America’s Principal Asset

And it is optionality that makes things work and grow—but it takes a certain type of person for that. Many people keep deploring the low level of formal education in the United States (as defined by, say, math grades). Yet these fail to realize that the new comes from here and gets imitated elsewhere. And it is not thanks to universities, which obviously claim a lot more credit than their accomplishments warrant.

Like Britain in the Industrial Revolution, America’s asset is, simply, risk taking and the use of optionality, this remarkable ability to engage in rational forms of trial and error, with no comparative shame in failing, starting again, and repeating failure. In modern Japan, by contrast, shame comes with failure, which causes people to hide risks under the rug, financial or nuclear, making small benefits while sitting on dynamite, an attitude that strangely contrasts with their traditional respect for fallen heroes and the so-called nobility of failure.

Book IV will take this idea to its natural conclusion and will show evidence (ranging from medieval architecture to medicine, engineering, and innovation) that, perhaps, our greatest asset is the one we distrust the most: the built-in antifragility of certain risk-taking systems.

CHAPTER 12

Thales’ Sweet Grapes

Where we discuss the idea of doing instead of walking the Great Walk—The idea of a free option—Can a philosopher be called nouveau riche?

An anecdote appears in Aristotle’s Politics concerning the pre-Socratic philosopher and mathematician Thales of Miletus. This story, barely covering half a page, expresses both antifragility and its denigration and introduces us to optionality. The remarkable aspect of this story is that Aristotle, arguably the most influential thinker of all time, got the central point of his own anecdote exactly backward. So did his followers, particularly after the Enlightenment and the scientific revolution. I am not saying this to denigrate the great Aristotle, but to show that intelligence makes you discount antifragility and ignore the power of optionality.

Thales was a philosopher, a Greek-speaking Ionian of Phoenician stock from the coastal town of Miletus in Asia Minor, and like some philosophers, he enjoyed what he was doing. Miletus was a trading post and had the mercantile spirit usually attributed to Phoenician settlements. But Thales, as a philosopher, was characteristically impecunious. He got tired of his buddies with more transactional lives hinting at him that “those who can, do, and others philosophize.” He performed the following prowess: he put a down payment on the seasonal use of every olive press in the vicinity of Miletus and Chios, which he got at low rent. The harvest turned out to be extremely bountiful and there was demand for olive presses, so he let others use the presses on his own terms, building a substantial fortune in the process. Then he went back to philosophizing.

What he collected was large, perhaps not enough to make him massively wealthy, but enough to make the point—to others but also, I suspect, to himself—that he talked the talk and was truly above, not below, wealth. This kind of sum I’ve called in my vernacular “f*** you money”—a sum large enough to get most, if not all, of the advantages of wealth (the most important one being independence and the ability to only occupy your mind with matters that interest you) but not its side effects, such as having to attend a black-tie charity event and being forced to listen to a polite exposition of the details of a marble-rich house renovation. The worst side effect of wealth is the social associations it forces on its victims, as people with big houses tend to end up socializing with other people with big houses. Beyond a certain level of opulence and independence, gents tend to be less and less personable and their conversation less and less interesting.

The story of Thales has many morals, all of them linked to asymmetry (and the construction of an antifragile payoff). The central one is related to the following account by Aristotle: “But from his knowledge of astronomy he had observed while it was still winter that there was going to be a large crop of olives …” So for Aristotle, clearly, the stated reason was Thales’ superior knowledge.

Superior knowledge?

Thales put himself in a position to take advantage of his lack of knowledge—and the secret property of the asymmetry. The key to our message about this upside-downside asymmetry is that he did not need to understand too much the messages from the stars.

Simply, he had a contract that is the archetype of what an asymmetry is, perhaps the only explicit asymmetry you can find in its purest form. It is an option, “the right but not the obligation” for the buyer and, of course, “the obligation but not the right” for the other party, called the seller. Thales had the right—but not the obligation—to use the olive presses in case there would be a surge in demand; the other party had the obligation, not the right. Thales paid a small price for that privilege, with a limited loss and large possible outcome. This is an early recorded example of an option-like arrangement.

The option is an agent of antifragility.