What Is Anti-Fragility?
Anti-fragility describes a category of things that not only gain from chaos but may need it to survive and flourish. Nassim Nicholas Taleb, a professor, and former trader and hedge fund manager, came up with the concept and coined the term “anti-fragility" because he thought the existing words used to describe the opposite of "fragility," such as "robustness," were inaccurate.
- Anti-fragility goes beyond robustness; it means that something does not merely withstand a shock but actually improves because of it.
- The concept was developed by professor, former trader, and hedge fund manager Nassim Nicholas Taleb.
- Taleb believes we must learn how to make our public and private lives anti-fragile, rather than simply less vulnerable to randomness and chaos.
- Examples include not getting into debt and avoiding optimization.
- In investing, Taleb proposes a "barbell strategy," that splits capital between highly safe and highly risky investment assets.
Anti-fragility goes beyond robustness; it means that something does not merely withstand a shock but actually improves because of it. In his 2012 book, Anti-fragile: Things That Gain from Disorder, Taleb offered the following definition:
"Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it anti-fragile. Anti-fragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the anti-fragile gets better."
The book's central theme is that we must learn how to make our public and private lives (our political systems, social policies, finances, etc.) anti-fragile, rather than simply less vulnerable to randomness and chaos. By positioning for nonlinear events, we can benefit or take advantage of stress, errors, and change, which are all but certain anyway.
In Taleb’s view, “We have been fragilizing the economy, our health, political life, education, almost everything” by “suppressing randomness and volatility,” much the way that “systematically preventing forest fires from taking place ‘to be safe’ makes the big one much worse.”
The concept of anti-fragility can be applied to a variety of fields, including physics, molecular biology, transportation planning, physical fitness, engineering, project management, computer science, and risk analysis—Taleb's specialty.
A key element of Taleb's anti-fragility is avoiding debt.
Taleb offers several examples of how the world and its population can become less fragile. One example that crops up regularly in his book is the importance of not getting into debt: "When you don't have debt you don't care about your reputation… and somehow it's only when you don't care about your reputation that you tend to have a good one,” he wrote.
For Taleb, a prerequisite of political anti-fragility is zero debt. He argued that governments should adopt rigid fiscal conservatism as debts make them fragile. Taleb also called for an increase in redundancies “in some spaces,” and avoiding optimization, even if it runs counter to everything that portfolio theory teaches.
“I have always been very skeptical of any form of optimization," he said. "In the black swan world, optimization isn’t possible. The best you can achieve is a reduction in fragility and greater robustness.” Taleb describes an anti-fragile trading strategy as one that does not merely withstand a turbulent market but becomes more appealing under such conditions.
Taleb also applied the concept of anti-fragility to others areas of life, such as health and fitness. This includes relying less on fitness-machine-based gyms and doctors, both of which he argues make us ill, eating less, and toughening our children up. Taleb advocates barbell strength training with heavy weights to provide the kind of intense stress that the body needs to become anti-fragile.
How to Become Anti-Fragile
Taleb compares anti-fragility to the hydra, a creature in Greek mythology that would grow two heads if one of them was lost. Whereas other creatures could be beaten by cutting off their heads, the Hydra would actually grow stronger.
Like the hydra, an anti-fragile system does not rely on a single "head." That means reducing the number of potential bottlenecks and choke points, with redundant systems and fail-safes. These redundancies can seem inefficient if everything works perfectly—but nothing works perfectly.
Stress is another element of anti-fragility, and Taleb again uses a metaphor of physiology. Just as focused exertion can help build muscles and bones, a well-controlled burst of stress can help organizations evolve and adapt to potential challenges.
Anti-Fragility for Businesses
For businesses, anti-fragility means avoiding reliance on any one product or strategy. Instead, an anti-fragile business is one that invests in several potential avenues for growth and retains the ability to pivot and redirect its energies when one of those avenues is closed. This entails avoiding debt and unnecessary spending, in order to limit potential downsides.
When it comes to investing, Taleb describes what he describes as a "barbell strategy." This entails dividing investments between highly safe bonds, and highly risky ones, with comparatively few investments in the middle ground. "If you know that you are vulnerable to prediction errors, and accept that most risk measures are flawed," Taleb wrote, "then your strategy is to be as hyper-conservative and hyper-aggressive as you can be, instead of being mildly aggressive or conservative."
Taleb described his investment thesis as the "barbell strategy," because he focused his attention on the two extremes of the risk spectrum. He invested in highly safe assets and highly risky assets, with little attention to intermediary ones.
Taleb’s anti-fragility theory can be linked to his earlier work. In his 2007 book, The Black Swan: The Impact of the Highly Improbable, he discussed unpredictable events that impact businesses.
He urged readers to brace themselves for so-called black swan events, rather than try and predict when they may happen. That requires businesses to be more conservative in what goals they chase and keep their balance sheets strong, among other things.
This book quickly captured a popular audience, with the onslaught of the wave of foreclosures and resulting financial crisis in 2007 and 2008 that led to the Great Recession apparently confirming Taleb's theories.
What Is Supply Chain Anti-Fragility?
In supply chain management, anti-fragility refers to supply networks that are less vulnerable to short-term disruptions or critical bottlenecks. To make anti-fragile supply chains, it is important to spread reliance on multiple suppliers and distributors and react in real-time to potential shortages rather than attempting to forecast supply.
What Is Taleb’s Convexity?
In Anti-fragility: Things that Gain from Disorder, Nassim Nicholas Taleb uses "convexity" as a synonym for the term he later coined, anti-fragility. For bond traders, convexity refers to bonds that can gain more from falling interest rates than they stand to lose from rising rates. Likewise, a convex or anti-fragile system is one that gains strength from downturns and volatility.