Beware Manufactured Stability
Attempts to suppress volatility and impose order in natural, economic, and biological systems often backfire, making systems more fragile and susceptible to severe collapses.
THE IDEA
Beware Manufactured Stability
Fear of volatility can lead us to interfere with nature to impose “regularity,” making us more fragile across many domains. Preventing small forest fires sets the stage for more extreme ones; giving out antibiotics when it is not very necessary makes us more vulnerable to severe epidemics—and perhaps to that big one, the grand infection that will be resistant to known antibiotics and will travel on Air France.
Which brings me to another organism: economic life. Our aversion to variability and desire for order, and our acting on those feelings, have helped precipitate severe crises. Making something artificially bigger (instead of letting it die early if it cannot survive stressors) makes it more and more vulnerable to a very severe collapse—as I showed with the Black Swan vulnerability associated with an increase in size. Another thing we saw in the 2008 debacle: the U.S. government (or, rather, the Federal Reserve) had been trying for years to iron out the business cycle, leaving us exposed to a severe disintegration. This is my argument against “stabilization” policies and the manufacturing of a nonvolatile environment.
* There is a difference between stressors and toxic exposure that weakens organisms, like the radiation I discussed in Chapter 8 with the story of the rats.
† There is a sociology-of-science dimension to the problem. The science writer Gary Taubes has convinced me that the majority of dietary recommendations (about lowering fats in diets) stand against the evidence. I can understand how one can harbor beliefs about natural things without justifying them empirically; I fail to understand beliefs that contravene both nature and scientific evidence.
* The financial equations used by the villains for the “random walk” are based on heat diffusion.
* The argument often heard about primitive people living on average less than thirty years ignores the distribution around that average; life expectancy needs to be analyzed conditionally. Plenty died early, from injuries; many lived very long—and healthy—lives. This is exactly the elementary “fooled by randomness” mistake, relying on the notion of “average” in the presence of variance, that makes people underestimate risks in the stock market.
III
MARGARITAS ANTE PORCOS *
When to use it
When managing a company's growth, allow small failures to avoid catastrophic ones.
In healthcare, avoid overprescribing antibiotics to prevent resistant strains.
In ecology, allow controlled burns to prevent massive wildfires.
In personal finance, examine whether a strategy that avoids small losses leaves you exposed to a much larger one.
FROM THEORY TO EVERYDAY LIFE
In practice
Forest Fires
Preventing small forest fires sets the stage for more extreme ones.
Antibiotics
Giving out antibiotics unnecessarily makes us more vulnerable to severe epidemics.
Economic Stabilization
Taleb argues that U.S. efforts to smooth the business cycle increased vulnerability to the severe crisis of 2008.
Life Expectancy Misinterpretation
A low average life expectancy can conceal a wide distribution: many people die young while some live much longer. Taleb connects this mistake about averages to the misreading of financial risk.
A MOMENT TO REFLECT
Put it to work.
How might efforts to stabilize a system increase its fragility?
What are examples in your own life where avoiding small stressors led to bigger problems?
Could the 2008 financial crisis have been averted by allowing smaller recessions?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- The Black Swan The Impact of the Highly Improbable With a new section On Robustness and Fragility (Nassim Nicholas Taleb)