How to Read Nassim Taleb?

Nassim Nicholas Taleb started his career as a trader before making the move to academia. His favorite hobby is blasting pseudo-intellectuals, psychologists, expert forecasters, and any kind of person he considers an intellectual phony, which is most intellectuals. He prefers taxi drivers, craftsman, entrepreneurs. The former have a voice but contribute nothing of substance, the latter do the opposite.

Understanding Taleb

Taleb would have you believe that he can sniff bullshit from a mile away, because unlike most people, he thinks in terms of numbers, constructs, and equations – not words. Of those who think in words, Taleb has a special word for them, ‘morons.’ You see, words are tools designed for charlatans and tricksters. Language is indefinite, and ambiguous. The meaning of a word differs from person to person, and it is possible to say a lot without saying much at all. It is even possible to say nothing at all and entrance an audience with profound sounding mumbo jumbo.

But you can’t mess around with mathematics. Numbers are absolute and they never lie.

As you can imagine, quite a few feathers have been ruffled by such a controversial anti-academic academic superstar. But few gain as much enjoyment from twitter disputes. You see, Nassim is anti-fragile. He thrives when things are going against him, when people call him out, and try to expose him as a fraud.

But controversial personality aside, Taleb has done a great job at popularizing inaccessible mathematical ideas to a lay audience. He is a great marketer, for sure, but what he is marketing has value. If nothing else, his material will serve as a permanent lesson in intellectual humility, even if the way it was written contains little humility.

Below are the books that he has written over the years, with a word or two about each.

Fooled By Randomness

We are great at recognizing patterns, even when they don’t exist. Why? We hate randomness. We love for things to go as we planned, and we like to believe that we have some sort of control over our destiny. But whether it’s predicting stocks, starting a business, or choosing a career, much of our success will ultimately be ruled by random factors that we did not anticipate. Now, it is possible, through hard work and discipline, to achieve some level of financial success, because the world is not totally random. But achieving enormous wealth is mostly due to luck (but not completely).

You will learn:

• Which level of analysis different issues deserve. Some deserve deeper attention, and others much less (or none at all).
• Isolate quality of choice from result. Sometimes, you make a bad decision and get rewarded. And at other times, you make a good decision and get punished.
• Give more value to old ideas that have survived the test of time. These are “distilled” ideas. New ideas, the cutting edge shouldn’t be trusted so quickly. They remain “undistilled.”
• Losing is fine, as long as you put a limit to your losses.
• Make it your ultimate goal to become a man of leisure who can afford to think about ideas properly, and over time, to gradually provide something that is truly valuable.
• Remember that science is speculation. Scientists create well-educated guesses about how the world works, but these hypotheses can be proved incorrect by one random event.
• Don’t just look at the odds of something happening, but at the payoff you receive if it does happen. An unlikely bet can be smarter than a likely bet, depending on the payoff.
• Rules are followed not because they are perfect, but because they make things move quickly. When faced between trivial alternatives, choose randomly so that you can move on.

The Black Swan

Given that the world is random, we can expect that it will continue to be random in the future. In other words, we will experience great change because of sudden, unforeseen events.

You will learn:

• What is a black swan? It is an outlier that has massive impact, and after it occurs, we will say that it was predictable and obvious.
• Entrepreneurs should focus less on top-down planning and focus on tinkering and recognizing opportunities when they come along. Be aggressive tinkering, you create the opportunity to get lucky.
• Positive black swans need time to pay off, while negative black swans show their effects instantly.
• Mediocristan: Accounting, safe road, unlikely to starve. Extemistan: acting, probably will starve, but if you make it, you make it big.
• You want to get the advantages of Extremistan while avoiding its downside. Don’t be like the turkey. The turkey thinks, since it is fed every day, that life will always be great. But then Thanksgiving comes along.
• Black swans depend on your perspective. The butcher isn’t surprised to see the turkey’s head chopped off. The turkey is.
• We like to interpret history like a nice story. But much of history is unplanned and random.
• “The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories.”
• We know about the winners, but rarely see the losers. Be wary of survivorship bias.
• Industries that have small losses and huge wins? Venture capital, publishing, scientific research, or movies.
• Don’t be precise, and don’t try to predict, just move in the right direction.

The Bed of Procrustes

This is Taleb’s book of aphorisms.

A few examples:

• Education makes the wise slightly wiser, but it makes the fool vastly more dangerous.
• An erudite is someone who displays less than he knows; a journalist or consultant the opposite.
• When we want to do something while unconsciously certain to fail, we seek advice so we can blame someone else for the failure.
• You never win an argument until they attack your person.
• To be completely cured of newspapers, spend a year reading the previous week’s newspapers.
• You don’t become completely free by just avoiding to be a slave; you also need to avoid becoming a master.
• The three most harmful addictions are heroin, carbohydrates, and a monthly salary.
• It is much harder to write a book review for a book you’ve read than for a book you haven’t read.
• Most info-Web-media-newspaper types have a hard time swallowing the idea that knowledge is reached (mostly) by removing junk from people’s heads.
• Don’t trust a man who needs an income—except if it is minimum wage. (Those in corporate captivity would do anything to “feed a family.”)
• You can only convince people who think they can benefit from being convinced.

Anti-fragility

Antifragile is about how we should measure risk. Taleb starts by providing a basic definition that will be the focus of the entire book. Some events or objects are anti-fragile. Others are fragile. Something that is fragile is vulnerable to stress. Ex: A porcelain coffee cup. A robust object can withstand shocks. Ex: A steel door. When something is anti-fragile, it benefits from shocks. Ex: Your muscles.

You will learn

• People should worry about abundance and safety, not scarcity and challenge. It’s easy to manage scarcity, it’s a lot more difficult to manage wealth. When you’re wealthy and comfortable, you become complacent and less likely to perform to your fullest potential. Comfort leads to decadence while scarcity and stressors lead to overcompensation. A busy person is better at handling an additional job than someone who’s idle.
• Stressors that are too big don’t necessarily make you stronger. People who survive harsh events such as wars do not emerge stronger as a result, necessarily. If you meet someone who’s made it through a traumatic event heroicly, it could be their toughness that got them through it.
• The idea here is that you don’t have to be a very smart entrepreneur to succeed. If you’re constantly creating new revenue streams for yourself (more optionality) then you’re more likely to outperform someone who makes one big bet on what he believes to be a safe prediction. An employee who’s developed one set of skills for many decades is a more risky option than an entrepreneur who’s started multiple businesses and made many investments.
• Employment is fragile because you steady income can stop at any moment. You’re exposed to the dark side of fragility. Entrepreneurship is anti-fragile because you benefit massively from shocks and volatility. Another advantage is that entrepreneurs benefit from their mistakes while employees get reprimanded for them.
• The medical fragilista denies your body to heal by giving you medicine with potentially harmful side effects.
• The policy fragilistadesigns systems that require constant intervention.
• The financial fragilista creates risk models that blow up the banking system.
• The military fragilista tries to restructure complex societies.
• The predictor fragilista convinces people to invest in future illusions.
• Chess grand-masters win because they didn’t make a mistake. Poker players win because they didn’t lose their stack. People get rich because they didn’t go broke when others did. Athletes become stars because they didn’t get injured.
• A donkey equally hungry and thirsty stuck between a bale of hay and water will die of starvation and thirst, unable to make a decision between the two. However, a random nudge in one direction will solve the problem for him. Randomness can help with decision making and becoming unstuck, but when we try to reduce it, we lose that beneficial stressor.
• We are living longer but people are more sick. All of our comfort has been detrimental to our healthspans. We thought aging causes bone degradation, but it seems that bone degradation causes aging.
• Taleb points out that procrastination is not always bad, it is something deep within us that is able to identify the urgency of a problem. We don’t procrastinate when a lion is attacking, but procrastinating responding to an email is probably fine. The cure to procrastination on the job is not to force yourself to create systems that fix it, rather, to find an occupation where you do not have to fight your impulses and where you do not procrastinate.
• “If true wealth consists in worriless sleeping, clear conscience, reciprocal gratitude, absence of envy, good appetite, muscle strength, physical energy, frequent laughs, no meals alone, no gym class, some physical labor (or hobby), good bowel movements, no meeting rooms, and periodic surprises, then it is largely subtractive (elimination of iatrogenics).”

Skin in the Game

Taleb’s Incerto concludes with Skin In The Game. This book makes the argument that some people, who are not engaging directly with reality, are not capable of understanding risks. This class of people includes academics (especially in the social sciences), bureaucrats, and advisers. What these people have in common is that they are isolated from the direct consequences of their behavior.

You will learn:

• Hierarchies are not inherently bad, they are only harmful when they result in bureaucracies that help people separate themselves from the consequences of their decisions. Hierarchies should exist, and if they are localized and decentralized then they would not result in the same errors.
• Be careful of taking advice from people with misaligned incentives. If someone advises you to do something that is mutually beneficial, realize they may not care if you end up being harmed.  
• An intolerant minority will set the rules for everyone else. People in the U.S eat Kosher food not because most of the U.S is Jewish, but because non-Jews tolerate Kosher while Jews don’t tolerate non-Kosher. This asymmetry informs us about what will happen with GMO’s.  Companies can promote genetically modified food, but it only takes a minority of people to stop GMO’s from being ubiquitous.
• Employees exist because they have a lot of skin in the game, they share risk with their employers – enough for it prevent them from being undependable.
• In Christianity, it would have been easier to separate Jesus from God, but there was an insistence on the Trinity. The duality of Jesus (being both man and God) is central, and has caused monotheists to see traces of polytheism in Christianity and Christians to be beheaded by the Islamic State.
• Anyone who needs to appease his colleagues to make progress, or his superiors, or deal with commentators, will have to take on the role of an actor, and by doing so, they trade results in the real world for their position in whatever artificial bureaucracy they find themselves in.
• Words have ambiguous meanings – this is bad for decision making. Philosophy was born out of the need for rigor in discourse – Socrates asked people what they thought they meant about what they said. This is in opposition to the sophist’s promotion of rhetoric.
• You don’t need science to survive, but you need to survive to do science. The best definition of rationality: actions that increase the chances of survival.

Which Order Should I Read Taleb?

1. The Black Swan
2. Anti-fragile
3. Fooled by Randomness
4. Skin in the Game
5. The Bed of Procrustes