The Central Triad in Taleb's Antifragile
Nassim Nicholas Taleb's "Antifragile: Things That Gain From Disorder" is a remarkable book. One concept he explores is the central triad, in which there are three types of exposures.
----------------------
Read more: Fed Tapering is Postponed
Taleb's describes the three types of exposures as fragile, robust and antifragile--in sum they are called the central triad. The fragile loves tranquility, the antifragile grows from disorder and the robust doesn't care too much.
Taleb quotes, as an example from Greek mythology, the Sword of Damocles as fragile (on the left of the triad)--it's only a matter of time before the sword hits Damocles. Phoenix (from the middle) as robust--the mythical bird turns to ashes and then rises from its ashes, retaining the previous position.
But multi-headed Hydra (on the right) is antifragile--in the sense it gains from adversity. Each time one of its head is cut off, two grow back. So, antifragile Hydra likes harm.
In finance, debt is fragile--during a crisis, debt-ridden households and companies gets harmed immensely. Equity is robust and venture capital is antifragile.
In learning, classroom type of learning is fragile, learning from real life is robust and learning from real life and library is antifragile.
As the book contains several technicalities, it is a difficult book to read. But it is illuminating as we come across several new concepts. Comparatively, his two other books, 'Fooled by Randomness,' and 'Black Swan' are much easier to the general reader like me.
Below are two images with examples of these three types of exposures (click on the image for a better view): there are several more in the book, but this is only a select list of items I liked:
Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
CFA Charter credentials - CFA Member Profile
CFA Badge
No comments:
Post a Comment