The Domestication of Uncertainty

The Domestication of Uncertainty

Barbell strategies can take different forms while sharing an asymmetry: limit losses that could ruin you and keep opportunities for gains.

Let us take a peek at a few domains. With personal risks, you can easily barbell yourself by removing the chances of ruin in any area. I am personally completely paranoid about certain risks, then very aggressive with others. The rules are: no smoking, no sugar (particularly fructose), no motorcycles, no bicycles in town or more generally outside a traffic-free area such as the Sahara desert, no mixing with the Eastern European mafias, and no getting on a plane not flown by a professional pilot (unless there is a co-pilot). Outside of these I can take all manner of professional and personal risks, particularly those in which there is no risk of terminal injury.

In social policy, it consists in protecting the very weak and letting the strong do their job, rather than helping the middle class to consolidate its privileges, thus blocking evolution and bringing all manner of economic problems that tend to hurt the poor the most.

Before the United Kingdom became a bureaucratic state, it was barbelled into adventurers (both economically and physically) and an aristocracy. The aristocracy didn’t really have a major role except to help keep some sense of caution while the adventurers roamed the planet in search of trading opportunities, or stayed home and tinkered with machinery. Now the City of London is composed of bourgeois bohemian bonus earners.

My writing approach is as follows: on one hand a literary essay that can be grasped by anyone and on the other technical papers, nothing in between—such as interviews with journalists or newspaper articles or op-ed pieces, outside of the requirements of publishers.

The exercise regimen described in Chapter 2 consists in going for the maximum weight one can lift, then nothing, compared to other alternatives that entail less intense but very long hours in the gym. This, supplemented with effortless long walks, constitutes an exercise barbell.

More barbells. Do crazy things (break furniture once in a while), like the Greeks during the later stages of a drinking symposium, and stay “rational” in larger decisions. Trashy gossip magazines and classics or sophisticated works; never middlebrow stuff. Talk to either undergraduate students, cab drivers, and gardeners or the highest caliber scholars; never to middling-but-career-conscious academics. If you dislike someone, leave him alone or eliminate him; don’t attack him verbally.2

So take for now that a barbell strategy with respect to randomness results in achieving antifragility thanks to the mitigation of fragility, the clipping of downside risks of harm—reduced pain from adverse events, while keeping the benefits of potential gains.

To return to finance, the barbell does not need to be in the form of investment in inflation-protected cash and the rest in speculative securities. Anything that removes the risk of ruin will get us to such a barbell. The legendary investor Ray Dalio has a rule for someone making speculative bets: “Make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil.” Such a rule gets one straight to the barbell.3

Rory Sutherland offers another proposed barbell: he contrasts the U.K. alcohol guidance described in this account with avoiding alcohol three times a week and drinking liberally on the remaining four days. The proposal is an analogy, not a health benefit established here. Invoking Jensen’s inequality does not by itself establish which drinking pattern is safer.

Most items on the right of the Triad have a barbell component, necessary, but not sufficient.

So just as Stoicism is the domestication, not the elimination, of emotions, so is the barbell a domestication, not the elimination, of uncertainty.

1 There is evidence of such a barbell strategy but no clarity about the theory behind it—evolutionary theorists enjoy narratives but I prefer evidence. We are not sure if the strategy of extrapair copulation in the animal domain actually enhances fitness. So the barbell—accountant plus cheating—while it exists, might not be aiming at the improvement of the species; it can be just be for “fun” at low risk.

2 In finance, I stood in 2008 for banks to be nationalized rather than bailed out, and other forms of speculation not entailing taxpayers left free. Nobody was getting my barbell idea—some hated the libertarian aspect, others hated the nationalization part. Why? Because the halfway—here, the regulation of both—doesn’t work, as it can be gamed by a good lawyer. Hedge funds need to be unregulated and banks nationalized, as a barbell, rather than the horror we now have.

3 Domain dependence again. People find insuring their house a necessity, not something to be judged against a financial strategy, but when it comes to their portfolios, because of the way things are framed in the press, they don’t look at them in the same way. They think that my barbell idea is a strategy that needs to be examined for its potential return as an investment. That’s not the point. The barbell is simply an idea of insurance of survival; it is a necessity, not an option.