Antifragile, what it means and how it’s related to profiting from volatility

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Teacup, Bamboo & Hydra… what is antifragile and how is it related to profiting from volatility

Something is Antifragile if it benefits from disorder. We can think of this disorder as unexpected stress, volatility, entropy and more.

Here’s a video I made about what Antifragile means, and its relation to profiting from market ups & downs.

I’ve also posted the video on LBRY:

https://lbry.tv/@AdrianScott:2/antifragile:1

The word was created by Nassim Nicholas Taleb. He created this word when he couldn’t find one that described this idea of benefiting from volatility or disorder.

Fragile

People know the word “fragile” for things that lose out to volatility. What happens to a teacup when it falls and hits the floor? It breaks into pieces. It loses from volatility.

Resilient, Robust

If you ask people what the opposite of fragile is, they will often answer “resilient” or “robust”. What happens to robust or resilient things when they hit disorder or volatility? They spring back to where they were, or continue unaffected.

An example of this is bamboo. Bamboo bends in a heavy wind and returns back to how it was when the wind stops. It also doesn’t break (at least not up to a crazy amount of wind, hehe).

So robust and resilient are not really the opposite of fragile, because they .

Antifragile

What are some examples of antifragile? Of things that benefit from disorder and volatility?

Hydra

The hydra is a Greek mythological creature which has several different heads that can bite you.

If you try to chop off one of the heads of a Hydra, two heads will grow back where there was just one head. So the Hydra becomes more powerful — it benefits from disorder. As we can see in this delightful clip from the movie Monster Snake (sorry, it requires a sign-in to YouTube, I guess because it’s a little gorey, in a low-quality computer animation way):

Wave Power Generation

Another example can be generating electricity using wave power. There are a few different designs for this, and each has a certain range of motion within which it might function, just as a hydra might not grow back any heads if you zap it with a huge missile. Here are a couple of video links with some info on Wave Power Generation:

coming soon…

Limits to Antifragility

Individual vs Group / Ensemble Antifragility

Antifragile, Investing and Markets

First version, 28 April 2020. Adrian Scott. Follow me on Twitter