Business

Taleb and his tale of hope

June 11, 2015

Read time 3 min

Nassim Nicholas Taleb is an option trader turned mathematician turned philosopher, and we love him. It’s probably because he is not – despite being a professor – preaching an abstract theory, but both profoundly and wittily addressing and re-phrasing something that we have experienced ourselves. He is a practitioner, and would rather describe himself as an engineer than a mathematician. A promoter of applied mathematics.

My first encounter with Mr. Taleb’s ideas was in 2006, when I bought his book Fooled by Randomness. After having worked a few years quite extensively with derivatives myself, his application of markets-related wisdom in everyday life (and the other way around) instantly made an impact. And little did I know what was to come. A black swan called the subprime crisis which, in a matter of a few days, showed that most of the exotic stuff we had been pricing, buying and selling, had been utterly mispriced from the start. If the system breaks down, it doesn’t matter how cool your user interface is.

Despite his insights into the faults of the financial system, I personally consider Taleb’s thinking most rewarding when it is applied to every-day and business-related matters. I don’t think he left anyone in the Tomorrow conference untouched when he described what it means to be antifragile. You get stressed, and you bounce back. Your response to an outside stressor might not be predictable, but as opposed to being fragile, you do have an upside when times turn volatile.

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In Taleb’s mind, businesses most likely to flourish and grow over time are those who love errors. Look at Chaos Monkey and Netflix: it’s better to stress your system “before the Chinese do.” More often than not, a break-through innovation isn’t something that’s been refined on the drawing board for ages, but rather something that someone more or less accidentally stumbled upon. A product of trial and error, at most a side-effect. In companies and politics decentralization brings the most gain: the individual is the best expert and decision-maker of what’s around her. Large, top-down, centralized systems, with the power in the hands of the few, are as fragile as anything.

Probably the most fascinating element of Taleb’s way of thinking is the amount of hope he delivers. In his presentation, he probably didn’t explicitly use the word once, but it was there, in the prevalence of his message and in between the lines. Here comes: it actually doesn’t matter so much how you ended up where you are now. What matters is what you do next. In the context of education, we should give up our school-centric thinking and think of life and work as a huge apprenticeship – from a business school, there is nothing intellectual to gain anyway. Failure is the only way to learn what’s relevant. To stay relevant, you should embrace stress, variability and initially negative surprises. So, when the next snow storm arrives, either you hide in your cave or you start making money out of it!

This is a guest post by Elina Lepomäki, a Member of The Finnish Parliament, representing the center-right National Coalition Party. Previously she has worked 11 years in the financial sector in different Nordics and in London. Previously, she has worked as an entrepreneur and programmer.

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