Antifragility: Gaining from Volatility, Stress and Disorder by Prof Nassim Talib - Part 1

[Music] very good morning to all distinguished guests ladies and gentlemen I move in and I'll be your MC for today on behalf of the national library board we would like to thank all of you for attending today's special events this event is brought to you by sure the national campaign in promoting information literacy where we equip you with the skills and resources to discern information meaningfully in a 21st century we would also like to extend our thanks to public service division for the opportunity in hosting this event our distinguished speaker today professor Nassim Nicholas Taleb will deliver his talk on antifragility getting from volatility stress disorder based on his latest book building upon his work from the Black Swan professor Talley investigates how individuals and entities can benefit from stress disorder volatility and turmoil laying out a blueprint of adopting and anti fragile state for living in a black storm world professor Nasim Poli [Applause] [Music] [Applause] it's always wet nose one but before you speak it's like making money without earning it was like a loan you've taken you had to repay back so nervous it's already bad bad enough one already getting applause it's worse when you get it before the lecture thank you so you guys are interested in topography fragility I'm not crazy about the top of agility because I'm right I'm continuing I'm writing a different book so I don't know if you know you mind talking more about the technical version of the insert oh called solid risk is it okay alright it's talking about that if I try to get it picking up on a way on YouTube on the whiteness it's not fresh okay so this is the mother book was a technical version of all the other ones so and I suggest the format is a short lecture and a lot of pure name is it okay there's some noise coming from there even better people to create some randomness a little bit of confusion which is always good because we are basically convex to such confusion so anti fragile is a subset of what I call silent risk why did I am I calling the technical version of the work which incidentally is available for free why am i calling a salad recipe mostly because risk is silent and people don't realize that all the techniques we have to detect risk there are a statistical don't work visibly to have something for something to be risky for something to be risky it has to be it's armed you know okay so do you think that for statisticians they had a solution there random events come pre-announced like you get some email from some higher authority telling you it's gonna be risk this ibly don't see it in the past you very normal all cases we don't have evidence so this conflation absence of evidence evidence of absence is very severe there this is not well understood that if risk was present and past data life would be easy but it's not so you had to give a name to me things call I'm given name like evidentiary you know things that have past evidence or non evidentiary last evidence so that's a basis of the title silent risk we'll get to a differential in a minute this is sort of the publisher title story and publisher always like to make things very very sound bite like but I don't like sound bites let me talk about this idea of a solid risk then fragility and then we'll talk a little bit about the fragility as something that connects to the idea fresher okay and so most scientific methods are evidentiary because science isn't about risk science is about statements you can prove and how do you prove statements either through a pipe reasoning some logical chain called an deductive or some kind of evidence you can say there is evidence that if you shave that you're not gonna have it whatever it is or ice and stuff like that but not enough evidence now the problem of course is that and realize we need to survive and a lot of things for which we don't have an evidence so you cannot rely on science to show you the way because there's the methods of science don't apply there it's not that we are as our scientific we don't have you know the structure and anything and in the complex world this even you know the problem is even more accentuated so you need something else to make decisions than science something is more rigorous than science so this is what I tried to qualify here is by by trying to codify by saying that if you were to just to focus on what's called science with derivation and proof you never go anywhere that's not the job of science science is not about being infallible it's about making certain class of statements and a very fallible way and there's competition between scientists but when it comes to risk you don't wanna blow up you don't terminate life on a planet you don't want you need infallibility at some level as part of this there is this book the in a box this booklet called the precautionary principle and in it we try to explain that there are some classes of risks that you cannot take not only you don't have evidence that they're harmful but you don't want that evidence because if it happens it'll be too late that's the first problem and the second one is that there's small risks at the level of the individual is not a big deal because we're gonna die anyway we are mortals we are fragile so eventually it's just a time clock you can even if medicine could make us live forever odds are 99.9% of us won't make it past 200 years simply because of accidents because of stuff like that so but you don't want mankind humanity the planet bio life to disappear you don't want it to be subjected to the same what I call open probability therefore we need to take zero risk and there's something very simple when we talk about sustainability we want to be able to you know continue forever literally using the word forever or close to forever something more than several hundred years several thousand years so sustainability means being able to have a resources that you replenish so you want to do that with a climate everything when it comes to risk there's an equivalent that's not in the literature okay it's sustainable risk-taking if you think small risks that entail ruined at the level of a unit of the unit whether it's you a family income to the town a country a continent or the world okay the unit you have a risk for ruin you take that risk it's very small and you survive it then what happens what are you gonna do you're gonna take it again you same thing now if you you're not replenishing anything because they add up so if you have a risk of ruin and we encourage the ruin is by walking all right that without and the way is renewable it's because before getting ruined typically we reproduce ourselves but the biosphere as a whole doesn't reproduce itself so you could not if you add up the risk of ruin you hit probability 100% eventually if you keep taking in certain classes of risk and this is not in the literature and this is vastly more important than anything and risk management is what I call non-renewable risk taking at a systemic level so you need the evidence that you're having close to zero risk at the level of the ecosystem and that's how mother earth managers how it never takes systemic risk it takes local risks confined to one area and of course if something breaks here it doesn't affect life in Rwanda all right and vice versa so there's but certain classes of risk that are connected and these you can't take so that was sort of the idea of working in silent risk first and defining things that in a vocabulary you are called verbal verbal istic definition of risk are not there are not present okay but once you met them mathematically as a precise object you read it you see oh boy it's clear and you can say it's wrong or it's right you can disagree with something clear and mathematical without having dissertations on how you feel about things all right this is Cleary there you go with this you go you say okay it's renewable or non-renewable if the risk is not renewable then even in Russia probabilities add up to 1 you know that even in Russia so if you agree with these statements and it's a logical inference that this is what we got to be doing so this is sort of like what I'm trying to do so salen risk has of course the precautionary idea it has a notion of non evidentiary risks why it's more important than science I have a clear definition of what I call a charlatan namely most people who work employed in risk management typically in finance especially alright and you continue with the definition of what's non charlatan and we continue and in it I talk as a subset of decision making a class of things called fragile and anti fragile decisions based on payoff whether you are sensitive to model error in one way or another to get that I need a definition of fragility okay what is fragile and once we define fragile things are very easy because anti fragile the opposite flows from it okay the best way and it took me a long time to figure it out to define fragile is to say that it's object this object does not like disorder and I don't have a coffee cup here but if it were I mean I don't have this is a doesn't mind too much it doesn't care about earthquake but if I had a porcelain nice piece here on the table it maps to something which an option when I was an option trader is called short volatility it has if there's a random event it has no upside from it there's no upside from random event okay that's pretty much how you can define the fragile if there's an earthquake there's zero probability that they will approve you agree okay so it means it has more downside than upside then we have a definition and it took me I repeat to everyone you know inside it took me twenty one years to understand this elementary point that a I was an option trader that things that are fragile don't like volatility and it may seem trivial phrase that way but you can use it to do a lot of things the first statement I'll make is that what does not like variability or volatility there's not like randomness okay second even more critical what doesn't like a randomness doesn't like time you are fragile you don't like time because time can bring random events you can have a car accident it terminates the life but you can't have a reverse car accident that make gives you a second life you see so we are negatively exposed to randomness all right that's the fragile and we continue doesn't like entropy doesn't like chaos doesn't like stressors so it has some classes of responses to stressors that's the fragile the anti fragile had exactly the opposite characteristics anti fragile likes variability between sale the anti fragile needs variability because if you don't have it you're harmed and the other characteristic but all of this anti fragile business comes from a definition of what is fragile so a few things we can say about the anti fragile first that it is not robust the robust doesn't care about random events you agree the anti fragile gains from them now if you have something that gains from random events like the plants here they tend to gain from water not too much but just enough you agree it means they need water they can't reach full potential that that so we can make a statement that if my body needs some stressors and I don't get these stressors that I'm harming it and effectively is true alright so the second statement we can make that variability and risk are not the same item if you define risk properly you would realize it has nothing to do a variability variability is typically a proxy used for risk because economists that's how they define risk but then again you can't trust anything done by economists so we can ignore that we can define risk differently okay and the other thing this is why I have a board every saying fragile has to have some kind of response to random event that is like this accelerated harm up to a point where it breaks and let me explain all right if if you jump okay this is the variable is height and this is the horn okay if I jump 10 meters I'm a lot more harm than if I jump 1 more than 10 times 1 meter it's not linear okay everything fragile has to have some kind of nonlinear response of the shape and call that concave the coffee cup is like this more like this this is the part that's fragile so it's quite important to understand that whatever is fragile is disproportionately more harmed by random by large random event than a small random event more examples if I hit I'm not threatening all right but if I hit someone on a head with a slab of concrete weighing 50 kilos all right it's here they have very stiff rules they I go to jail definitely but the person will suffer considerably here agree now it'll be harmed a lot more than if I hit him on a head more than 50 times if I hit him on a head was 1 kilo you agree and more than 500 times a tenth of a kilo it has to be that way otherwise just by hitting object you would die you see so you have to have anything that survived has to have a disproportionate accelerating respond the random events that's a necessary property so this is the fragile and then of course the anti fragile will have the opposite response which is there's a zone in which this is variable this is a result there's a zone in which you have accelerated benefits and you can look at it as have more upside than downside so this is the anti fragile and the other the fragile why is it important why this curve can explain it can tell me the following instead of having as I explained an anti fragile a long ventilator if a said of having a unit of a hundred I'd better have a tea and then 120 I do better than if I have a hundred in other words if instead of administering anything in fixed unit you vary the unit for the same average you do a lot better you say take the weather the temperature your fragile if you'd rather have 22 degrees then an average of zero and 44 okay and and and and the reverse is if your anti fragile and effectively a little bit of variation is good for you and the rest is bad for you we can explain what that I mean to many details we can explain everything based on that what's the connection with risk the connection with a GameSalad risk i cannot figure out the risk of anything meaningful just by having a computer and a bunch of statisticians you're not gonna go anywhere on the other hand i cannot measure risk people have tried it's just fooling themselves I can measure fragility and I can measure antifragility you say I can measure how fast fragility can be measured exactly at acceleration you measure acceleration you get fertility you see as you can see the fragile is harmed a lot more by large deviation than the linear if you have something linear and that's pretty much critical in moving forward so everything is repackaged as you know a general idea that you can't break up into pieces so a little bit about my writing career I wrote four books I did everything backwards I traded first then got into math later and I wrote general public books before writing technical and let me tell you I enjoy writing the technical vastly more than general public why I don't know so but I mean I course I don't mind talking and communicating with Sheryl public but it looks like I'm gonna change format and to writing technical stuff okay and it's better to do it backwards because if you study and then face real life you have stuff that sort of completely destroy your view of reality but then if you observe real stuff get in trouble have problems don't have problems have you know lose money make money have stuff like that and then go in and study stuff it's a lot cleaner because you're gonna have much fewer distortions okay so so this is what what you know I had to say for now and we can open the discussion for Q&A and let me tell you we can continue via Q&A for several reasons I want to do it that way when I sit and here's someone participating I get bored okay if I engage them it's more interesting and the second point that I will make sure that I will say what I have to say all right through the Q&A sometimes by answering in a totally uncorrelated way people's question and even they will not notice this is one thing I figured out from going on TV and now I don't go on TV anymore but I've done it a few times and when I go on TV I make sure that I don't hear the question you know when I go on and often I just look at the face of the person and then give the next video you know and it works politicians do that and it's right you have to stay within the same subject but without here if you don't hear the question you give a better answer then when you hear the question and it tries to be precise alright so you end up doing something I won't play the same game with you of course I will listen to the question but we can start the Q&A now no that's and then again pick any topic related to the insert though let me remind you I repackage the books in one unit called insert Oh all the books and this is the technical insert oh here first question yes my question is how can we have anti fragile attributes when we live in a society or if we do live in a society that doesn't have the volatility doesn't have the range okay this is very interesting because this is not new the point that we have today is not new you know that we're made from some statistic of variability in our food intake all right and I don't know if many of you have heard of Jesus Christ okay no okay one of the things he did what did he do sorry he went into the desert for forty days during which all he has is a little bit of water and roots so he had periods of deprivation that was emulated after okay well it turned out that almost all Semitic languages a semitic religions have this counter civilization re-injecting randomness unevenness you see this curve the one you know the second page having instead of having a hundred units of meat you know every day you had periods of deprivation and then you have a lot of meat on festivals they reused it why because society had gotten rich already then by the time of Christ and you had to counter that opulence by forcing people to have some deprivation okay and religions introduce fasts so if I take the Orthodox religion we had 200 days without meat or vagin okay now so the point that you're talking about now is not new it has been dealt with the religion is that and now we're discovering that fasting you know people don't know that but fasting is there was today someone posted on a Facebook page that today the article by Madison Madison was already was not very well known when I was writing at the fragile and Matson showed that four days of fasting periodically controls the risk of Alzheimer impact Parkinson - okay so it means it doesn't mean that it's good for you it means it's necessary for you okay and were deprived of that okay now this problem is let's say it's closed we know that we need some variation and food and particularly within food groups like for example protein we're not supposed to have protein all the time because you know we're omnivorous but we're not really on Everest we're part cow whereas if we had a linear combination of the cow and a lion a predator were both predators and boringly you know like you know vegetarian all right so we can eat salads I mean many people I know eat sell us I don't but I'm kidding right so eat salad is very something very boring okay what does a cow do it eats all day long four hours very inefficient and almost every day

Channel: National Library Singapore

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Length: 27min 8sec (1628 seconds)

Published: Mon Nov 05 2018