Events that are a combination of extreme, unpredictable and sudden will have by far the greatest impact upon your life. Discovering love, or the sudden loss of it; illness, crime or an economic crash; the big break or a career-tanking calamity.
Life-changing though these events will be, as individuals we don’t prepare for them, not least because they occur so rarely.
Nassim Nicholas Taleb has made them his life’s work. He calls them "black swans" because all swans were presumed to be white before the discovery of black swans in Australia.
Taleb is a Lebanon-raised New York City options trader turned independent scholar of ‘risk know-how’. He made himself a fortune by betting on the fact that the money markets (and you and I) tend to grossly underestimate the possibility of unforeseen negatives in every walk of life.
Antifragile: How to Live in a World we Don’t Understand (2012) is his iconoclastic bestseller. Taleb proposes that the opposite of a person or system being fragile – i.e. easily harmed by life’s black swan incidents – is being antifragile. His new word tries to capture the quality that goes well beyond being resilient or robust, or even versatile.
Something antifragile actively benefits from its ability to flourish amid any sort of uncertainty, unexpectedness or accident.
One example of such flourishing might be the entrepreneurial spirit who takes the opportunity to profit from surprising changes in the market for a product or service. By contrast, most humans presume that because we cannot currently see any evidence of a problem, no problem is forthcoming. We are like a turkey, mistakenly presuming that because we have been so well fed on the 364 days before Christmas, then Christmas Day will follow suit.
In order not to become a cooked turkey Taleb advises us that making predictions about the future is foolish vanity; it is better to put one’s energies into preparing to thrive, whatever happens. To which end he advocates his ‘barbell’ principle whereby you invest your resources in two very different, extreme and yet mutually balancing directions: one is a deeply safe option so that no matter what happens you won’t sink; the second simultaneous investment should be in something very daring that could make great gains if the unexpected strikes.
For instance, you might put 90 per cent of your money in super-safe, readily cash-able gold shares, while putting ten per cent into a high-risk house speculation.
If the economy crashes your house is worth nothing, but the world will crave your gold; yet if there’s a market boom, then gold shares do little, but property will rocket. That, says Taleb, is how you ride life’s storms whatever direction they blow.
What Taleb warns against is the widely accepted wisdom of taking a middle and narrow stance. It leaves you fatally vulnerable to unforeseen disasters, yet unable to take advantage of the changes.
So how could you apply Taleb’s counter-intuitive principle of taking a position where two extremes balance each other in your career, financial investments, health regimes and personal relationships?
In the last few years of the world BC, Roman poet Horace ended his pastoral ode with a famous piece of advice: carpe diem. The most plausible translation of the entire line – long forgotten – would not read as "seize the day" but "pluck the day", putting as little trust as possible in tomorrow. The study of lifetimes would suggest that Taleb’s barbell solution for investing in our fabulously unpredictable future is a far more practical and convincing approach.
Visit Nick’s website at DrNickBaylis.com