Category: Compilation of Articles, Anecdotes or Interviews

Antifragile

The Book of the Week is “Antifragile, Things That Gain From Disorder” by Nassim Nicholas Taleb, published in 2012. In this repetitive ebook, Taleb reiterates a few of the concepts from his earlier book “The Black Swan” and again appears to derive pleasure from pointing out human fallibility. He writes that “Uncertainty, incomplete understanding, disorder, and volatility are members of the same close family.” He shows how people generate inaccurate predictions and draw the wrong conclusions through spurious causality, or “epiphenomena.”

Taleb discusses a state of being he calls “antifragility” (or more often, a lack thereof) in the realms of politics, economics, science, academia and medicine, taking swipes at all of them as he goes along. He gives tips on how systems and individuals can make themselves more antifragile (the opposite of fragile), a good thing. The author also provides real-life and theoretical scenarios that perpetuate fragility.  Humans appear not to be learning from past scenarios, as they continue to make the same mistakes over and over. One example of a real-life scenario includes the economic bailout of certain big companies, by the United States government (and by extension, American taxpayers) in 2008.

Fragility is vulnerability to negative occurrences. Antifragility is the ability to withstand negative occurrences due to various measures taken to reduce risks; this state of being actually benefits from volatility and randomness.

Humans tend to overestimate their ability to predict shocks and rare events (like revolutions, crises or budget deficits), and when the worst happens, it is worse than the previous occasion. Taleb writes that after havoc strikes, blame incorrectly gets assigned to one factor of the big picture. “The focus is wrong even if the logic is comforting.” People need to study the system and its fragility, not events.

One general example Taleb provides of spurious causality includes the questionable, widely-held assumption that academic research is the generator of wealth because so much research comes out of countries that are wealthy. Taleb thinks it is actually the other way around. “We have no evidence that academia helps science and technology, which in turn help practice.” One narrow instance of this was the building of the atomic bomb, in which there was directed research. But in that, there was selection bias and confirmation bias.

Another example that Taleb provides– a theoretical one– is when an Ivy League university scientist lectures a bird on how to fly. The bird takes flight. The scientist hastily writes books, articles and reports stating that the bird listened to him. The university is now an authority on aerial transportation by the avian species. It will implement further studies with funding by the government. Unfortunately, birds do not write books and papers, so we cannot get their side of the story.

The author advocates interventionism in particular areas and not others. He thinks the government should impose restrictions on the size, concentration and speed of entities including itself (obviously idealistic of him) because bigness increases fragility and the probability of disasters. He thinks less is more (do nothing or implement minimal intervention unless a medical condition is life-threatening) when it comes to medicine.

Taleb says education is useful in that it helps a family retain wealth insofar as its descendants use their educations to enter professions that were more lucrative than those of their ancestors. Almost all projects take longer and cost more when an element of uncertainty is added. “We have never had more data than we have now, yet have less predictability than ever.”

Read the book to learn more about: a) errors in human reasoning that aggravate adverse situations;  b) why fragility is increased with fiscal deficits and awarding of prizes in the fields of literature, finance, and economics; c) which actions are helpful in promoting antifragility and d) an inopportune event caused by Taleb’s own fallibility and his reasoning in dealing with it.

In sum, “The problem with people who do not incur harm [suffer no punishment for their influential opinion-making that causes economic collapse or a war] is that they can cherry-pick from statements they’ve made in the past, many of them contradictory, and end up convincing themselves of their intellectual lucidity on the way to the World Economic Forum at Davos.”

Outliers

The Book of the Week is “Outliers” by Malcolm Gladwell, published in 2008. This short, repetitive yet fascinating ebook is a hodgepodge of commentaries on human nature.

The author argues that extremely successful people in specific areas of expertise, such as professional sports, computer programming, music, science and lawyering “…are invariably the beneficiaries of hidden advantages and extraordinary opportunities and cultural legacies…” that give them a helping hand with regard to pursuing their passions. He also touches on a few peripheral topics, such as cultures of honor, plane crashes, rice paddies, education and slavery, all of which involve complex systems of teamwork and communication.

Outliers take advantage of the chances they get over the course of about a decade, or 10,000 hours, in which they hone their abilities in one area that, at the time, happens to become valued by society.  An outlier is what some business commentators refer to as a “hedgehog” rather than a “fox.” The former becomes an expert in one or two areas–  the outlier mystique; the latter gains some experience in many areas– useful in times of crisis, but never conducive to outlier status.

Gladwell names real-life examples of various celebrities, mostly Americans, explaining why their incredible achievements were attained with assistance from fate. He writes that stories about outliers are often exaggerated, failing to mention the set of lucky circumstances that led to success.

For example, the nurturing of talent of young Canadian ice hockey players is based on a biased selection process. Players are grouped in leagues by their playing abilities within age ranges determined by their birthdates. The ones who are older, even by a few months, have a statistically significant advantage in terms of size and strength. Thus, it so happens that a large percentage of players are born in January, February or March. These lucky ones are provided with a superior experience, whose success feeds on itself, called “accumulative advantage.”

The maximally successful achiever is one who is both book-smart and street-smart, as was J. Robert Oppenheimer, project manager of the atomic bomb. According to Gladwell, street-smart consists of attitudes and skills instilled by one’s family. If one happens to be born into a wealthy, nurturing family, one is much more likely to become an outlier.

Read the book to learn: 1) which countries’ students are best at math and why; 2) the reason there is an achievement gap between high-income and low-income American elementary schoolers; and 3) other interesting findings.

Inviting Disaster

The Book of the Week is “Inviting Disaster” by James R. Chiles, published in 2002. This is an ebook that describes the causes of fatal mechanical failures in aviation and industry.

Human error is always a factor. There is never just one cause. “A disaster occurs through a combination of poor maintenance, bad communication, and shortcuts.” Taking shortcuts such as omitting the testing of newly manufactured machine parts leads to improper, unsafe modification by end users.

In the stages leading up to a catastrophe, when workers realize they are in trouble, most react with intense concentration, anger at the malfunctioning equipment, fear and even panic.

Hypervigilance is a form of extreme panic with trembling hands, hyperventilation and heart palpitations; the mind blanks on what one was taught in training, and perception narrows. Often this causes people to take a course of action with the best of intentions– that makes conditions worse.

Architectural engineers must make sure buildings are designed to withstand the natural disasters that typically hit the areas where they are located. About every sixteen years, Manhattan gets hit by a hurricane that might cause, say, a particular building to collapse. That was why, shortly after it was built in 1978, the Citicorp Building had to be structurally modified at great expense. However, many deaths were likely prevented.

A common chain of events precipitates disasters in third world countries. A light manufacturing plant might be erected in a lower-class residential area. As time passes, however, the owner might want to begin making hazardous products.

Certain conditions prevail:  There is a dearth of laws governing environmental impact; the local economy would suffer if the plant couldn’t expand; the local residents enjoy living there. Over time, people become sloppy about safety.

Before lots of accidents, internal memos warning of an unsafe situation go unheeded. “The bureaucratic solution is to let the memo sit in the inbox for a while– then send it back for more explanation.” It is easier than making trouble, and in the short term, economically advantageous.

One way companies such as Boeing are checking themselves from making the same mistake twice is by continually adding to a knowledge base– confidential archives of troubleshooting reports that are actually read by designers.

Read the book to learn about other ways deadly mishaps could have been, and can be avoided.

Thank You For Arguing

The Book of the Week is “Thank You For Arguing” by Jay Heinrichs, published in 2007. This is a book on debating. The author teases apart the differences between arguing and fighting, and logic and rhetoric.

There are three kinds of persuasive language:  blame, values and choice. Each is of a different tense. Blame is past tense. Values depict the present. Choice talks about the future. The author advises the reader to switch tenses if an argument gets heated. The future, though, is the tense most likely to bring about peace.

People in a courtroom recount past events that involve blame. However, to get their points across, lovers and politicians should try to stick to the present and future. Two useful questions to ask when a problem crops up are, “What should we do about it?” and “How can we keep it from happening again?”

Values, which involve morals, are undebatable. The author says, “Argument’s Rule Number One:  Never debate the undebatable. Instead, focus on your goals… If you want your audience to make a choice, focus on the future.” Also, “When you argue emotionally, speak simply. People in the middle of a strong emotion rarely use elaborate speech.”

One more tip:  When one is deciding on an issue to argue, the most persuasive issue will be the broadest one. For instance, in launching a protest against consolidating two departments in a workplace, one should seize upon the issue of productivity, rather than fairness.

The author sadly concludes that universities used to teach rhetoric, but stopped doing so in the 1800’s when “…academia forgot what the liberal arts were for: to train an elite for leadership.”

Read the book to learn more debating techniques.

The Black Swan

The Book of the Week is “The Black Swan” by Nassim Nicholas Taleb, published in 2010. In this book, the author explains his theory about rare, unexpected events, “Black Swans”– unexpected by those affected, because human traits and uncertain situations cause people to draw the wrong conclusions, formulate the wrong predictions, and make the wrong decisions. “Black Swan events are largely caused by people using measures way over their heads, instilling false confidence based on bogus results.” The author applies his ideas mostly to “experts” who manipulate the financial markets.

While Taleb makes some good points, this blogger suspects that very few readers of this book will come away fully understanding what a Black Swan is. Taleb tries to provide several examples; his illustrations are unclear as to why one event is a Black Swan and why another is not.

One example consists of five trading managers at a European-owned financial institution who wrote a five-year plan. Having neglected to consider all possible adverse future events, they were done in by “the Black Swan of the Russian financial default of 1998 and the accompanying meltdown of the values of Latin American debt markets.” Yet, Taleb writes that the 2008 financial crisis was not a Black Swan. He says such a cluster screw-up will happen again. A Black Swan is a negative or more rarely, a positive occurrence that in general, has never happened before.

One human trait people have is that they are reluctant to attribute events to randomness. But Taleb thinks randomness plays a part in all sorts of events, including long winning streaks of investors. He even generated a computer simulation showing how it would be impossible not to have money managers who beat the market year after year– he says they did so simply by luck alone. Another reason these investors are overrated is that people hear more often about winners rather than losers.

Taleb writes, “We want to be told stories, and there is nothing wrong with that– except that we should check more thoroughly whether the story provides consequential distortions of reality… Just consider that the newspapers try to get impeccable facts, but weave them into a narrative in such a way as to convey the impression of causality (and knowledge).”

The 7 Habits of Highly Effective People

The Book of the Week is “The 7 Habits of Highly Effective People” by Stephen R. Covey, published in 1990.  The author tells readers how to improve their social skills to achieve their goals. He illustrates his points with anecdotes on parenting in his own large family. One phrase in the book that stuck in this blogger’s mind is, “Use your resources and initiative.”

The Emperor of All Maladies

The Book of the Week is “The Emperor of All Maladies, A Biography of Cancer” by Siddharta Mukherjee, published in 2010. Through this tome, the author, an attending cancer physician, researcher and assistant professor of medicine, discusses the history of cancer– how it came to be named, treated and researched through the centuries, and how it develops on the cellular level. He also talks about how cancer statistics can be manipulated to give people the impression that the illness is more common than it really is (to scare people into getting tested and treated), or– that treatment (including drugs and surgery) is more effective than it really is.

In ancient times, cancer was rare because lifespans were short. Several other diseases (tuberculosis, dropsy, cholera, smallpox, leprosy, plague or pneumonia) killed people before cancer would. More prevalent cancer testing has also made cancer a more common culprit in the cause of death, rather than, say, the labels, “abcess” or “infection.”

In modern times, specific factors, (like smoking and changes in public hygiene and diet) have increased the incidence of some kinds of cancer, and reduced the incidence of others.

The author points out the difficulties in determining whether detecting cancer early, helps save lives. Some cancers are quick-killing and others are slow-growing. If someone is diagnosed with an early stage of quick-killing cancer. whose treatment is rigorous and unsuccessful, is that a better situation than one in which someone has the quick-killing kind without knowing it, but goes about blissfully living his life, and dies quickly once he is diagnosed? Perhaps the former person lived six months longer, but given his lack of enjoyment of life after diagnosis, he might as well have died sooner.

The  author also writes regarding testing, “Using survival as an end point for a screening test is flawed because early detection pushes the clock of diagnosis backward.” Say we have the hypothetical scenario of cancer patients A and B. They both developed the exact same kind of quick-killing cancer at the same time. Say patient A’s illness was diagnosed in 1985 and she died in 1990. Patient B’s illness was diagnosed in 1989 and she died in 1990. But since doctors diagnosed A’s cancer earlier, it seems, falsely, that she lived longer and that the screening test was beneficial.

In 1976, a highly regarded mammography study was done on 42,000 women in Malmo, Sweden. The results showed that a significant number of women 55 years and older benefited from breast cancer screening– the lives of one fifth of them were presumably saved than otherwise. “In younger women, in contrast, screening with mammography showed no detectable benefit.” Many additional studies thereafter reinforced this conclusion by 2002: “In aggregate, over the course of fifteen years, mammography had resulted in 20-30 percent reductions in breast cancer mortality for women aged fifty-five to seventy. But for women below fifty-five, the benefit was barely discernible.”

Mukherjee also describes a moral issue that can arise when it comes to the testing of cancer drugs. A company was reluctant to spend hundreds of millions of dollars to do further testing on what appeared to be a promising new drug for a rare kind of leukemia that might (or might not) benefit only thousands of people. Thousands is considered a small number, compared to millions of individuals whom a drug might help in the long run. The company could spend the same amount of money helping millions. Patients for whom all other treatments had failed, aggressively pushed to be included in the drug trial, arguing it could save their lives. The company did eventually agree to test the drug, but on a small scale. The drug was wildly successful in its first decade for those few who were treated with it. However, a few years later, cancer cells had become resistant to the drug. A next-generation drug had to be developed to continue to keep those patients alive.

The author tries to explain why, even with all the resources currently poured into research for a cancer cure and improving treatment, many cases are still fatal even in industrialized countries. Nevertheless, he points out– there are pitifully few resources being thrown into prevention. I suspect it is just not as lucrative as research and treatment.

Don’t Try This At Home

The Book of the Week is “Don’t Try This At Home” edited by Kimberly Witherspoon and Andrew Friedman, published in 2005.  This is a compilation of anecdotes from chefs who encountered some difficult situations during their careers. Some told of “making lemons from lemonade” and others gave a general overview of their experiences.

Four chefs whose stories were particularly intriguing, include Daniel Boulud, David Burke, Marcus Samuelsson and Geoffrey Zakarian.

Boulud recounted an episode in which, as culinary chairman of a fundraising event, he and his staff and extra hired help were required to make 1,200 servings of pea soup.  The “400 pounds of a variety of five peas” were to be stored in “25-gallon stainless steel containers set in ice water.”  Certain people failed to stir the soup hourly overnight, as they should have done, so it fermented.  The next morning, “All twelve hundred servings’ worth, was sour, useless garbage.”  The guests would be arriving that evening and were expecting high-end pea soup.

Burke is another chef who also saw a serious problem for which he had to come up with a solution quickly. He was supposed to cater a man’s fiftieth birthday party at which there would be a surprise dessert, envisioned by the wife.  She wanted a greatly enlarged, custom-made French dessert (“floating islands”) that would serve 200 guests. However, all of the meringues to be used in the dish collapsed, producing a very unprofessional look.  It could not be presented at the end of the meal.  What to do?

It was a language barrier that caused the Swedish-speaking Samuelsson excessive grief while he was working at a restaurant in Switzerland.  This was on New Years’ Eve, no less– one of the biggest nights of the year for business. He was asked to make terrine, which required proper setting of gelatine.  He had never used powdered gelatine before, could not understand the German, French and Italian instructions on the package, and did not ask anyone for help. The resulting concoction smelled bad, and resembled bathtub mold. Was it too late to salvage the situation? Samuelsson’s anecdote was the only one in the whole book that exhibited admission of error and true introspection. Kudos to him.

Zakarian tells of how he became a foodie. When he fell in love with France on a college assignment, he scrapped his academic plans to enjoy the fine food there instead.  Even so, as a starving student, he led a frugal existence, until two strokes of great good luck allowed him to partake of more luxury than otherwise.

Leg the Spread

The Book of the Week is “Leg the Spread” by Cari Lynn, published in 2004.  The author interviewed several current and former commodities-futures traders, providing detailed descriptions of their days at the market in Chicago.

Some traders, employees of a broker-dealer, actually stood on the trading floor, yelling and waving paper from the time the market opened at 8am until mid-afternoon.  Others traded online.  They had good days and bad days.

One female who formerly made a large amount of money on the trading floor before becoming burnt out, had many bad days, both because the job itself was stressful, and because the vast majority of people around her– practically all men– were sexist.  In many cases, the way for a female to get ahead besides having super luck, quick math skills and keen intuition about human behavior, was to sleep with one’s (male) boss.

Read the book to get a comprehensive, entertaining picture of the American commodities-futures market in the mid-single-digit 2000’s.