What if a system got better as conditions got worse, and contingencies started happening?
Normally I think of risk management in terms of robustness, resiliency, and survivability: all dedicated to neutralizing or at least diluting the impact of an unfortunate event.
But, there’s a better way.
It turns out that certain (primarily biological and human) systems improve when shit hits the fan: that’s the whole point of evolution, in which periodic negative events (predators, falling rocks) are more likely to hit poor genetic mutations. Even entrepreneurs are antifragile, getting more likely to succeed with each failed company because they learn from the last.
Conversely, overly stable and risk-avoiding systems are more vulnerable. By avoiding periodic risk and volatility they increase vulnerability to catastrophic risk: a secure job at a large company is far more vulnerable to a catastrophe (getting fired, economic crash) than a light-footed job as a cabbie, web designer, or prostitute.
The former case may not see it coming, have any backup options, or be able to recover quickly.
All of the latter three will feel the wind change and be able to adapt (shift neighborhoods or client bases) or change smoothly to a backup plan. Either way, the shakeup provides valuable space to reorganize and do some business process spring cleaning — fixing all the “when I have time I really should” details that can sap morale and efficiency.
Lifehacking, from the “things I keep re-learning” department:
Avoid computers and other electronic devices for an hour or so after waking up. Roll-out-of-bed email checks are forbidden.
Result? Productivity goes up, mental focus and concentration goes up, let-me-check-email-and-Slashdot-syndrome goes way down.
Hypothesis for why this is: Brains are still a little plasticky on waking up, more “suggestible” as the psychologists put it. What you do when you wake up has a big effect on how your brain orients itself to the rest of the day.
Settling down in the chair for a bleary-eyed round of “lol what’s on the internets?” is just not a good tone for getting things done.
Going a little further out into not-generally-accepted-theory territory, thinking of the Internet as an “information field” into which you immerse yourself as soon as you start surfing presents another possibility. By not “jacking in” until your brain’s acclimated itself to the real world instead of the Internet Dimension, you spend the day working with real-world priorities in mind instead of Internet ones… priorities like Getting Stuff Done, instead of Watching Russian Dash Cam Meteor Footage. Again.
“WHAT is the opposite of fragility? Though not quite right, “resilience” and “robustness” are two words that come to mind. If fragility means something that breaks under stress, its exact opposite should mean something that grows stronger under pressure. There is no word that quite captures this, says Nassim Nicholas Taleb, an American essayist and scholar, so he has invented one: “antifragile”.
The neologism is necessary because antifragility, he argues, is the secret to success in a world full of uncertainty. Mr Taleb’s earlier books were devoted to showing that no one can measure the likelihood of rare events—or “black swans”, in his now famous phrase. From the financial crisis to the tsunami that struck the Fukushima nuclear reactor in 2011, the worst-case scenario will never be quite bad enough. So instead of trying to predict the future and failing, the best thing to do is try to benefit from shocks when they occur.
That, after all, is what nature does. Evolution is a system for turning random mutations to lasting advantage. The body responds well to certain pressures; the bones in the racquet-holding arm of professional tennis players are stronger than those in the other arm, for example.
There are all sorts of ways in which bad events contain useful information. Pain teaches children what to avoid. The failures of past entrepreneurs steer the next lot of start-ups away from the same mistakes. Plane crashes yield data that make the next flight safer. (Bank failures have the opposite effect; because of the interconnectedness of the financial system, one blow-up makes another more likely, not less.)
Indeed, Mr Taleb thinks the big mistake is trying too hard to avoid shocks. Long periods of stability allow risks to accumulate until there is a major disaster; volatility means that things do not get too far out of kilter. In the economy cutting interest rates at the first sign of weakness stores up more trouble for later. In markets getting rid of speculators means prices are more stable in general but any fluctuations cause greater panic. In political systems the stability brought by regimes such as Hosni Mubarak’s in Egypt was artificial; without any effective way for people to express dissent, change leads to collapse.
The principle applies to career choices too. An apparently secure job within a large company disguises a dependency on a single employer and the risk that unemployment will cause a very sudden and steep loss of income. Professions that have more variable earnings, like taxi-driving or prostitution, are less vulnerable to really big shocks. They also use volatility as information: if a cabbie is in a part of town where there are no fares, he heads to a different area.
This is getting to the heart of antifragility: being in a position where the unexpected allows improvement, where the potential gains from a surprising event outweigh the potential losses. The obvious example from finance is the option, which gives the buyer the right, but not the obligation, to undertake a transaction at an agreed price. The first option on record was exercised by Thales of Miletus, an ancient Greek philosopher who bought the right to use every olive press in the area and was then able to specify his terms when a good olive harvest meant high demand for the presses. At worst, his losses were limited; at best, his gains were enormous.
The equivalent in investment terms is to hold mostly ultra-safe assets and have a sliver of wealth in something that offers a huge pay-off if there is a positive surprise. In business, inefficiency becomes a potential virtue; holding lots of inventory is a great strategy if there is a shortfall elsewhere in the market. As for countries, Switzerland takes the prize for being the “most antifragile place on the planet”. When bad things happen, the money flows in.”