The unconstrained vision of Nassim Taleb.

• Author: Murphy, Ryan H.
• Position: Report

Nassim Taleb has risen in the past decade to become an authority on the intersection of finance, statistics, and epistemology, popularizing insights regarding fat tails and true uncertainty. While he has brought attention to many worthy concepts poorly understood by the public, his recent work underscores an important tension within his thought. Though Taleb claims to champion the superiority of traditional institutions over the rationalism and expertise of social engineers, his arguments and conclusions betray a supreme confidence in his own ability to rationally evaluate which traditions are beneficial. In contrast to many thinkers who see the institutions and practices of modern civilization as outcomes of evolutionary processes, Taleb is a social engineer who endorses radical change, although those radical changes involve a return to institutions and practices of years past.

Most recently, his 2012 book Antifragile: Things That Gain from Disorder follows the ideas of the earlier publication The Black Swan: The Impact of the Highly Improbable (2007), and its extensions are apparent. The Black Swan challenged readers to consider unpredictable events that fall outside the formal models of academics, especially economists. A theory may always seem right--but only until it isn't; the eponymous black swan falsified the long-standing theory that all swans are white. Similarly, theories that data told us perform well may suddenly cease describing reality, just as a financial model may cause a naive investor to lose his shirt.

Antifragile shifts the emphasis to domains where black swans are asymmetric. Some domains of human experience offer unlimited upside but limited downside. That is, the downside is capped, but the gains are potentially great. A vibrant restaurant scene entails many failed restaurants, but their failures are far outweighed by the upside due to the innovations of a large number of entrepreneurs experimenting with new ideas. Taleb contrasts this scenario with "too big to fail" Wall Street. Financial economists advised regulators and banks to actualize institutional arrangements that supposedly improve "efficiency" but in reality induced future economy-crushing financial crises. These domains, with limited upsides and theoretically unbounded downsides, are socially and economically destructive.

Banks are therefore fragile; if the system is pushed just slightly too hard, it shatters at a high cost. When they are subjected to novel stresses, there is little to gain but much to lose. Restaurants are the opposite. If entrepreneurs try more ideas, there is still only so much to lose, but there is much to gain. If the potential damages a system can inflict are capped, but the upside is unlimited, the system is "andfragile." Taleb encourages his readers to find ways to make their personal lives and the social and political worlds more antifragile.

Little of Taleb's conceptual framework is easily disputed. Following his rubric would indeed lead to more progress while minimizing economic disasters. What is less obvious is his point of reference: we want unlimited upside and limits to downside, but upside and downside relative to what: One possible point of reference is the status quo, meaning we first ensure that our departures from present-day practices are antifragile. That is not, however, Taleb's point of reference--nature is, or, in its absence, ultraorthodox institutions, wisdom, and other such sources of tacit knowledge.

This point of reference coheres with the beliefs of many who see the importance of institutions. The human intellect is too limited to fully understand the importance and usefulness of mores, norms, and customs that have stood the test of time, but recognizing this limitation hardly implies that society should set them aside. The recognition of our inability to determine which factors are essential to the successes of the modern world demands a deep-seated conservatism. Practices that matured parallel to humanity's escape from crushing poverty must be presumed to contain wisdom even if their purposes are not readily apparent.

For these reasons, Taleb's thought ostensibly fits in what Thomas Sowell (1995, 2007) calls the "constrained vision" or the "tragic vision." For instance, Taleb emphasizes the importance of tacit knowledge and traditional institutions. Sowell, citing Joseph Schumpeter, describes visions as "a pre-cognitive act." "A vision, as the term is used here, is not a dream, a hope, a prophecy, or a moral...