Stoicism: The Barbell Strategy

hi i want to return to the themes in the seemed nicholas celebs book anti-fragile and in particular today i want to talk about stoicism now stoicism is a philosophy of life that goes all the way back to ancient times but what i'm going to talk about today is a certain aspect of stoicism that taleb finds there the stoic tries to avoid suffering from the downside of life they're going to be problems and downsides no matter what happens in life after all life is in a certain sense a tragedy it ends in death but forget about some of the aspects of the bigger picture metaphysically we can simply think about details day to day year to year this year has been filled with negative effects so i don't have to mention any more of them perhaps there have been some very recently in my personal life as well as in the bigger picture and so loss is something we all have to come to grips with how do you deal with loss that's the aspect of stoicism that a lot of people have focused on and thought about but taleb focuses on the other side after all seneca became a very rich and a very powerful man lots of other stoics were also very powerful people in fact one of them was not only a great roman general but an emperor marcus aurelius so what we need to think about here is not simply the downside of life and how to protect ourselves from the downside but also the upside of life how to take advantage of the good things that life presents while trying to avoid the pain of the bad hence the relevance of stoicism it's something that has at the core of its philosophy the barbell strategy the tele focuses on and talks about let's start with an observation from the roman poet livy men feel the good less intensely than the bad that's the core idea of prospect theory it's also the core idea of laura bhutak's risk-adjusted expected utility theory it's something that i think is a fundamental truth about us but if we focus on it we can say well is this simply a psychological fact about human beings that we worry more about losing position than gaining position actually as tully points out they're very powerful survival related reasons why we do this we want to be able to increase our thriving we want to thrive we want to be happy as aristotle says but we also want to survive we don't want to die and so the downside is more dangerous from us in a sense than the upside some of the losses sustained in the downside of life are really irrecoverable they're things that are irreversible we can't gain back the ground we've lost it may even destroy us however the upside well that's great we'd like to improve would like to be better off but it's most important that we avoid the downside our survival depends on it so when we think about it that way it's not just some weird psychological quirk we have it's something that is fundamentally rational it's born into not only us as human beings but you might think into the entire animal kingdom we try to survive and that means we necessarily worry more about the downside of life than the potential upside now this means however that success is a double-edged sword after all once you gain success you now have something to lose and that the stoic says is what causes the trouble after all there are a lot of people who gain a certain amount of success in their careers for example in reputation in fame or they just simply gain a lot of money one source or another but the point is then they have something to lose i've known people who are academics very concerned with their academic reputation they become obsessed with where they stand in the field they have something to lose there are all sorts of stories of pop stars who become rich and famous on the basis of a song or two maybe an album or two and then there's huge pressure to keep that up they now have a lot to lose not only their money which many of them manage to lose but also a question of that reputation they don't want to put out a stinker of an album and so it creates pressure it's something that gives them a lot to worry about because now they have something to lose the stoic says look success is great but steal yourself against the downside don't live your life focused on what you have to lose now it's very important that you avoid serious losses so you don't want to be stupid you want to make sure you survive and so it's very important not to be ridiculous and not to risk huge downsides but on the other hand don't let success be something that is a burden to you a monkey on your back that you now have to worry about instead treat it differently so seneca gives some advice for this he says assume at the outset that the enterprise is going to fail it doesn't mean you're not going to try it doesn't mean don't do it in the first place can't win don't try no instead what he's saying is already counted as written off counted as lost i've had a chance to get involved in a number of projects over the years with various collaborators and some of them have worked out most of them have not really worked out very well but okay it's more important in a sense to have a foot in but recognize yeah this may not go anywhere and so at the end don't feel like oh that was such a waste i just wasted a year of research time focusing on a project that didn't work out instead say well okay i assume from the outside i'm doing this because it's interesting because it's fun because i like working with this person may go somewhere if it goes somewhere that'll be fantastic it doesn't go anywhere oh well and do that from the outset write it off from the beginning and then any upside fantastic any downside well i went in knowing it probably wouldn't work again that doesn't mean you don't want to fight hard but it does mean in a sense don't go all in recognize that you have a lot to lose and don't put all your eggs in that one basket don't go in counting on a gain it may not work out go in counting on a loss hoping for a game and it makes all the difference in this way seneca says we can transform fear into prudence we can change pain into information and indeed for a long time until a cat threw up on it i kept in my office a copy of forbes magazine that had a title article that said failure why it's so damn good for you i do think that's true why well it's not that it's not painful it is painful but it conveys information you can learn from it and so i find that i get a lot more information out of criticism that i do out of praise praise it's great positive reinforcement is good great i'll keep doing what i did to succeed but although it's more work i learn more if i get a negative result pain yields information and so failure is good for you failure makes you think okay what went wrong that time what can i fix what can i do better and by applying those kind of incremental improvements we can get much better at what we're doing our chances of success go up there's another factor to what seneca says in addition to trying to steel ourselves in this way against losses by assuming they've already happened and then being delighted if they don't he says also invest in good actions try to do good things for people benefit others that can't be taken away from you virtue is something that can't be taken away from you after all it might be that you lose your worldly goods it might be that you lose your reputation you're standing in the field whatever else it is that you care about but on the other hand you're not going to lose your own sense of virtue you're not going to lose the sense of having helped someone else and that idea of doing good things continue to do good things that's not something that can be taken away the point of that is you become robust that fights fragility worldly wealth possessions those things are fragile life too is fragile just a couple of days ago a friend of mine died last january a very close friend of mine died so we have a lot to lose but virtue is not something we can lose in that way here's the core idea fragility that's a state where i have more to lose than i have to gain i'm fragile when i face a situation where the downside for me is greater than the upside i have more to lose than to gain that's a situation where i'm fragile it's an unfavorable asymmetry a situation in which i'm anti-fragile is just the reverse it's where i have more to gain than to lose in this situation i also face an asymmetry but this time it's a favorable asymmetry i've got more upside than downside more to gain than to lose that makes me antifragile so what then is the stoic attitude about life well it's not just this rather pessimistic take on hay anything bad can happen assume it's already happened that can be a recipe for neurosis as well as for peace of mind which is the stoic goal the key idea is this we want to become not only robust but anti-fragile so the robust part try to protect yourself against the downside try to minimize the effect of losses that means don't get too attached to the things of this world that can be taken away don't get too attached to worldly goods don't get too attached to wealth or to political power or to fame or to reputation or to any of those things that depend on other people in fact try not to get too attached to life itself that's something you can lose however you do want to take advantage of the upside you want to make yourself anti-fragile and that means you want to find situations where you have more to gain than to lose and so that means be on the lookout for those opportunities look for situations where you don't have that much to lose if you invest your time invest your money invest your effort into something but the potential payoff is large now the probability of the payoff may not be huge but still as long as there's more upside than downside that's where you want to be so taleb summarizes his barbell or bimodal strategy it's basically paranoia plus a kind of aggressiveness and so what is this idea this combination first of all mitigate the downside fight fragility try to be more robust that means look damage which is often irreversible is something you want to avoid if you can so in certain areas play it safe play it safe where the downside is greater than the upside play it safe in regions where you're facing a greater downside than upside when you're in the situation where you might face negative black swans now notice here some dangers like the danger of skydiving is pretty predictable the parachute might not open or even if it does you might judge it wrong open it too early or too late you might end up hitting a tree or something else you might break your ankle or break your legs there are all sorts of dangers and you can anticipate those but in much of life there are really black swans we can't anticipate what might happen we don't know we're undertaking dangers but think about the dangers think about that try to play it safe in regions where there are negative black swans and we're highly susceptible to them on the other hand also be alert for the kinds of situations where there are positive black swans and there be aggressive be willing to take risks so be risk loving in the areas where there's more upside the downside where you've got the possibility of positive black swans yes then be aggressive then make sure you get in the game when there's more to gain than to lose but if there's more to lose than to gain be paranoid play it safe if possible avoid the game altogether so he summarizes this in a proverb provide for the worst the best can take care of itself provide for the worse you want to make yourself robust important not to die important not to be destroyed important not to go out of business important within a company let's say not to be fired etc etc but on the other hand where's the where is the potential for gain put yourself into those situations and dare be aggressive so he says a lot of people will have a diversified portfolio playing it safe going for stocks each of which is pretty safe says that's probably not the best strategy the better strategy would be to be 80 or 90 in cash and the other 10 to 20 percent in highly risky but potentially large return investments and something similar happens in life he says look in much of your life play it safe more downside than upside so be safe about all that but on the other hand there are opportunities for gain the potential for gain may be so large you don't want to be left out there be aggressive go for it

Channel: Daniel Bonevac

Views: 2,056

Rating: 5 out of 5

Keywords:

Id: 7NFWEPCi-uo

Length: 13min 12sec (792 seconds)

Published: Mon Nov 16 2020