Anti-fragile

No, I did not make this word up. Nassim Nicholas Taleb coined it in his book of the same name (he is also the author of the excellent The Black Swan). He needed a word that would express a unique and very important aspect of how complex organic systems function, including us.  

Anti-fragile refers to a system or organism (including humans and their societies) that can grow or improve in response to certain kinds and levels of shocks or stressors. Such systems are not vulnerable to challenge, disruption, or uncertainty, at least up to certain points—they actually benefit from them. At the personal level---lifting weights judiciously is an example of how the body can absorb stressors and actually improve in response, or getting low or mediocre grades on a composition is a stressor that helps some students become better. At the organizational level---planes do on occasion crash, a significant stressor that fragilizes the plane and the passengers. But since the airline industry and FAA use the crash information to make plane travel safer, the overall system is anti-fragile. 

Redundancies are a way to ensure anti-fragility, at least to some degree. Economies that have many new business start-ups have considerable redundancy. While many of these will fail, they are fragile to the risk, the economy itself will be healthier as many are successful. It will be anti-fragile. As Taleb says, “Restaurants are fragile; they compete with each other, but the collective of local restaurants is anti-fragile for that very reason.” The start-up and loss of these small entities ensures the continued dynamism of the local or national economy. From the above example, planes have a number of redundant systems that help with anti-fragilizing. 

Fragility, on the other hand, is the condition of responding poorly to stressors---being vulnerable to and harmed by shocks, disorder or uncertainty, even if of a small order. It is a function in part of having few or no options when disruptions hit, or in having the wrong ones. Anti-fragility is rare, but fragility is quite common on both the personal level (later post) and larger societal level. 

For fragile systems to survive, they require that all goes according to a “plan,” formal or not. Most governmental programs, for good or ill, are predicated on the assumption that the effort will pan out as described if many conditions (those of the plan) are met. Since these programs are initiated as part of complex interactions, and are implemented in complex settings---other agencies, groups or individuals, including opponents---the chances that the plan will work as intended are remote. Complex conditions always produce unexpected, for the most part unpredictable, and often undesirable, consequences. Thus, these programs are fragile to the unpredictability of human systems complexity. 

The greater the fragility of a system, the easier it is to knock it off balance. Highly fragile systems are very sensitive to even tiny shocks, which throw them quickly and sometimes deeply into disarray, if not into disintegration. A firm whose sales and profits have declined, and which has past-due obligations, is far more fragile than one whose financial condition is better. A relatively small shock to the first, say a letter from a lawyer for one of its smallest customers, could precipitate many bad things, with bankruptcy being only one. 

The collapse of mining in Africa has seriously damaged the well-being of a growing middle class. As global mineral demand has declined, particularly from China, Nigeria, Angola and South Africa have been hit hard, but Zambia has experienced some of the worst outcomes, with much higher unemployment, sharply increased inflation, a currency worth half its value, and higher suicide rates. Since each miner’s salary supports 15 dependents, loss of a job has a devastating impact. The nation and those workers, families, and companies dependent on the mineral industry are fragile to the decline in demand. Those at the top politically or otherwise  are anti-fragile to the demand change by virtue of the money and power they have acquired, legitimately or not. 

From our recent credit bubble of 9 years ago comes a similar story. All states were hit by the recession, but two states took particularly huge hits---Arizona and Florida, mainly because their growth and success depended primarily on the housing market, which tanked big time. Once again, high dependence on one sector means fragility when the shock arrives, and it always does, eventually. As is the case with all complex systems, when a shock will arrive and its magnitude are completely unpredictable. This construction disruption, like the African examples, led to significant unemployment and difficulties for workers and families, not to mention state revenues. 

California’s current tax structure depends greatly on the wealthy and super wealthy---around 50% of its budget comes from sources like income taxes and capital gains taxes from the top 10% of the population. When times are good, California reaps the reward and when they are bad, it pays a significant price. Its revenues are thus subject to roller-coaster-like trends, and during low points funding of many of the state’s programs is jeopardized. The state is thus fragile to its own tax structure and to the ups and downs of the state and national economies. Naturally, when revenues decline, cuts have to be made even in programs that are of great benefit, with the state’s fragility exported to those most needing those programs, and often to the average taxpayer.

The US and the EU currently have economic sanctions against Russia. Nonetheless, the people at the top in Russia are getting richer and richer while the average Russian is suffering from cuts in health care, interest rates not far from 20%, the flight of capital leading to higher unemployment, and from higher inflation generally. Anti-fragility at one level, encompassing very few people and companies, and fragility at another, involving great numbers of people. 

It is not just economies that are subject to fragility. Politics is as well. Two of those running for president, Sanders and Trump, are one-trick ponies. For Sanders, his pitch is that nearly everything is the fault of Wall Street, and more taxes on it will solve the nation’s troubles, especially if we give away all kinds of things for free. For Trump, he is selling himself as the end of all America’s problems. Neither Trump nor Sanders has much knowledge beyond his very (one might say astonishingly) limited domain, indicating fragility because national and international shocks (things not going as planned---practically guaranteed) will seriously upset either’s tiny apple cart, leading to poor, if not disastrous, errors in response---fragility. But their fragility would also be exported to the American public, who will pay the eventual price for mistakes resulting from either one’s singular and simplistic view of the world. 

These examples only hint at the expansiveness of the anti-fragile/fragile concept. Fragility and anti-fragility are evident in all human activities and processes. The examples also inform us about the complexity of the anti-fragile/fragile relationship. It is seldom that a system or entity is either anti-fragile or fragile. It can often be a mixture of both. Even with the Russian sanctions, because Putin has stopped importing much Western foodstuffs, this has meant a great boost to the local farming communities, which are thus anti-fragile to the sanctions. In our immune systems individual cells will die---fragility---in order for the system itself to grow stronger---anti-fragility. Our bodies, like many systems, thus have characteristics of both fragility and anti-fragility. In addition, comparisons indicate differences in degrees of fragility/anti-fragility. Although affected adversely by the decline in mineral demand, South Africa’s economy is more diverse than Zambia’s and is thus somewhat less fragile than the latter. 

What can we learn from understanding fragility and anti-fragility? One big thing for sure---that anti-fragility is a more desirable state than fragility. Expecting things to go as we want is a prescription for fragility. This is as true for individuals and families as it is for nations, governments, economies, religions, stock markets, and businesses. If anti-fragility is a desired state, what can we do to create more of it, at least for ourselves if not for larger entities? That will be the subject for the next post.