Books of the summer so far

This post is off topic, but no one in the US is reading anyway due to the holiday weekend ;)

I wanted to share the books I've read so far this summer; it's been a great reading season - when I looked back I was shocked at how many I've finished. Enjoy!

Steve Martin, "Born Standing Up: A Comic's Life." A performer's coming of age, from raw beginner to superstar.

Dan Isenberg, "Worthless, Impossible and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value." Valuable, plausible and wise. More to come on this book in the coming weeks.

John Le Carré, "The Spy Who Came in from the Cold." I borrowed this from the seaside hotel where we spent the Memorial Day weekend, and I'm glad I did. Chilly, and chilling. Its reputation as a classic is well-deserved.

Haruki Murakami, "1Q84." A 900-page mind f---. I loved it.

Nassim Nicholas Taleb, "Antifragile: Things That Gain from Disorder." Perhaps the most significant book I've read in recent years. Explains much of my current mindset on economics, philosophy and social policy. But be warned: the author's voice is quirky, redundant and can be infuriating. Ignore that and focus on the ideas, which are priceless.

Trial and error is not random; rather, it requires intelligence and planning

I find this Thomas Edison quote fascinating:

Negative results are just what I want. They’re just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don’t.

What feels strange about these words is the equating the value of negative results (failures) to positive results (successes). Why would they be equally valuable? Couldn't you spend your whole life producing negative results? How depressing!

Not if you're like Edison. Because what's not stated in the quote is that, to pull this off, Edison had to work in a certain frame that bounded his search for an answer. Within a bounded frame, each negative result is valuable, because it indicates an area of the frame that is not what you're looking for, making it more likely that the next test, within that boundary, is successful. And so on.

Nassim Nicholas Taleb crystallized this in his book "Antifragile," when he described how to approach trial and error "rationally."

Trial and error has one overriding value people fail to understand: it is not really random, rather, thanks to optionality, it requires some rationality. One needs to be intelligent in recognizing the favorable outcome and knowing what to discard.

And one needs to be rational in not making trial and error completely random. If you are looking for your misplaced wallet in your living room, in a trial and error mode, you exercise rationality by not looking in the same place twice. In many pursuits, every trial, every failure provides additional information, each more valuable than the previous one - if you know what does not work, or where the wallet is not located. With every trial one gets closer to something, assuming an environment in which one knows exactly what one is looking for. We can, from the trial that fails to deliver, figure out progressively where to go.

I can illustrate it best with the modus operandi of Greg Stemm, who specializes in pulling long-lost shipwrecks from the bottom of the sea.... He does an extensive analysis of the general area where the ship could be. That data is synthesized into a map drawn with squares of probability. A search area is then designed, taking into account that they must have certainty that the shipwreck is not in a specific area before moving on to a lower probability area. It looks random but is not. It is the equivalent of looking for a treasure in your house: every search has an incrementally a higher probability of yielding a result, but only if you can be certain that the area you have searched does not hold the treasure.

Stemm first maps the area where the shipwreck could have been, in the same way you focus on the living room to look for your lost wallet. That's the frame of the problem, and it takes intelligence and thought to figure out the appropriate frame (Edison would agree). Within the frame, trial and error becomes a powerful tool, in which each failure incrementally reduces the size of the frame, and gets you closer to your ultimate success.

Are "negative results just what you want"? If you have defined a proper frame for your search, the answer is yes.

[While I have been digesting "Antifragile," Albert Wenger has posted a fantastic and very thoughtful synopsis of the book and its ideas. Highly recommended.]

Cracking open Nassim Taleb's "Antifragile"

A friend recently recommended "Antifragile: Things That Gain from Disorder." Already, I can see there will be many resonances between the Mistake Bank project and Taleb's book. First off, a definition. Taleb coins the term antifragility to mean something that's the opposite of fragility - beyond robustness or resilience. He writes, "The resilient resists shocks and stays the same; the antifragile gets better.... The antifragile loves randomness and uncertainty, which also means - crucially - a love of errors a certain class of errors." I couldn't have written it better myself.

Here are a few delicious tidbits I've found already. Just in these brief snippets, you can already see that "Antifragile," is a book of philosophy as much as anything else:

In short, the fragilista (medical, economic, social planning) is one who makes you engage in policies and actions, all artificial, in which the benefits are small and visible and the side effects potentially severe and invisible.

Just reading the above passage brought to mind the AIG credit default swap scheme - in which one of the world's largest insurers sold, for nickels and dimes, insurance against a very unlikely event - the mass default of mortgage loans. Of course, when that event occurred, the nickels and dimes were long spent, and the tens of billions of liabilities to be paid would have brought the company toppling down (and perhaps our economy), except for unprecedented financial intervention by the federal government.

Taleb and I also have had similar experiences when writing about a subject that we have found interesting for many years:

I write about probability with my entire soul and my entire experiences in the risk-taking business; I write with my scars, hence my thought is inseparable from autobiography.

Taleb also lays out a table comparing examples of "fragile," "robust," and "antifragile" institutions in politics, business, academics, etc. He describes it thus:

On the left, in the fragile category, the mistakes are rare and large when they occur, hence irreversible; to the right the mistakes are small and benign, even reversible and quickly overcome. They are also rich in information. So a certain system of tinkering and trial and error would have the attributes of antifragility. If you want to become antifragile, put yourself in the situation "loves mistakes" - to the right of "hates mistakes" - by making them numerous and small in harm.

Taleb and I are coming from two different starting points, but ending up in a similar place. Smart mistakes are cheap and informative. Dumb mistakes are costly and keep us in ignorance. I can't wait to keep reading "Antifragile."