This space is for sharing interesting and thought-provoking
articles, presentations, shows and ideas that provide great insight
and might change our lives and societies. Personal essays are
welcome, as are those hipster posters, but conspiracy theories do
not belong here.
I'll start with this - why do we go through bubbles and
recessions? Our institutions and minds favour stability or constant
growth, but that's at odds with reality, which is volatile and
unpredictable. Taleb details 5 ways this can change.
Learning to Love Volatility
Summary from Thought You Should See This:
Rule 1: Think of the economy as being more like a cat
than a washing machine.
—”[The] denial of the antifragility of living or complex systems is
the costliest mistake that we have made in modern times. Stifling
natural fluctuations masks real problems, causing the explosions to
be both delayed and more intense when they do take place.”
Rule 2: Favor businesses that benefit from their own
mistakes, not those whose mistakes percolate into the
system.
Citing the airline and restaurant industries,
Taleb describes: “These industries are antifragile: The
collective enterprise benefits from the fragility of the individual
components, so nothing fails in vain. These businesses have
properties similar to evolution in the natural world, with a
well-functioning mechanism to benefit from evolutionary pressures,
one error at a time.”
Rule 3: Small is beautiful, but it is also
efficient.
—“Experts in business and government
are always talking about economies of scale. They say that
increasing the size of projects and institutions brings costs
savings. But the “efficient,” when too large, isn’t so
efficient.”
Rule 4: Trial and error beats academic
knowledge.
—“To promote antifragility, we must
recognize that there is an inverse relationship between the amount
of formal education that a culture supports and its volume of
trial-and-error by tinkering. Innovation doesn’t require
theoretical instruction, what I like to compare to “lecturing birds
on how to fly.” ”
Rule 5: Decision makers must have skin in the
game.
—“In the business world, the solution is
simple: Bonuses that go to managers whose firms subsequently fail
should be clawed back, and there should be additional financial
penalties for those who hide risks under the rug. This has an
excellent precedent in the practices of the ancients. The Romans
forced engineers to sleep under a bridge once it was
completed.”
