How to Be Stupid
Taleb argues that favorable optionality can reduce the need to predict which attempt will succeed: limit losses, retain access to large gains, and recognize useful outcomes. He connects the benefit of convex payoffs to Jensen’s inequality.
THE IDEA
How to Be Stupid
If you “have optionality,” you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur. (The key is that your assessment doesn’t need to be made beforehand, only after the outcome.)
This property allowing us to be stupid, or, alternatively, allowing us to get more results than the knowledge may warrant, I will call the “philosopher’s stone” for now, or “convexity bias,” the result of a mathematical property called Jensen’s inequality. The mechanics will be explained later, in Book V when we wax technical, but take for now that evolution can produce astonishingly sophisticated objects without intelligence, simply thanks to a combination of optionality and some type of a selection filter, plus some randomness, as we see next.
When to use it
Investing using a barbell strategy: most assets safe (avoid ruin), a few high-risk/high-reward bets (optionality).
Entrepreneurship: running many small experiments instead of committing to one business plan.
Career development: acquiring skills with low downside and high upside (e.g., public speaking, networking).
Scientific research: pursuing multiple hypotheses in parallel, letting results select the correct one.
FROM THEORY TO EVERYDAY LIFE
In practice
Investment Portfolio with Small Bets
An investor holds a portfolio of many small, independent bets. Most bets lose money, but a few have asymmetric payoffs (e.g., venture capital or options). The investor can be wrong often but still achieve significant overall returns because the few winners outweigh the many losers.
Product Iteration in Startups
A startup launches multiple minimum viable products (MVPs) simultaneously. Most fail, but one becomes a major success. By having optionality (many quick, low-cost experiments) and a selection filter (market validation), the startup succeeds without needing to predict the winning idea in advance.
A MOMENT TO REFLECT
Put it to work.
How can you structure your decisions to have more optionality (asymmetric payoffs with limited downside)?
In which areas of your life do you rely on being correct frequently? Could you instead focus on avoiding catastrophic mistakes and recognizing lucky opportunities?
Think of a past decision where you tried to be very accurate. How would the outcome differ if you had prioritized optionality over precision?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- Antifragile (Nassim Nicholas Taleb)