I’ve had the privilege to listen to the prime minister yesterday (Friday) and I’m going to comment on two points that he mentioned — the first, small is beautiful. Small is in fact much more efficient; and the second point is about the education concept. My bio over here makes me look like someone who ‘thinks’ for a living, sits in the library with books and sips a French wine. That’s not me; I was an options trader for many years in the market and I don’t know if you’ve met an options trader… their conversation is very, very limited. They know two things: one is drinking and the second is volatility.You spend your time dealing with volatility, buying, selling, studying and tracking it. So I thought, hey, you know what, I can connect volatility to the topic of fragility — which is something that doesn’t like shocks, randomness and stressers.My concept of ‘Black Swan’ is something that loves randomness; these are the things that will effectively create growth and will get us to $20 trillion from $2 trillion that the PM spoke about. It is the opposite of fragile and loves volatility. But I am not sure if there’s a word for the opposite of fragile, not even in Gujarati or Hindi. Some tell me the word is robust, that’s not what it is — if I’m sending a package from here to China I write ‘fragile’ on it, ‘please handle with care’ — if it’s robust, what do I write? Anti-fragile is one way to refer to it… and there are metaphors. I’m going to hopefully spend the next 25 years working on this. In Greek mythology there’s the phoenix — a symbol for my own town Beirut — you shoot it, it comes back. I will use the concept of Disorder Brothers here — this is not a company, just a concept that I developed long ago when I had hair. This is about something that likes uncertainty, likes disorder and if there’s an earthquake, it doesn’t want peace and tranquillity...



Let’s look around: a lot of things gain from stressers. There’s a gym in this building that I visited yesterday. You go to a gym to stress your body out. People understand there’s a need for some kind of stressers. If you eat all the time, it’s not good for your body; you need to shock your system once in a while. The same way you can gain working out at the gym.

My book Antifragile: Things that Gain from Disorder was aimed at readers who had read my previous work and are intelligent people. But I tried to avoid the US book reviewers by writing something that cannot possibly be reviewed by skimming through. Intentionally, I made no direct connection between the titles of the chapters and the content and you get the metaphor after reading the full chapter. A lot of people reviewing my book The Black Swan are actually reading it. The concept of The Black Swan is about anti-fragile. Here’s an example of the cat and the washing machine. The main difference between the two is that the washing machine is not organic and doesn’t need stressers.Similarly, if we think monetary policy should aim at completely freezing movement in the markets, it will be like a forest [which is organic]; if you suppress every single forest fire, flammable material accumulates and at the first noise, the whole forest is gone.The same happens in the financial markets: if you don’t have fluctuations, bad companies accumulate with a lot of risks and stuff on their books. And guess what happened in 2007-2008 — we had such an accumulation. The organic loves some variability — not too much — so always over-stabilising is bad; extreme comfort is bad as some discomfort is good. Since we started talking about risk, we have lived with the illusion that you lower risk by lowering variability. The two are seemingly co-related in some domains, but not always. In fact, there is an opposite system — you increase risk if you lower volatility. And this is the same for your company and for the economy.So the concept of anti-fragility is working some amount of risk and disorder into the system — this is true for the Disorder Brothers. For example, we hear all the time about this phenomenon called post-traumatic disorder; in real life, for every victim of such disorder, there are a 100 others who have post-traumatic growth. All my friends in Beirut who survived the war experienced some kind of such growth. Similarly, there are some businesses that improve only through problems — the restaurant business is one example. Similarly, the transportation business — every time a plane crashes, the probability of the next crash decreases. But this is not the case with the banking industry in America or Europe: if you read in the papers that a bank crashed today, the chance of another bank crashing tomorrow increases.Yesterday, the prime minister mentioned ‘small is beautiful’, I tried to figure out why: small is less fragile than the large. By understanding this, we can understand what is fragility and what is anti-fragility. In the Bible, for example, the Tower of Babel is more vulnerable than a number of houses and in the natural world, a mouse is much less fragile than an elephant. If we take this to analysing governments and regimes, China and Singapore have pretty much the same regime, but it worked for Singapore [small] but not as well for China. In history, city states have done the best as ideal political units — and that’s why the PM said the central government’s job is to meddle as less as possible.Large companies are more fragile than small — economies of scale exist only in Bschool textbooks. Being large is an advantage on paper, but makes you more fragile in reality. If you are large and you have a problem, it costs you disproportionately more to solve it... Many small units doing a lot of small things is better than one big unit doing one big thing. The Germans have figured it out which is why we see Germany performing so well. Little companies are driving the German economy.There are many businesses that love disorder and benefit from their own problems. There are two ways of doing things: first to be anti-fragile where the cost of error is small and benefits big. The other is to know where you are going. The PM spoke about setting up 1,000 schools — but while schools and education are necessary, over-education is not. Most tech applications have actually come from bottom-up tinkering rather than top-down research. In the antifragile theory, every society gets destroyed with over-intellectualism. In Germany, for instance, a lot of students get to spend 50% of their time at the vocational level getting to learn the real things, rather than in schools.And finally, a bit about the Lindy Effect [a theory of the life expectancy of non-perishable things that posits for a certain class of non-perishables, like a technology or an idea; every additional day may imply a longer life expectancy]. One of the most fragile things is technology which gets displaced every five years. In fact, life expectancy increases as you go older for technology. Companies too that have been here longest have a long time to go.