From Nassim Taleb:
Chapter 4. Thales’ Secret, or The Intelligence of
I landed early (once) — A simple heuristic to get an inheritance —
Where we discuss the idea of doing instead place of walking the
Great Walk — Where the philosophers’ stone was staring at us —
ideas matter less than fragility
Now, the central chapter. A bit technical, but central. Or perhaps not
technical, but central.
A SIMPLE RULE, PERHAPS TOO SIMPLE
A story, present in the rabbinical literature (Midrash Tehillim), but also in
Eastern lore, says the following. A king, angry at his son, swore that he would
crush him with a large stone. After he calmed down he realized he was in
trouble as a king who breaks his oath is unfit to rule. His sage advisor came
up with a solution. Have the stone cut into very small pebbles, and have the
mischievous son pelted with them.
This is a potent illustration of how fragility stems from nonlinear
effects. Let us leave side the idea of circumventing rules and other lessons
one might derive from it, and focus on the very simple point, in fact, that
For the fragile shocks bring higher harm as their intensity increases (up to the
point of breaking).
I’ve used the intuition to show why large corporations hurt more (when
they fall) than small ones and why speed is not a good thing —whether in
traffic or in business. Your car is fragile. If you drive it into the wall at fifty
miles per hour, it would cause more damage than if you drove it into the
same wall ten times at five mph. The harm at fifty miles per hour is more
than ten times the harm at five mph.
Relying On Old-Fashioned Stock Picking, Lee Ainslie Reports His “Strongest Quarter” Ever
Lee Ainslie's Maverick Fund USA enjoyed its "strongest quarter in the fund's history" during the three months to the end of June. According to a copy of the firm's second-quarter letter to investors, which ValueWalk has been able to review, Maverick Fund USA gained 18% in the second quarter. Following this performance, the fund was Read More
Other examples. Drinking seven bottles of wine in one sitting, then
water for the remaining six days is more harmful than drinking one bottle of
wine a day for seven days (spread out in two glasses per meal). Every
additional glass of wine harms you more than the preceding one, hence your
system is fragile to alcoholic consumption.
Jumping from a height of thirty feet (ten meters) brings more than ten
times the harm of jumping from a height of three feet (one meter) —actually
thirty feet seems to be the cutoff point for death from freefall. Or letting a
porcelain cup drop on the floor from a height of one foot (about thirty
centimeters) is worse than twelve times the damage from a drop from a
height of one inch (2 and a half centimeters).