Our hero
Posted on 03/01/2020 4:34:51 AM PST by Bon mots
after this, you’ll welcome obstacles
“The general principle of antifragility, it is much better to do things you cannot explain than explain things you cannot do.” – Nassim Taleb
“Being an entrepreneur is an existential, not just a financial thing.” – Nassim Taleb
“They have turned the wolf into a dog and man himself into the man’s best domesticated animal.” – Friedrich Nietzsche
The ideas in this post have been the most transformative in my life over the last couple years. I avoided writing about them because I didn’t feel I could. Finally, I feel that I’ve internalized, tested, and understand them deeply enough to communicate them with you.
This is a long post, but it could change your life and outlook in massive ways. I can say that without arrogance because these ideas aren’t my own, they’re Taleb’s.
Nassim Nicholas Taleb warned the world about the 2008 financial crisis before it happened. He didn’t predict it, per say, he just evaluated the financial system and saw how fragile it was.
The world is slowly beginning to admit how terrible we are at predicting the future. Stumbling on Happiness showed us that we can’t even predict what will make us happy in the future.
“Your mistake was not in imagining things you could not know—that is, after all, what imagination is for. Rather, your mistake was in unthinkingly treating what you imagined as though it were an accurate representation of the facts.” ― Daniel Gilbert, Stumbling on Happiness
I am going to do my best to share a new lens of the world with you and convince how powerful it can be in your life. This isn’t about wishful thinking or small self-help lifehacks. This is about looking at reality as the mess it is and learning to benefit from the chaos.
I’m not going to attempt to summarize Taleb’s books, it would be blasphemy. Almost all business books I read I feel fine sharing a summary, synthesis, and some quotes. That’s all they deserve. Taleb’s work is different. Reading his work, especially Incerto (containing The Bed of Procrustes, Fooled by Randomness, The Black Swan, and Antifragile) is an experience. This post will provide a powerful perspective shift and tools that you can begin using immediately. It will not replace the books in any way.
I’ve written skimmable articles before, this is not one of them. This stuff is too important to skim. I hope you take the time to read the whole thing. If you can’t read it now then skim it and bookmark it for later.
Here is an overview of what we’re going to be getting into:
Our goal is presented by Taleb in the Prologue of Antifragile:
I want to live happily in a world I don’t understand.
We think we need to know what’s going to happen to be ready for it. We think we need to have a perfectly clear vision of what we want our future to be if we want to avoid being homeless. We believe experts when they bullshit us and themselves with comforting predictions that are ultimately worse than useless – they convince us that we can know the unknowable.
It took me a long time to accept that I can’t know what’s going to happen in life. It can be paralyzing to realize that what you’re doing might not work, that the economy is changing so fast you won’t be able to keep up, and that, no matter how well things are going, the shit will inevitably hit the fan.
Taleb opens Antifragile with the following:
Wind extinguishes a candle and energizes fire.
Likewise with randomness, uncertainty, chaos: you want to use them, not hide from them. You want to be the fire and wish for the wind. …
The mission is how to domesticate, even dominate, even conquer, the unseen, the opaque, and the inexplicable.
How?
Let’s find out.
Our hero
[Note 1: All quotes without a name attached are Taleb.]
[Note 2: There are some complex ideas here, if you don’t understand something then keep reading – the next paragraph may explain it.]→ → → MORE >>>
The CoronaVirus is here to stay - like it or not. It has already had a strong effect on markets.
Assumptions:
Q: What is AntiFragile?
A: There are three states you can be in for a black swan type of event:
1.) Fragile - If the market crashes, you will lose everything;
2.) Robust - If the market crashes, your investments don't really lose (gold?);
3.) AntiFragile - If the market crashes, you make a fortune
The fragile are the left lemmings who look to their rat controlled government for protection as they were instructed
So on this list you can easily identify what is what!
1.) Carnival Cruise Lines - VERY FRAGILE. Great opportunity for a 'short'. The cruise lines will not recover easily from this scare.
2.) TVIX down to the SPXS - these are AntiFragile investments. As the market dives, these will go up - a lot.
3.) GOLD - Robust. As you can see, the panic barely affected gold. As the market continued to dive, however, the price did go down a bit as investors sold some of their gold to cover positions.
What are some of yours?
I’m in gold and silver
Thanks for posting this. Taleb should be required reading for every Freeper. Forget that, every serious human being
So 'Robust' - safety.
I'm looking at SPXS - look at where it was in the 2008 crisis and where it is today:
AntiFragile. Get on the roller coaster! :)
Bookmark
I’m in beer and ammunition
That's why I posted it.
Whatever happens with this CoronaVirus; it has spawned a black swan already.
70-80% of the people, even ones who know about it, still have 'normalcy bias' - this is when the astute can make a killing; or lose everything.
If you had 1000 shares of SPXS in February 2008 it would have been worth several million dollars. You can pick it up for a few thousand bucks today.
This is why we learn about these things!
Not only so that we may understand what is happening, but so that we may act boldly when the opportunity arises.
Why The SPXS?
Look at the three year chart (below):
The SPXS has just hit its lowest level in a decade - since the last crisis. So it is at the very bottom and markets are boiling. This is an anti-fragile position; but one with a long record.
Worth looking at if you have the stomach for roller coasters.
Lead, brass, and steel have more value.
They didn't do any good in 2008/9 and likely won't be much use now either.
You could have made over 40% in a day had you speculated on the VIX on Feb. 27! Then you could have bought a lot more ammo... if that's your thing.
This isn't over.
Thanks for the great post, but ... no one should be “investing” in 3x etfs, especially TVIX, unless they fully understand what is happening behind the scenes with them.
Definitely for later reading when I am more awake.
For those who don’t like a lot of risk, you don’t have to pick the bottom to buy stocks at a good price. If a good stock loses 40% of its value it may be worth buying even if it loses another 10% after that.
Notice, I didn't use the word 'invest'; but 'speculate'.
Some want to ride the roller coaster, some want to watch, some avert their eyes...
Reads like every Amway training session ever.
My hero:
Architech, physicist, and wrote the book on Risk Management.
(Actually, my hero is Jesus. George the character is kind of cool, though).
How so?
Not my blog.
Not a time to just sit, watch and wonder what's happening with your 401K or IRA...
Anti fragile? what a load of crap
what he uses many syllables to describe is the term tough.
most Americans are too lazy to be tough. it requires deliberate effort
I’m in copper, lead, and brass.
L
I guess it went over your head.
Professor Nassim Nicholas Taleb is one of the most brilliant minds alive when it comes to events like the one we are currently experiencing.
Taleb is the author of the Incerto, a five volume philosophical essay on uncertainty published between 2001 and 2018 (of which the most known books are The Black Swan and Antifragile).
He has been a professor at several universities, serving as a Distinguished Professor of Risk Engineering at the New York University Tandon School of Engineering since September 2008.
He has been co-editor-in-chief of the academic journal Risk and Decision Analysis since September 2014. He has also been a practitioner of mathematical finance, a hedge fund manager, and a derivatives trader, and is currently listed as a scientific adviser at Universa Investments.
His 2007 book The Black Swan has been described by The Sunday Times as one of the twelve most influential books since World War II.
The Corona Virus is a black swan event.
If every time someone uses a big word, you react this way, your life will indeed be tough.
The concept is simple:
You have a 401K?
Investments are:
1.) Fragile;
2.) Robust;
3.) AntiFragile
If you have a better or more enlightening source for financial guidance during times of turmoil, please share it.
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