Author: Nassim Nicholas Taleb
Publisher: Penguin Books
Date of Release: November 27, 2012
Cost: Rs.557.00 (Paperback) and Rs.449.50 (Kindle edition)
Reviewer: Jainendra Shandilya, CFA
This is yet another master-piece by the Arab American genius, though this is on a different footing compared to his previous books, namely, The Black Swan and Fooled by Randomness. It touches more on the philosophical aspects of life than just the financial markets about which his previous two books dwelt at length. The illustrations in the book are the ones that we encounter in our day-to-day lives, hence, like his previous best sellers, this one is bound to attract readers till the finish!
The author chose the name anti-fragile as he did not find the exact opposite of fragile. A close word robust did not fit his requirement as he feels robust models are also prone to fragility. Things that turn out to be much stronger when given to stressors can only be said to be anti-fragile. He goes on to say that human beings are fragile, though nature is anti-fragile; individual investments are fragile, though the market is anti-fragile. He also reminisces of his childhood memories giving his account of his father, his upbringing etc. About the financial markets he has unequivocally criticized the VaR based risk models and especially banks that are using them to fool the world. In his words, hedge funds are better risk managed than banks. In all his previous books, he coined words that remain indelible in our memories, viz, the Great Intellectual Fraud(GIF), which he coined in The Black Swan while referring to the Gaussian Normal Distribution. In the Anti-Fragile, he speaks of ‘skin in the game’ while referring to policy makers, who are not conversant with the effects their policies have on markets/societies.
He has cited examples of Roman Engineers standing underneath their bridges when the same was opened for public and this he thinks is also required for all the financial engineers talking about great models; the true skin in the game. In the same vein, he has criticized academicians for talking theories which have no practical supports in the reality; viz. the VaR based Risk Management. He impresses upon very cautious based portfolio management much like the pyramid based portfolio constructions that behavioural finance focuses on. The book also highlights the problems in the medical sciences, which also behaves very much like probability distributions based on empirical evidence. In this regard he has brought out in detail the problems related to iatrogenics – illness caused by medical examination or treatment. Surgery is effective, however, consumption of medicines to treat illness does not do much good according to evidences cited by Taleb in the book. There are many evidences of convexities presented by the authors, which according to him is the reality of the world, much unlike the linearity presented by theorists. In his efforts to explain the nuances of the uncertain world, he has not spared Economics and the Economists especially when it comes to predicting the uncertain world. One of the finest lines we come across the book is his mention of “mistaking absence of evidence for evidence of absence, a mistake that we will see tends to prevail in intellectual circles and one that is grounded in the social sciences.”
The book has been divided into twenty five chapters followed by Appendix, that explain the maths behind his averments made in the book. Overall, a very lucidly explained book that touches upon every aspects of individual life ranging from investments, politics, war, philosophy, intelligence, evolutions, etc. The books does not let down despite being philosophical at every level. The Kindle edition is priced at Rs. 449.50 compared to the hardcover price of Rs. 557 at Amazon India; a value buy indeed for personal growth option!
– J S