Shared by JohnH

Hints of the new book. HatTip to Dave Lull.

137- The Science of Antifragility, an Ignored Ubiquitous Concept

Just as a package sent by mail bears a stamp “fragile” on it, “handle with care”, imagine the opposite: “please mishandle” or “be careless”, as it benefits from shocks. Such package is said to be “antifragile”.

My next book, announced under the vulgar title Tinkering will be actually called Antifragility.

Ask anyone the antonym of fragility, they will answer robustness. Wrong -and this is a mistake made in a variety of dictionaries of synonyms and antonyms. This seems to come from a mental bias, 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 neutral -or the opposite of destruction, they will answer construction. Clearly, therefore the opposite of unstable is not stable or sturdy; likewise the opposite of brittle is not solid -but antibrittle, or antifragile.

This seems quite a universal traits of languages (I tried Mediterranean, classical, and Semitic languages),where the notion of antifragility is totally absent.
So there are three layers:

• fragile
• robust: not fragile, can resist shocks.
• antifragile: benefits from shocks, “long volatility” in trader parlance, has positive optionality. This is my life in the markets. This is my situation now: a breakdown in the banking system benefits my portfolio.

When I defined them mathematically, fragile became concave to errors; antifragile became convex (i.e., with a positive second derivative that makes it benefit from uncertainty). Actually I have written an ENTIRE book on that (Dynamic Hedging, published 14 years ago).

The absence of such word -and absence of the awareness- is symptomatic of the error of fragility: if you shoot for robustness, you ususally get robustness, but on the occasion you get fragility. If you shoot for antifragility, at worst you get robustness.

Antifragile benefits from randomness (as expressed, for a given probability distribution, by an increase in dispersion, i.e., variance for a Gaussian, etc. -just as an option benefits from an increase in volatility).

• Evolution:it benefits from variance (up to a point). It has positive optionality.
• Economic growth: it does not come from anything EXCEPT antifragility.
• Creative destruction: why bailouts fragilize.