Tag Archives: antifragile

Skin In The Game

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Sticking with the Antifragile theme, Taleb (and Gordon Livingston) write that honor flows from demonstrating courage when exposed to risk due to one’s beliefs. Taleb uses the example of enduring ridicule, and financial risk, for being true to his beliefs. 

Last summer, I listened to elites hammer on about the underclass not having skin in the game. This discussion seemed to lack justice but I wasn’t able to put my finger on an exact reason.

Having worked alongside the wealthy, I have experience with the problems of the rich. My move to the US gave me a chance to dig deeper into tax policy and I’ll be sharing some observations about that in future articles.

At the top of society, what does an honest person risk?

  • Size of main residence
  • Frequency, location and duration of vacations 
  • Number of years until retirement
  • Proportion of personal budget dedicated to luxury spending
  • Amount of capital passed to the next generation

Facing the above doesn’t require courage – no wonder extreme activities become popular in societies with wide income differentials.

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In Taleb’s worldview, meaning comes from exercising courage with regard to one’s beliefs. I tend to derive meaning from the pursuit of excellence, working on my goals and meeting my obligations to my family. There’s not much personal risk in the way I roll through life, but it seems to work for me.

I enjoyed the Antifragile book, so I’ve been considering how I might be fooling myself. I’ve come up with a few areas.

As a 4th generation, first born, white male… the world has been skewed in my favor since birth. Listening, to my peers complain about the burdens of sharing society with their fellow citizens, demonstrates an ignorance of my reality. Seeing older versions of myself complain offends something inside me – my time in Asia taught me that I rarely have anything to complain about.

There is a disconnect between my reality and what the public is told about people like me. My effective (US) tax rate is similar to what I paid in Hong Kong. Having lived in Europe, Oceania and Asia – America is a low-cost, and very attractive, place to live and work.

Taleb makes the point that seeking to change the human condition is folly and warns against seeking to remove greed. He advises regulation to protect our societies from the effects of greed. Examples would be getting rid of banks that are too big to fail and applying criminal sanctions for white collar criminals. There have been a lot of examples in the news recently. HSBC banking drug cartels and Barclays fixing global interest rates. If a small institution took these actions then their directors would be going to jail, or at least losing their banking license.

Remember that we only see a portion of the corruption in our societies.

  • What do the financial scandals tell us about that society?
  • What does the USADA report tell us about endurance sport?
  • What lessons can we learn from these real-life dramas to make better decisions in our own lives?
  • When faced with an ethical choice, do we take the money or remain true to ourselves? 
  • Is it possible to do both?

I’ve spent a lot of time considering the above and my latest book shared a road map for how I live.

Before we publish on Amazon, my editor asked me to include the human side of how I arrived at my framework. Over the next few months, I’ll be sharing the stories that created my way of living.

The Antifragile Family

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My family owes a debt to Taleb as applying his books, Fooled By Randomness and The Black Swan, enabled me to avoid personal bankruptcy in the Great Recession of 2008/2009.

His latest book, Antifragile, extends his work beyond business and finance. I highly recommend this book – here’s a link to his Wikipedia page for a short-form intro to his thinking.

As a father, I have two heuristics that I apply to my kids:

  • Keep the kids alive
  • Don’t protect from failure

My wife and I have debates about the second point and she’s a good counterbalance to my approach. I’m willing to let my kids get dirty, hurt, sick, upset, cold, hot… especially when I think there’s a chance they will learn by doing. My goal being to teach personal responsibility and put ‘failure’ in perspective.

I’m willing to let my kids struggle because Taleb makes the point that we want to do as much nothing as possible. He makes the point with regard to medicine and I’ve heard Buffett make the same point about investing. Both authors note that “doing nothing” is very difficult to achieve and always open to criticism (because it is difficult to attribute the benefits of no-action).

The authors of Siblings Without Rivalry share that the wise parent acknowledges conflict then gives the kids an opportunity to learn how to resolve themselves. What’s the minimum intervention that will help my kids learn to get along in the world?

Recently, my daughter was having trouble playing with older kids. Lex is the first born and defaults to total domination in relationships – the older girl (also first born) yelled at her and Lex came to me to ask if I would intervene…

  • Lex – tell her to play with me
  • Dad – it made you feel sad when she yelled at you
  • Lex – yeah
  • Dad – you want to play with her and her brother
  • Lex – yeah
  • Dad – I could tell her to play with you but kids don’t like being told what to do – why don’t you act a bit more calm and see what happens

Total time investment – ten seconds – kids worked it out over the next ten minutes without any adult intervention. An intervention was required a little later when she nearly slammed a toddler’s fingers in a door (that was a chance to teach “do no harm“)

The message that tinkering leads to adverse outcomes is repeated in many fields. So what to do? I think Taleb would advise:

  • Remove fragility – child-proof the home
  • Limit the effects of asymmetric negative outcomes – seat belts, health insurance, long term care insurance
  • Gain exposure to positive asymmetric outcomes – have children, change careers, meet new people
  • Then stand back, let it ride, avoid noise and spend your time learning

Asymmetric means that the outcome is much greater in one direction than the other. For example, my friends tease me because I always drive the speed limit, or less. I drive slow because the cost (time) is tiny compared to the benefit of less fatalities. An avoidance of negative Black Swans is why I wear seat belts, helmets and don’t run lights & stop signs. It’s also why I don’t yell at strangers, especially in America.

Because Taleb shares stories of multi-million dollar investment profits from applying his knowledge, it’s tempting to consider how we can make a lot of money from his advice. For example, a reader sent in a question about “barbelling” a small portfolio. My advice would be to barbell your life. There is far more upside for a young person to focus on asymmetric outcomes with their human capital, than their financial capital.

I’ve been thinking about my family’s exposure to positive Black Swans and my children keep coming back to me. Little people require a lot of change in the lives of parents but their lives provide the opportunity for positive events to enter the family system. 

How can I help my family benefit from positive asymmetric outcomes?