) was by a man who got quite a bit average doesn't matter in the long run.4 For in some instances the
mishandling by history. average underestimates the effect; in other cases the average
On March 29, 1900, a student at the Sorbonne who worked as a overestimates it. Jensen, in fact, was generalizing an earlier, almost
stockbroker in order to support himself, Louis Bachelier, defended a a century old result by the French mathematician Augustin-Louis
doctoral thesis in mathematics at the University of Paris, then known Cauchy. Neither he nor the audience realized how fundamental this
as the Sorbonne. The idea was about how to value financial options, result was for about everything —no more than the audience in the
these asymmetric contracts that give the right but not the obligation thesis committee of Monsieur Bachelier, knew the import of that
to buy a stock at a specified price. The thesis was poorly received by poor man's work. The paper by the Dane was published the
the head of the committee, and Bachelier received the grade following year in French in the Swedish mathematical journal Acta
euphemistically called "honorable", not the "très honorable" that was Mathematica with the eloquent title "sur les fonctions convexes et les
necessary to get a real academic position. It was said to lack in rigor inégalités entre les valeurs moyennes" —and went unnoticed for a
but there was also this unattractiveness of the financial topic for the long time, a very long time, as, 105 years later I can hardly find
committee. Bachelier never managed to have a decent academic people who can assess its consequences.
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
4 Jensen, J. L. W. V. (1906). "Sur les fonctions convexes et les inégalités
the pricing of derivatives, and two people Robert Merton and Myron entre les valeurs moyennes". Acta Mathematica 30

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

Jensen's result describes the following, well understood by b) Person B spends three hours less five minutes lifting no
regular people, but almost always lost whenever someone does too weights at all, just chatting with the otherwise bored gym employees,
much mathematics (or perhaps people inclined to do mathematics then does an Olympic lift, from the floor until he holds over his head
have some mental blindness to these things): you do not cross a for a few seconds close to 200 pounds of weights; he then puts it
river that is on average four feet deep. More generally, 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.
for some systems, the long run benefits or harm do not depend So both persons have lifted the exactly same total, and the
on the average but on the dispersion around such average. exactly same average over three hours. Over the long run, Person A
gets almost no benefit at all, for all the boredom encountered
In other words, for anything nonlinear, which we will define, counting to 1000, while person B, over time, will start looking like
variation can matter more, much more than the average (in someone who will be more motivated in removing his shirt at the
proportion to such linearity). And my very definition of fragility here beach.
in this book is when the system does not like variability; antifragility Let me add a couple of additional applications.
is the reverse.
Let's consider two examples. Traffic

Your Grandmother at 70 Degrees 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
First example, the fragile case. If you put your grandmother at takes me around 26 minutes to reach the British Air terminal at JFK
zero degrees Fahrenheit for an hour (around -18 Celsius), then at one airport. At that time, New York is empty. When I leave my place for
hundred and forty degrees for another hour (around 60º C), for an the later flight at 6 AM, there is almost no difference in travel time.
average of the very desirable seventy degrees (21º C), you would most You can add more and more cars on the highway, with no or minimal
certainly end up with no grandmother, a funeral and, possibly, an impact concerning time spent in traffic.
inheritance. So the average here is of no significance when one is Then, mystery, you increase the number of cars by 10% and the
fragile to variations. It is easy to see that the dispersion in possible travel time jumps up by 50% (I am using approximate numbers).
thermal outcomes here matters much more than the average. 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
Three Hours at the Gym
cars for another hour, traffic would be much, much slower than if you
had 100,000 cars for two hours5.
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 5
I have used this argument to try to make central banks avoid printing
his head a very small weight, of, say, 1 pound, for a total of 1000
money: you print and print with no effect, then a jump in inflation. We will
times —making a total of 1000 pounds which we compute by
see how so many economic results are completely cancelled.
multiplying the weight by the number of times lifted.

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
Procrustean Beds and Jensen's Inequality 13

So travel time is fragile to the volatility of the number of cars on I learned about Jensen's inequality in class at Wharton, in the
the highway, not to their total number. lecture on financial options that determined my career, and
immediately realized that the professor did not understand it himself
How to be Stupid —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
Now how does Jensen's inequality work? The details (and benefit from Jensen's inequality.
technical matters) will be relegated to Chapter x, but, take for now
I will relegate ample details to Chapter x, but this inequality
the following complete principle:
implies the following: that there are some conditions in which
variability benefit, for the same average, the one who had more
If you gain more when you are right than you are hurt when
extremes. And there are conditions under which the variability
you are equally wrong, then Jensen's inequality will benefit
destroys things —like the grandmother.
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 Another way to deal with the notion of average is to look at it as
stability, using it —from Darwin-Wallace theories of evolution to the a Procrustean bed. Procrustes was a brigand who in order to make
very idea of epistemology, via of course risk management and the travelers fit in his bed, cut the limbs of those who were tall, and
modern economics6. Accordingly, you don't have a need for much of stretched those who were short. But he had the bed fitting the visitor
what is commonly called intelligence, knowledge, insights, skills, and with total perfection. I've used the Procrustean bed analogy to
these complicated things that take place in the brain cells. For you describe situations where the simplification is not a simplification.
don't have to be right that often. All you need is wisdom to not do The average temperature of 70º Fahrenheit does not simplify the
foolish things to hurt yourself (some acts of omission) and know if an situation for your grandmother. It is a Procrustean bed —and these
outcome if fine (after its occurrence), not before. Otherwise, if are often committed by economic modelers since a model by its very
Jensen's inequality works against you, sorry, but you are doomed, no nature is a simplification. You just don't want the simplification to
matter how intelligent you are and how many PhDs from Harvard distort the situation to the point of being harmful.
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 Why Planes Don't Arrive Early
eventually break, in time, with certainty.
To see how Jensen's inequality works with estimation and
model error, consider the following. I've taken the very same Paris-
6 This is a technical note for those who need it now. Jensen's inequality New York flight most of my life, from the days when luggage did not
translates into; the average of a convex function of a variable x is higher have wheels. The flight is about 8 hours. I recall many instances in
than the function of the average of a variable x. Given that in probabilistic which I arrived early, about twenty minutes, no more. But there have
terms, the average is the expectation of a random variable, we can already been instances in which I got there more than 2 hours late, and, in
see biases emerging. If you gain more than you lose, then you are convex, one instance, more two days to get home.
otherwise concave. Anything nonlinear has local convexity or concavity.

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Procrustean Beds and Jensen's Inequality 14

So uncertainty causes flying time to increase, not decrease. Or to I said that the average does not matter in some situations. It
just decrease by minutes, and increase by hours. Anything overestimates the benefits (underestimates the dangers) in the event
unexpected is likely to increase flying time. This comes from the of fragility; it overestimates it in the case of antifragility.
same effect of Jensen's inequality.
This also explains the irreversibility of time, in a way, if you Social Fairness
consider the passage of time as an increase in disorder.
The same phenomena explains very vicious incentives by the
Some Errors Go One Way pseudocapitalistic system we currently have in place, with managers
having incentives without disincentives —which the general public
These examples showing that under nonlinearities, the average doesn't quite get. There is a difference between a manager running a
is meaningless illustrate the type of errors stemming from a company that is not his and the owner-operated business in which
reduction: in situations of fragility, a simplification goes in one the manager does not need to report numbers to anyone but himself.
direction, typically causing Procrustean bed-style the At the time of writing the stock market is lower between 25%
underestimation of randomness and fragilizes (or ignores and 50% over the last decade, so retirees are poorer in the aggregate
antifragility). And remarkably, as I said earlier, those we deem (particularly that they were expecting the exact opposite outcome)
intelligent, as they tend to succeed in classes (particularly while managers of the companies composing the stock market,
mathematics) and do well on SAT-style exams, then make it to, say, thanks to the asymmetry of the stock option, are richer in the
MIT, in other words, the nerds, are even more vulnerable to this aggregate. Even more outrageous is the fate of the banking industry:
mental distortion, since the very definition of intelligence we use is banks have lost more than they ever made in their histories, with
grounded on their ability to focus, hence contract and simplify, deal their managers being paid trillions in compensation.
with the average instead of a richer set, and become blind to these Now let me use the sense of outrage of the reader to give a sense
small nuances. And the core of things —of life— can reside in these of how Jensen's inequality works: these managers get much more
nuances. upside than downside. They have the opposite of "don't cross the
Do not cross a river if it is six feet deep, goes the adage. Let me river if it is on average four feet deep": volatility benefits them since
repeat. Simply whenever you are estimating something that depends they only get one side of the payoffs. They too benefit from variations
on a nonlinear variable, the average does not matter, and the —the more variations, the more value to this asymmetry. Consider
information gotten from it may be irrelevant. So "for simplification", two scenarios, in which the market does the same thing on average
telling your grandmother that she can expect "70 degrees" will but following different paths.
certainly kill her. And a model, a mathematical model, is precisely Path 1: market goes up 50% then goes back down to erase all
what does simplifications. Yet this estimation —and use— of the gains.
average is what economists do for a living. We will see why modeling Path 2: markets does not move.
is doomed in many cases whenever you hear "optimal" owing to such
Visibly Path 1 is more profitable to the managers who can cash
sensitivity to error.
in their stock options. So the more jagged the route, the better it is
for them.

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
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
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 helps pulling it, I suddenly remembered the days when I had to haul
was going to be a large crop of olives..." So for Aristotle, the reason my book-stuffed luggage through the very same terminal, with
was Thales' superior knowledge. regular stops to rest and let the lactic acid flow out of my sore arms. I
If we look at it with the eyes of antifragility, the story is could not afford a porter and, even if I did, I would not have felt
altogether different. Thales was in a position to take advantage of comfortable doing so. I have been going through the same terminal
Jensen's inequality. The key to this book is that he did not need to for three decades, with and without wheels, and the contrast was
understand too much the messages from the stars. eerie. It struck me how lacking in imagination we are: we had been
Simply, he had an asymmetric payoff, like a financial option, putting our suitcases on top of a cart with wheels, but nobody
which he bought cheap: there was no need to be right on average —so thought of putting tiny wheels directly under the suitcase.
long as you pay a low price that allows you to have greater upside Can you imagine that it took close to six thousand years between
than downside. His payoff was so large that it afforded him to be the invention of the wheel ( by, we assume, the Mesopotamians) and
wrong very, very often and still make a bundle in the long run. this brilliant implementation (by some luggage maker in a drab
This is the center of my ideas about knowledge. We don't need industrial suburb). And billions of hours spent by travelers like
to know what's going on when we buy cheap. myself lifting luggage through corridors full of rude custom officers
(often French).
The giant of rationalism, the Medieval philosopher Averroes
(Ibn Rushd) considered Aristotle the supreme expression of human Worse, this took place three decades after we put a man on the
intellect —rationalism, reason. And visibly this is the very reason Moon. And consider all this sophistication used in sending someone
Aristotle missed the point, because he overestimated human on the Moon, and its totally negligible impact on my life, and
rationalism—the reason of Thales' success was imparted to compare it to this lactic acid in my arms, pains in my lower back, and
knowledge about the stars, or about the future coming from the stars, sense of helplessness in front of a long corridor. Indeed, though
not from the nature of the bet.vii extremely consequential, we are talking about something trivial: a
very simple technology.
Which brings me to how we got to be where we are today.
But it is only trivial retrospectively –not prospectively. All those
ON INNOVATION AND INTELLIGENCE brilliant minds you see at conferences who discuss Gödel, Shmodel,
Riemann’s conjecture, quarks, shmarks, had to carry their suitcases
To see how overvalued our notion of human intelligence as a through airport terminals, without thinking about applying their
director of human activities, consider the story of the wheeled brain to such an insignificant transportation problem. And even if
suitcase. I carry a large wheeled suitcase filled with books in all my they did, they probably would not have gotten anywhere. So just by
travels. It is heavy (books that interest me when I travel are always intelligence we cannot go very far. You need action, antifragile action.
hardcover —I don't use eReaders for hedonic and intellectual reasons This tells us something about our mapping of the future. We
as I remember much better what I read in books). humans lack imagination, to the point of not even knowing where
In March 200x, I was rolling that generic, heavy, book filled, tomorrow’s important things look like. We use randomness to spoon-
suitcase outside the JFK international terminal and, looking at the feed us with discoveries —which is why antifragility is necessary.
small wheels at the bottom of the case and the metal handle that

12/22/10 © Copyright 2010 by N. N. Taleb. This draft version cannot be disseminated or quoted.
Creative and Uncreative Destructions 17

The story of the wheel is even more humbling than that of the the attack weapons of Hyksos and the drawings of Philo of
suitcase: we keep being reminded that the Mesoamericans did not Alexandria, individual transportation is limited to bicycles and cars.
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 CREATIVE AND UNCREATIVE DESTRUCTIONS
used vast quantities of human labor, corn maize, and lactic acid to
move these gigantic slabs of stone in the flat spaces ideal for Another one who got a version of the point, but without
pushcarts and chariots where they build their pyramids. They even understanding the nature of the process is the economist Joseph
rolled them on logs of wood. Meanwhile, their small children were Schumpeter. He vaguely understood that some things need to break
rolling their toys on the stucco floors (or, perhaps, not even doing for the system to improve —what is labeled as creative destruction —
that as the toys might have been solely used for mortuary purposes). a term coined by Karl Marx. But a reading of Schumpeter shows that
Something sneaky in the process of discovery and both he and his detractors (the Harvard economists who thought that
implementation –something people usually call evolution. We are he did not know mathematics) missed both the notions of
managed by small little (or large) accidental changes, more antifragility as convex, the consequences of Jensen's inequality, and
accidental than we admit. We talk big but hardly have any the opposition between tinkering and top-down planning. Indeed
imagination, except for a few visionaries. We need some randomness there is a pattern: whenever you hear some economist accusing
to help us out —with a double dose of antifragility. And randomness another for being not mathematical enough, you can be sure of the
plays a role at two levels: the invention and the implementation. The sweet irony that he himself got into a Procrustean bed. He most
first point is not overly surprising, though we play down the role of probably missed the central point of Jensen's inequality because of
chance, especially when it comes to our own discoveries. But I was his simplification.
shocked that it took me a lifetime to figure out the latter:
The Fallacy Of Aggregation
implementation does not necessarily proceed from invention. It too
requires luck and circumstances. The history of medicine is littered
Let me report a paradox. Business life, that is the economy, is
with the strange sequence of discovery of a cure followed, much later,
antifragile when left on its own. But, for that, a single business is
with the implementation –as if the two were completely separate
necessarily fragile, exposed to breaking —evolution needs organisms
ventures. Just taking something to market requires struggling
(or their gene) to die when supplanted by others. But a businessman
against a collection of naysayers, bureaucrats, empty-suits,
is not too interested in suicide; he is therefore necessarily interested
mountains of details that invite you to drown, and one’s own
in seeking antifragility or, at least, some level of robustness.
discouraged mood on the occasion. This is where all you need is
So there is a problem of aggregation, in which the property of
wisdom to realize what you have on your hand.
the sum (the aggregate) varies from that of each one of the parts.
Another element to retain for now: the simplest "technologies",
Now what is the solution? There is none. People come to me for
or perhaps not even technologies but tools, such as the wheel, are the
advice that is local to them, that is their own career; they go to
ones that seem to run the world — what we call technologies have a
business school to learn how to survive while taking low risks —but
very high mortality rate. Just consider that of all the means of
the economy wants them to take a lot, a lot of risks themselves.
transportations that have been designed in the past 3000 years since

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The Charlatan, the Academic, and the Showman 18

Government interventions to save companies fragilizes. But wait, the side effects of mustard gas, not the “progress of medicine”. The
there is a solution: overconfidence on the part of individual economic rationalists –all academics tend to be – want you to believe that
agents, the overestimation of their chances of success and reasoning has a monopoly on the production of knowledge.
underestimation of risks in their businesses. In other words, foolish So the final point here is about those called charlatans. For a
risk taking is healthy for the economy —provided people don't take long time official medicine had to compete with the crowd of the
the same risks —and foolish for the person involved. flashy showmen, mountebanks, quacks, sorcerers and sorceresses
and all manner of unlicensed practitioners. Some were itinerant
Now, a bit of history to tie matters together. showmen, going from town to town, in which they carried out their
curative acts in front of a large gathering. They could perform
THE CHARLATAN, THE ACADEMIC, AND THE SHOWMAN surgery on the occasion while repeating incantations.
This category included doctors who did not subscribe to the
Our misunderstanding of tinkering, antifragility and how to dominant Graeco-Arabic school of rational medicine, developed in
tame randomness is weaved into our institutions --though not the Hellenistic world of Asia Minor and later grown by the Arabic
consciously and explicitly. language school. The Romans were anti-theoretical pragmatic
There has been a conflict between two classes of people and bunch; the Arabs loved everything philosophical and “scientific” and
methods, two opposite ways of doing things and attaining put Aristotle, about whom nobody seemed to have cared until then,
knowledge: those who rely on thinking and theorizing and those who on a pedestal. Medicine, for the Arabs, was a scholarly pursuit and
rely on experience, with or without thinking and theorizing –and use founded on the logic of Aristotle and the methods by Galen. The
that option. The first category include those called the rationalists, medical practitioners were the Other.
the Platonists, the classicists, the Weberian rationalists and The medical establishment, whenever we see them regulated,
rationalo-bureaucratists, the top-down social engineers, the worried about the empirics for economic reasons as competition
orthodox economists, the social planners, the venerable members of made their incomes drop. So wonder they were bundled with the
the various academies of sciences, etc. The second one includes the thieves, to wit this long title for an Elizabethan treatise: A short
empirics, or empirical skeptics, the doers, and that is about it --we do discourse, or, Discouery of certaine stratagems, whereby our
not have many names for them as they have not written a lot of London-empericks, haue bene obserued strongly to oppugne, and
books. Many of their works were destroyed or hidden from cultural oft times to expugne their poore patients purses.
consciousness, and their memories have been treated very badly by
Charlatan was held to be a synonym of empirick. The word
history. Formal thinkers and theorizing theorizers tend to write
“empiric” designated someone who relied on experiment and
books; seats-of-the-pants people tend to be practitioners who are
experience to ascertain what was correct. In other words, trial and
often content to make the money and make discourses at the bar.
error and tinkering. That was held to be inferior –professionally,
Their experiences are often formalized by the academics. So
socially, and intellectually. It is still not considered to be very
surviving history has been written by the rationalists because of a
mental disease –our search for order and thirst for theories-- that
But luckily for us, the empirics enjoyed immense popular
gives us the illusion of design. Take the discovery of chemotherapy
support and could not be uprooted. You do not see their works in the
for the treatment of cancer. People do not realize that it came out of

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Summing Up 19

literature because they were not academics. But they left a huge what you found is acceptable to keep (hence, once again, a modicum
imprint on medicine. of this thing called wisdom). You can do so individually (you have the
Now, I agree that most nonacademically vetted medical option, we will see), or using a set criterion of survivability, as nature
practitioners were scoundrels, mountebanks, showmen, quacks. But does. We said that nature likes randomness: it is because it sees
let’s hold off jumping to the wrong consequences. Formalists, to various outcomes in the diversity among offspring, picks those it
protect their turf, have always played on the logical fallacy that if likes best and discards the rest by dispatching them into genetic
quacks are found among nonacademics, nonacademics are all oblivion. The great French biologist Francois Jacob who introduced
quacks. They keep doing it: all what is nonrigorous is nonacademic – the notion of tinkering (under a variant called bricolage) into
yet it does not imply that all that is nonacademic is nonrigorous. The science, argued that even within the womb, nature knows how to
fight between the “legitimate” doctors and the Others is quite select: about half the embryos undergo a spontaneous abortion –
enlightening, particularly when you note that doctors were silently easier to do so than dream of the perfect baby by design. Nature
(and reluctantly) copying some of the remedies and cures developed understands options vastly better than humans, and certainly better
and promoted by the Other. They had to do so for economic reasons. than Aristotle.
Also, formal academics, seen in the light of history, were not
better than those they called charlatans –they just hid their fraud b) The Defects of Designed Systems. If trial and error is superior
under a weight of more convincing rationalization. They were just to knowledge, then a) what you learn in the university lecture is less
organized quacks. valuable than claimed; and what you learn in the streets is
This closes the loop with the three stories: thinking, particularly underestimated; b) as we said earlier, academics contributions to
formal thinking, has always been the archenemy of trial and error – knowledge might be grossly overhyped —as is the role of
hence a severe handicap for innovation and advancement. I hold that "intelligence" (though not what we call "wisdom"). This, we will see,
what has been done by academic life is rather dress up random is overly trivial to show and back-up with reverse evidence, which
discoveries with rationalizations, and claim credit for inventions of tears apart claims of use of taxpayer money and monies directed to
others. In other words, I will show how academia and official sources the bureaucrats of the National Cancer Institute. This I've called the
are more of a public relations machine rather than a source of "lecturing birds on how to fly" effect (academics lecturing birds on
knowledge. Ex cura nascitur teoria, no contra. flying, then showing you "evidence" of their contribution to the
welfare of the birds).
c) Epistemology (theory of knowledge) is ancillary to decision-
I have four implications here. that will be explored in the rest of
theory (what we should do). In other words whether something is
the book
true of false is irrelevant and academic in the worst sense of the
a) The Importance of Trial and Error. The first thing to comes word; what matters is the payoff, the benefits. Being wrong is not
to mind is trial-and-error, tinkering, stochastic search, an activity important if it is harmless —or if it benefits us by Jensen's inequality.
conducted by an agent who patently does not fully understand what Interestingly, that was the ancient's positions (Cicero, Seneca,
is going on, but is fully aware of the incompleteness of his grasp of Marcus Aurelius, Zeno, the Roman poets, the Greek tragedians —
things. It costs you so little to search; all you need to know is whether

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This Book 20

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


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

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