by | 08, Jun 2022

Book Deep-Dive: Antifragile

What is the opposite of fragile?

Remember, with each episode, we will provide a helpful Deep-Dive infographic where we break down the entire book on to 1 page! Check out, and download, this week’s infographic below!

Nassim Nicholas Taleb, the author of Antifragile, reveals how to thrive in an uncertain world. You might be familiar with his previous work, Black Swan, a book we also highly recommend. What is the opposite of fragile? Taleb says it’s antifragile. He believes many things in life benefit from stress, disorder, volatility, and turmoil. The antifragile is beyond the resilient or robust. The resilient resists shocks and stays the same; the antifragile gets better and better.

Here are our top 10 takeaways:

  1. Antifragile
  2. Antifragile Examples
  3. Via Negativa
  4. Fragile Constituents
  5. Skin In The Game
  6. Barbell Strategy
  7. Doctors Advice
  8. The Turkey Problem
  9. Practice VS Theory
Download the infographic here!

Tweetable Quotes:

“Sometimes the best way to know what a thing is or how to do a thing is to first focus on what the thing is not or how to not do the thing.”  – Anthony Vicino

“In order to have an antifragile system, you need the smaller parts that make up the system to have fragility.”  – Dan Krueger

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** Transcripts

Antifragile

[00:00:00] Anthony: hello. Welcome to multi-family investing made simple. This is the podcast where we take the complexity out of real estate investing so that you can take action today. I’m your host, Anthony Pacino of Invictus capital joined as always by. Dan SMR, Krueger. Dan, how’s it going

[00:00:32] Dan: today? This feels like a softer

[00:00:33] Anthony: episode.

That’s bringing the energy down so we can build it up later. We just took a

[00:00:38] Dan: nap. That’s okay.

[00:00:40] Anthony: No, but we know we only have one hammock in the workplace, but we do not share it. Only one person. We actually need to have a company hammock. Yeah. We got to kick this

[00:00:49] Dan: up. Cause I actually am going to get really tired if you keep doing that.

Okay. We can bring it back up

[00:00:52] Anthony: people. Yes, please. Hey, thanks everybody for taking some time to join us here today. If this is the first time that you’ve ever heard this podcast, then you’re going to be [00:01:00] confused with stick with us. It probably gets better. Get better. Okay. It doesn’t get better. Um, but just buckle up.

Um, what’s needed. What’s new. I

[00:01:09] Dan: mean, honestly, there’s a lot. That’s new. Okay. I can’t really

[00:01:14] Anthony: talk about it. Oh, that’s fair. Yeah. We’ve got some stuff under contract. Can’t talk about all the stuff it’s really cool. Over the coming months and years, you’re going to hear about them. Um, but we, yeah, that’s, that’s pretty exciting, you know?

Okay. So completely unrelated to. At all, um, as listened to this other thing today or the other day, and the guys on this podcast use the word action a lot. Like, Ooh, I got to get in on that action. And I was like, I really, I really liked that word. And I want to try and find a way to incorporate it more into my life, but I don’t, I don’t think I can pull it off.

So I wanted to, I wanted to brainstorm this today. I thought that could be like the whole basis of this episode. Brainstorming ways in which Anthony, can you like implement the word action?

[00:01:58] Dan: Yeah. You can try to come [00:02:00] to an acronym. You can apply to all sorts of things.

[00:02:03] Anthony: So that is a six letter acronym, which is going to be very hard to explain to people like, okay, bear with me a for aardvarks C for cat nip T for time traveler.

Like by the time I get to, oh, they’re going to be like, This man is bringing damaged.

[00:02:21] Dan: Yeah. Yeah. I mean, they’ll, you’ll get that same reaction if you just use the word action over and over again too. Is that true?

[00:02:27] Anthony: Okay. So I got some, I got some, I got some sick action here today for you guys. Uh, we’re going to dive into, and I do not say this with hyperbole.

I don’t know if I’m feeling it. I say this with pure sincerity. This is my favorite book of all time today. We’re going to talk about my favorite book. And it’s a book that I think everybody should read because conceptually, like we were talking about this before I was showing, read my notes. Cause I, I write up my notes from books I highlight and everything.

And like, I pretty much highlighted the entire book, which doesn’t do you any good as a, as a note taking system, by the way. [00:03:00] So

[00:03:00] Dan: good. That’s what that means. It’s all good stuff. I had that same problem with novels, uh, that the vomit neck, like, yeah, I, I. I, I thought I was going to sit down with a highlighter and I just started reading.

I was like, the pages turned yellow. It’s all just yellow. It’s all gold. There’s no fluff. No. So the thing with this one, though, we haven’t even, did we introduce the title?

[00:03:20] Anthony: Um, it’s called what it’s called antifragile. I think it has some kind of subtitle too, but, um, antifragile by Nicholas. And he wrote, um, he’s written a serious series of books that you might be familiar with, like the black Swan fooled by randomness skin in the game, uh, better procrastinates, which are all part of this ongoing series.

He calls the in Certo and, um, well, let’s just, who is Nassim, first of all. And he’s a

[00:03:47] Dan: really smart. And that’s something you got to know, if you aren’t aware of him and you start to read his stuff or listen to him or watch him, or, you know, whatever medium you’re consuming this stuff on is really great stuff.

Uh, he’s a really smart guy and he knows it [00:04:00] and he doesn’t dumb it

[00:04:00] Anthony: down. Um, uh, what was a more polarizing, uh, novel? Yes, he’s Novalis Neval was a Dick. I’m just going to say it again. He knows it and he owns it. Um, so he would not be upset by me calling him that he’d be like, it’s true. Yeah.

[00:04:16] Dan: He’s he’s. Th the, the quality of his content he puts out is extremely high, but like I said, he does not dumb it down.

So his books, you’re not going to just pick up and breeze through on the weekend. It’s not a casual read. You’ve got to sit down and read it and think about it and really make sure you understand it because he does. You know, he doesn’t simplify it. So you gotta, I, I take it

[00:04:37] Anthony: slow. Yeah. Anti-fragile is like 500 pages.

I, and I, I read it voraciously every single day and it still took me a month to get through. Yeah. Because there’s so much to unpack and think about pretty much every other sentence you’re like. Okay. And he says things very polarizing ways where you’re like, what do I think about this? And it can be intimidating because he is [00:05:00] obviously very intelligent.

And so as you’re reading it, you’re like, I don’t know if I agree with this, but I might just be too stupid to understand, you know? So there’s a little bit of that going on.

[00:05:08] Dan: Yeah. But I guess to answer the question of who he is, he’s a guy who, um, you know, did quite well as a trader. I think he was, um, he was in the currency markets.

He was. Did a lot with options. And so people who know anything about options know that they’re fairly complex products. And so it’s all about managing risk and you can get really intricate with managing risks. So he knows. How to manage risk. And he ties that in nicely with a whole bunch of other stuff to really, really dive deep on this book in particular, um, you know, his, his, uh, his, his series of books dive into different topics.

Black Swan is probably, I’d say probably the best, most it’s about black Swan events. Right. I think, did he coin that? Um, was that, that was

[00:05:51] Anthony: no, it was used before it was used. Um, so the blacks one incident, so this is actually a cool story. Um, Back in the day. I [00:06:00] don’t remember what time period this was, but there was a time period when, um, people in Europe had only ever seen white swans because a black Swan is a very rare thing.

And then at some point they saw a black Swan and they’re like, oh my God, a black Swan that’s at that point, they thought a black Swan was an impossibility like that. They just didn’t exist. So that the whole, um, all swans are white. All of a sudden with this one black Swan, that whole. Understanding of the universe just got flipped on its head.

So the idea of the black Swan theory is that our lives are more influenced by these unpredictable. Um, paradigm shifts that occur in life that you can’t see coming. You can’t predict them until they happen, but those are the things that have the largest ramifications in our life. And so if you look at like the 2007 financial crisis, if you go back, you know, the world war two, and like these big black Swan events is what he would say.

And what he’s done very well is, um, thriving in an environment where his investment portfolio benefits from black Swan events, disproportionately. [00:07:00] Then the other traders and the interesting thing here is his whole, his whole stick is I’m going to make a hundred bets, 99 are going to be wrong. But the one that I get right is going to be so right, and it’s going to win so big.

It’s going to have such asymmetric returns and such a long tail event that, um, it’s going to make up vastly for all the shortcomings of the rest of the portfolio.

[00:07:21] Dan: Yeah. We’ll dive into that a little bit more in detail because that ties in really well. One of the takeaways I pulled out of this book, but.

Yeah, I think a good place to start. I mean, should we just jump into the takeaway takeaway was what is

[00:07:34] Anthony: Antifa? What is antifragile? I think that’s, we’ve got to start there. That’s the big one, right? So quickly, quickly, because this is, this is one of my favorite questions to ask people is what’s the opposite of fragility.

What’s

the

[00:07:45] Dan: thing. You don’t really have a

[00:07:46] Anthony: word for it. Yeah. Well, some people will say resilient or robust. Yeah. But when you think about resilience, Resilient means it bounces back from being from like some kind of traumatic event, but it [00:08:00] doesn’t necessarily come back better. Uh, robust just means it’s very hard to hurt and it’s not fragile, but it doesn’t what we’re looking for.

If it’s truly the opposite of fragile, which is the thing gets like weaker or worse than traumatic events, what the opposite of fragility would be is something that actually benefits from.

[00:08:20] Dan: Yeah. One of the, what I love about the concept is it’s so applicable all over the place in nature everywhere you see it, but we just haven’t had a real good word to describe it in the past.

So we explain to them. Yeah. So antifragile is like Anthony said the opposite of fragility, right? Fragile items are, uh, impaired or damaged by volatility. We’ll use the word volatility a lot because this guy’s coming from a trader background. So. Kind of the word, but really volatility could be used or stress or, or, um, difficulty, um, you know, certain things are going to be impaired or damaged by that.

And there’s other things that actually benefit from that. And, uh, anti-fragility [00:09:00] is. Some is a quality that has propelled human evolution, right? Where our success is a result of our anti-fragility. And as we go through these takeaways, we’ll kind of dive into exactly what that means in a little bit more detail, but to kind of set the stage first takeaway from me is like I said, the, what was born, what the hell is anti-fragile even mean?

[00:09:22] Anthony: So initially when you hear this, you’re going to go. Okay. But what does that actually look like? Like what is something that actually benefits from traumatic incidences or volatility? The neatest example is probably bones or muscular growth things that your muscles grow by first being coming damaged, right?

Like a little micro tears. When you go and exercise, then as it rebuilds, it rebuilds stronger. Same with your bones as they’re damaged or impacted, they start to rebuild and rigorous stronger. And of course there’s a failure point where it’s not a question of like, is this. Fragile or anti-fragile, it’s [00:10:00] more of a spectrum how fragile, how antifragile, and you’re never going to be perfectly antifragile that would put you in God’s God-like status.

So the goal is to be as antifragile as possible. In the example of the muscle, there is a point when too much muscular damage is now bad, same with the bones they break. And so thinking on that paradigm, that spectrum, okay. How antifragile is my investment or my business or my life, like as a. And I find that like, when you get down to the evolutionary impetus behind this, you’re like, This is how we evolved, like to be anti-fragile

[00:10:35] Dan: in a lot of ways.

Yeah. And it’s, like I said, there’s so many examples of nature that I think it’s nice for a lot of readers. Like I really enjoy the whole finance kind of investing angle that, that jives really well for me, but for a lot of people, maybe not so much. So some of these natural examples I think are probably easier for people to wrap their head around around the concept.

Like you mentioned the workout one, that that’s a great one. Putting stress on [00:11:00] your muscles. You’re actually breaking down and damaging the tissue causing harm, but because of that, they grow back stronger. So it’s, it’s not just like it’s unbreakable or damage. Uh, being anti-fragile, but it actually gets better because of the stress.

I think that’s one of the key parts. And another few examples I pulled out were, uh, he used the, uh, the example of, uh, uh, Hydra, who was a Greek from a creature from Greek mythology, which was a, some sort of serpent dish, uh, guy where if you chop his head off, he goes to. All right, so that kind of stress didn’t just not hurt him.

It actually made him even stronger and even better. And forest fires are another example that were in the book that, that really kind of helped tie this all together for me or those little forest fires that happen all the time are great. And they actually prevent the big, horrible fires because they read the forest of the most flammable pieces.

So if all these little issues happen, they might be perceived as bad or harmful, stressful or are destructive, but they’re actually preventing a big. Destruction in the future. Whereas if we don’t have those, there’s [00:12:00] all this flammable stuff flying around and all of a sudden before, you know what the whole state of California is on fire.

So there’s a lot of examples in nature and human evolution and obviously in business as well, where this is the case. So I think this is probably another one of the takeaways for me. It was kind of all the examples of this in nature that at least for me really, how. Bring it all home and, you know, put this into some kind of context that I could, I could understand personally.

So with the,

[00:12:24] Anthony: with the hydro, I’m trying to remember. So he goes through all these different things and says, like, this is an instance of something that’s fragile, that something that’s, um, robust or neutral and then something that’s antifragile. And he goes through all these different things to help you conceptualize this.

And I think the hydro is a really cool example. And if I remember correctly, it was like a. Uh, a neutral sign and a minus. And the plus is something that benefits from, from chaos and damage. And that’s the hydro, you cut off one of its head and it had another to grow back and not just a, another head, another two it’s like, oh God.

So it’s getting stronger when you damage it. I believe the neutral sign [00:13:00] was the. You killed the thing. It just comes because it comes back and it does not better. It’s not worse. It just comes back. I’m trying to remember what the fragile thing, I think it was

[00:13:10] Dan: being shipped and, you know, something that actually will break

[00:13:13] Anthony: in the, in the instance of like mythology.

And I think, I think what it was was I think he used the sort of Damocles, which it’s a weird parable. Um, I don’t know if you’re familiar. Okay. We don’t need to get into the weeds, but anyways, I, I found that part really interesting. Um, this concept is so foreign initially that I think seeing examples and he lays out like a whole chart.

He’s like, here’s, here’s how to think about this to get you in the right frame of mind. I think it’s super. ’cause I know for me as I was just sitting there, I was trying to like, think in my own life, I’m like, okay, what’s an example of being antifragile. And a lot of times you just come up with things that are robust or resilient, but not necessarily benefiting from the trauma.

Yeah.

[00:13:50] Dan: And I think the key takeaway on that one for me was those are all the examples of antifragile systems. But the key point there is that the volatility, the [00:14:00] stress, the, the, the, the, the problem running out of synonyms here, but the volatility is necessary. For things to get better. They’re not going to get better with the stress.

You need the volatility. And that’s going to tie in more to some of the other takeaways here in a second. All

[00:14:16] Anthony: right. So I got, um, I

[00:14:19] Dan: I’m through to, I dunno

[00:14:20] Anthony: for you, we both kind of had the S um, the first one, what is anti-fragility that was also one of mine. Cause it’s very, it’s a, it’s a core concept. Um, you had volatility as essential for anti-fragility.

Yeah. Um, okay. So I went with some other ones that I thought there was a chance that you wouldn’t actually touch on that didn’t actually have much to do with the concept of anti-fragility, but other concepts Nassim talks about throughout the book, which I think were really awesome concepts. Number one is via negativa.

This is something he talks about over and over throughout the book. And what it is is a. The the, sometimes the best way to know what a thing is or how to do a thing is to first focus on what the thing is not or how to not do the [00:15:00] thing. So for instance, instead of sitting down and trying to figure out, okay, what would a happy life look like would be very hard to like, sit through and think like, okay, what are all the things that would make me happy?

You could first sit down and say, what are the things that would make for a miserable. And suddenly it’s pretty easy. Like, well, I would be in horrible health and I would have horrible relationships and I would, I would be poor and like, not be able to feed myself and like, you can quickly think of all the.

These negative things, right? Because the human brain is better at like perceiving threats than it is at perceiving, uh, beneficial things for a reason, because it helps us survive. But the whole concept of via negativa, isn’t just about zeroing in, on the negative side of things, but always inverting and thinking about what’s the opposite or the contrary, which is where the whole concept of fragility and antifragility even starts, like when you’re asking yourself what’s virgility well, or what’s antifragile let’s first by asking ourselves what’s fresh.

And then figuring out what’s the reverse of that. And so I think that’s a really cool mental model just to carry with you constantly. When [00:16:00] you run up against something, you don’t know how to do it, ask yourself, well, what would I do to not do this thing? What would have to happen for me to not do.

[00:16:09] Dan: Yeah.

And I think it’s a really healthy way to look at things, because sometimes you ask yourself the initial question and you have some emotion, you have some difficulty for whatever reason, but you know, one example is, you know, how do you have a happy, uh, and I was reading when you were talking there. So I apologize if you use this one, but you know, how do you have a happy marriage?

You know, th the different approach that might be, how do I have a miserable marriage? Um, that’s a pretty easy list to come up with, and then you just do the opposite of those things. But this is also something I’ve seen with myself in, in financial markets. It gets emotional, especially when you’re trading, like, like to seem to, if you’re doing short-term things, there’s going to be points where, you know, you’re just off.

You’re just emotionally not there. You’re, you’re not mentally in a, in a. In a good place to be doing it. And you ought to just walk away, but there’s been times where I’ve been like that. And I’ve just started to literally do the exact opposite of what my initial impulse is to do [00:17:00] actually works out. So it’s kind of interesting.

You, you, if you think of things in reverse, what I’ve found is there’s, there seems to be less emotion for some reason. I don’t know why it just is there’s

[00:17:09] Anthony: for me, this is such a cool concept on its own via negativa because like, I’m looking at my notes here and it’s reminded me of another aspect of this, which is growth through subtract.

Not addition. And I was like, it’s so simple and beautiful. It’s the whole Marcus, or really his concept of the goal of a good life is to do less better. It’s like focusing on being effective, not necessarily just being efficient. And that’s, that’s another one where as entrepreneurs investors, it’s just humans are walking around this earth.

We can have this tendency to try and do more and more and more and throw more onto the cart when really. Subtraction taking away from the weight that’s weighing us down will actually allow us to move towards our goal faster. And a lot of

[00:17:54] Dan: cases. Yeah. Especially when it comes to investing less is more, um, especially, [00:18:00] especially, especially if you’re in the trading space like Nasim was, and a lot of people still do.

Do less and just focus on the best opportunities, you know, focus on that one or two or three things that come across your, uh, your, your, your desk on a, a long time horizon and just do those. And I think Warren Buffett’s at something similar. And one of his, um, uh, shareholder meetings where he’s said, ah, you should be investing as if you have a punch card with like 6, 6, 6 punches on it.

And those are your only investments you can make for your entire life. You’ve got six. So make them really good if everybody did. Honestly, no matter what they’re doing, investing just anything in life. You’re probably going to end up doing a hell of a lot better with, of a lot less work. So it’s really powerful concept.

All right. What’d you got next? Oh, that’s a good question. Um, I wanna thank you.

[00:18:50] Anthony: I do

[00:18:50] Dan: ask a question. Well, my mind went to, I went to the top where he was talking about. So the next one I’ve got is that the [00:19:00] antifragile system. Depends on the fragility of his constituent

[00:19:05] Anthony: parts. I don’t understand. That’s that’s deep unpack me.

[00:19:10] Dan: It’s counterintuitive and weird. And this is something I had to think about a bunch of times to really understand it. And I might still not even understand it, but what I took away from it was that in order to have an antifragile system, you need the smaller parts that make up the system to have fragility.

And a good example of this is evolution, right? And so if you don’t have, you know, the weak die off, for whatever reason, you don’t have the room and the resources for the strongest survive, right? So you need some fragile elements for there to be a refresh and for there to be optimization. So in order for an antifragile system to exist, it needs to be made up of parts that have rigidity.

I’m hoping I’m getting it right? Yeah, no, that’s, that’s what I took away.

[00:19:55] Anthony: I think you’re dead on the, even thinking back of the example of muscular or [00:20:00] bone growth and strengthening. Um, the only way that’s possible is that the muscle itself is fragile, right? Like it can be damaged beyond repair. It it’s very easy to damage.

If you couldn’t do that, then it couldn’t bounce back. So, you know, it’s, the sum is greater than the. The individual parts, right? Like the parts being like fragile lead to an antifragile

[00:20:24] Dan: whole. Yeah. It’s weird to think about, because you’d think that, oh yeah, you just need a bunch of anti-fragile pieces to make a super antifragile system.

It’s like, no, you can’t really advance. You can only get better if there isn’t some element of fragility, uh, To respond to the volatility and get better. So, yeah. Then I referenced the workout example, which I think we’ve already used like three times

[00:20:43] Anthony: just pounding that one to death. Okay. So I’m going to go a completely different direction.

And this was, um, I believe in the chronology of Wayne Nassim rose books, he wrote, um, fooled by randomness and black Swan, better Procrustean, antifragile skin in the game. So. [00:21:00] Throughout antifragile. He talks a lot about the idea of skin in the game. And so he talks about it so much. It’s such an important concept.

He ended up going and writing an entire book on the concept, but it’s still so core to anti-fragility. And I think it’s super important when we’re talking about investments and like who you’re going to work with in terms of operators, in terms of like, do people actually have skin in the game and his complaints when you look at the world at large and people like the disparate, uh, Gap between the haves and haves nots in a lot of cases is that the halves are gaining from the fragility of the system where as the have nots and a lot of situations are the ones that are struggling.

And the reason for that is because the haves and I’m using these terms very, very loosely. Um, they get to sort of break the system in ways where they don’t have skin in the game. So for example, uh, CEOs who come into large corporations, To turn them around, drive up that profitability and increase shareholder value over the short term.

And then, and so doing the cannibalize, the company [00:22:00] so that they can get their golden parachute, they can get their big exit. And they’re out of there before the long-term ramifications of their parasitic behavior. Wreaks havoc. And what ends up happening when that, when that occurs is people are incentivized in the short-term to do what’s in their best interest and not in the longterm what’s in the company or the society’s best interest.

And so what, he talks a lot about skin in the game and the idea of every captain goes to, it goes down with their ship, which removes the agency problem. And the agency problem is. If the person is going to be no longer in a position where we can hold them accountable and penalize them once the ramifications of their actions have occurred, then we have, um, functionally, a misalignment of interest.

And so if you think back in the Roman. What they would do is I found this really interesting. This isn’t actually in the book. This is just from some of them had a good quote about that, right?

[00:22:52] Dan: Uh, maybe you want to done, what did he say?

[00:22:54] Anthony: If you, if you want it to, oh, that’s different. I

[00:22:57] Dan: don’t want to done send somebody [00:23:00] basically says if you want it done, right.

Do it yourself. If you don’t want to done correct. Send an agent who probably

[00:23:05] Anthony: doesn’t give any. Yep. And this is the, this is the principal agent problem in a nutshell. Charlie Munger talks about being like the most important issue that any of us has to solve for in business and investing. But the Romans, what they would do is when an architect would build an arch, when they, before they would take out, as they were taking down the sky.

The architect, the builder would have to stand underneath the arch as they remove the scaffold that’s aggressive. So that builder is incentivized. They better be sure that that thing is going to stand. He is going to be very certain before they remove that scaffolding. That, that thing’s good to go. And this goes back to Hummer Robbie, if you go like really long time ago, so the.

How long ago that was, but the rule of Hama Robbie was if an architect or a builder builds a building. And at any point that building ever falls down, say 50 years later, if that building falls down and kills the son of whoever’s living in that [00:24:00] building, then the architect’s son is to be murdered. If the mother is, it dies in the collapse, then the architect’s mother.

And so it created like this long incentive of like, you better build this thing really well because you don’t get to walk away from your responses. Yeah, there

[00:24:15] Dan: was similar stuff with bankers back the day. I can’t remember, you know, what culture would, uh, what society did this, but if you were effectively running a bank or, you know, maybe way back in the day, you’re the blacksmith who was kind of like the banker.

You’re just the guy who had the precious metals store your money and give you a note. Did the same thing as a bank before there were banks. If that guy, the blacksmith or the, the banker, as, as times went on for a long time, there’s a lot of societies that will kill the. If he went belly up, he didn’t fulfill his obligations.

So very different than 2007. Where that one person with the job at all, no one died, no one should die, but there should’ve been some repercussions, but there’s a laundry list of example. Lack of skin in the game these days, whether it’s politics or business it’s.

[00:24:58] Anthony: Well, one of the, one of the other things on [00:25:00] this Hummer, I’ll be brisk management system that I have in my notes here, which is super important is that the ins, the builder knows how to hide things and where to hide things better than the inspector knows where to find the things.

Right. And so inherently the CEO of the company or the operator that you choose to work with, if you’re going to be a passive investor in a deal, they know how to bamboozle. Far better than you will. Like it’s, it’s, it’s the classic. The criminals are always one step ahead of the justice system because they’re, the criminals are constantly innovating and doing something new, which then the police have to react to, to try and solve, right?

So inherently there’s always an advantage to be the criminal in this situation, which for a period of time, for a period of time, long-term long-term we know that this is not a winning strategy game theory does not play out well for you. In the short-term we see a lot of behavior like this, where people are there, they don’t have skin in the game.

They don’t have long-term incentive to, to, um, mitigate risk. And they, they, um, prioritize [00:26:00] short-term gains over long-term sustainability.

[00:26:02] Dan: And a lot of these people that we’re talking about are making long-term decisions and they’re only. The next couple of years, but the decisions they make impact decades.

Yeah. So, yeah, it’s uh, yeah. Um, anyhow, um, I could get on a soapbox and complain about that

[00:26:17] Anthony: all day. That was my soap box. That was, that was the one I’m most interested in.

[00:26:20] Dan: Uh, my next takeaway is the barbell strategy. Um, so if you guys actually get the book, there’s a, there’s a barbell on the cover. This one, right?

Yes. Yeah. You probably wonder where

[00:26:29] Anthony: that is of all the things that you could see on the cover. You’re like, it’s not making sense when you read it.

[00:26:35] Dan: Yeah, it’s a lopsided, it’s lopsided for a reason. I’m going to tell you why right now. Um, I mean, he’s a, he’s an avid weightlifter, so I get why there’s a lot of barbell references here.

But anyways,

[00:26:45] Anthony: the he’s an avid one rep max weightlifter. It seems like that’s all he does is go in and do one rep maxes and gets, he wants to look like a butcher. That’s his goal is to look big and scary, like a butcher, and

[00:26:57] Dan: he loves, he loves food [00:27:00] clearly show that was your goal in the scene. Look like anyways.

Barbell strategy. What the heck is that? Um, like I said, he’s an avid weightlifter, not relevant here. Uh, but it’s a fun little fact. Um, anyhow, so to become anti-fragile. Now this is speaking about your investment portfolio. If you want an anti-fragile portfolio, uh, this is what the scene describes, and I think this is probably pretty similar to what he was.

Extremely simplified, uh, because we’re not talking about any advanced financial products, they were just talking about general portfolio management. If you want an anti-fragile portfolio, uh, the seam recommends the barbell strategy. So what the heck is the barbell strategy and why is it lopsided? Um, I’ll tell you why.

Okay. Uh, what do you suggest is that you, what most people do is they go and they find kind of the middle of the road. Peak of the bell curve option. Right. What’s kind of the average risk thing I could get into, not something that’s super speculative. That’s going to be just like a moonshot [00:28:00] and then not something that’s so not treasuries.

Right. I was trying to think of an example of like, it’s, you know, you’ve either got treasuries or something like that, where the yield is obnoxious low and far below inflation, or you’ve got something super speculative that could go to the moon, but yeah. Most people end up near the middle index funds, you know, the usual kind of blue chip stocks that is perceived as the safe option for a lot of people.

Uh, but that ignores those kinds of extreme ends of the bell curve. Right. Uh, if you go out to the far end on either side, you’ve got some extremely good scenarios and extremely bad scenarios, and those are the things that people completely discount and ignore. I don’t even perceive as, as an option, whether it’s super good or super bad, they really hang out in the middle.

Uh,

[00:28:42] Anthony: and the same calls, those long tail events. Yeah. It was really important to know that like it’s a term, he uses a ton.

[00:28:47] Dan: Yeah. Because tales of the belt group. Um, so if you have a picture of a bell curve and you’re in your head right now, you’re, you’re on the right page. And so he’s really focused on, on the edges here on the extreme, good side and extreme beds.

And so what he recommends is, you know, take 90% of your [00:29:00] portfolio and put it in something that’s going to be. Kevin marginally good return, but, um, do really well when things go really bad. Okay. So the returns are okay, but when, excuse my language, shit hits the fan. This is going to do really well.

Otherwise you’re going to probably vastly underperformed the rest of the market all the time and then take 10% and put it into something speculative. That’s going to do great. If things go to the moon, so that. You know, you’re 90% of your portfolio is underperforming the market, but that one, you know, that one in a hundred, um, more than compensates for that.

And you’re doing fantastic. And if shit hits the fan, uh, you’re doing pretty good. And meanwhile, everyone else is losing their shirt. And so that’s kind of a strategy. And for most of the time everyone’s going to look at you, like, what are you doing? This makes no sense. You’re underperforming like crazy, or you’re betting on these two extreme outcomes, neither of which are likely at all.

But it’s all about hedging off the downside risk, right? You’ve almost entirely eliminated your [00:30:00] downside risk. Your downside risk is lame returns or doing really well. Whereas the guy hanging out in the middle, if shit hits the fan, he’s screwed. He’s on both sides.

[00:30:09] Anthony: Uh, so the, the whole takeaway there is capped, downside, infinite upside that’s, that’s really the takeaway of anti-fraud fragile investment thesis.

And it actually, the other day on Twitter, um, I espoused a new investment theory that people seem to really like it was around crypto, but I’m going to share it with you. Cause you’ve used this term a couple of times now I call it the moon in the dirt investment thesis. So you shoot for the moon and you keep your feet.

So what’s that mean? So you shoot for the moon. And then in this context, it was in a conversation around crypto. Crypto is kind of like a shoot. The moon type of thing could also be angel investing could be whatever, highly speculative shoot for the moon, but keep your feet in the dirt and the dirt. Do you think the dirt is Dan,

[00:30:49] Dan: um, insurance?

I don’t know. Real estate. Oh, shoot. For the moon. I was trying to think about ways to hedge the risk

[00:30:56] Anthony: off. Nope. Shoot for the moon. Invest in real estate. There you go. [00:31:00] That’s my investment.

[00:31:02] Dan: Okay. I just have all your money in real estate and get a little crypto and see what happens. Get

[00:31:06] Anthony: a little bit of crypto, do a little angel investing.

Yeah, the whole, the majority of it and something that has a cap downside. I mean, real estate does have a very high downs, potential downside, but it’s, it’s kept to a certain degree and the infinite upside of, of crypto or, you know, shooting for the moon of, um, angel investing, if that’s your thing. But, um, the big takeaway here is that, um, the, by trying to stay in the middle of the bell curve, you think that you protect.

And in fact, what you’re doing is you’re exposing yourself to even higher degrees of risk. You just don’t see it. And

[00:31:38] Dan: you, because downside and like not much upside. Yeah. Because

[00:31:41] Anthony: it was black Swan events are so rare and human or human behavior is just a, to completely discount them and say like, oh, that was a fluke.

That would never happen again without realizing that all these things that could never happen again, they don’t happen exactly the same again. But they do happen again. [00:32:00] So COVID happened, right? Like every five to seven years, it seems like we have a new

[00:32:04] Dan: virus of some kind floating around. So

[00:32:06] Anthony: these long tail events that you think like could never happen, they happen constantly all the time.

So you gotta be prepared for them and invest accordingly

[00:32:14] Dan: frequently enough. Oh yeah. That ties into my next one. So. I didn’t. I just do barbell. I think you’re up next. Oh

[00:32:20] Anthony: yeah. Yeah. Okay. Um, I kind of took two and jumped them into the same, which was the skin in the game and the hammer, Robbie risk management, uh, thesis.

So here’s another one. And this one came, uh, as I was going through my notes today for this podcast, I was thinking about this one because I actually read an article on this yesterday. Um, when it seems says, has never asked the doctor what you should do, ask him what he would do if he were in Europe. And this is, this was like, this caught my eye as I was going through my notes today.

And when I was writing the book, this was, I was like, oh yeah, that’s, that’s great. That makes so much sense. But after what I read yesterday, and this other article, this like hit different, which is [00:33:00] doctors in like palliative care or oncology, like with patients who do not have long to live or, and they don’t have a high quality of life to look forward to that.

Overwhelmingly recommend that their patients undergo, you know, aggressive chemo in like they fight, fight, fight, like do all the things, throw the kitchen sink and do whatever’s necessary to like extend your life and like maybe, you know, stretch out this thing. But when those same doctors get cancer or they’re at the end and they’re looking down the barrel of a disease or an illness, and they’re given the same.

The majority, like in the statistics on this are crazy. Like they blew my mind that the majority of the doctors choose not to do the thing that they recommend that their patients do, they accept it and they just say, Hey, you know what? We’re just going to get comfortable for the remaining period of time here.

And we’re just going to, we’re going to float it out. And I found that super fascinating. When you look at this, this [00:34:00] concept of like, don’t ask the doctor what. What you should do, ask what he

[00:34:04] Dan: would do. Yeah. Cause I can see, I mean, I get questions all the time on investing stuff where the, the answer I give to the average person asking me what they should do with their money is a hell of a lot different than what I would do with my money, because I’m me, I’m obsessed with real estate.

And I don’t mind being overly invested in one thing. I don’t recommend anybody have as much exposure as I do. But if someone were asking. What I would do in most situations is probably different than what I’d recommend other people to do.

[00:34:29] Anthony: It’s like when people ask Warren Buffett, what, what should be, what should I do?

And he’s like, I don’t know, majority people probably go get some index funds, but that’s not what he does. No, it’s not at all what he does at all. So it’s like, yeah, it’s very interesting when you look at experts in all their different fields, um, it’s, it’s the classic do, don’t do, as I say, but do, as I do, which is the opposite of, uh, what my mom used to tell me, which is do, as I say, not as like you.

Yeah. It’s

[00:34:52] Dan: interesting. In the doctor example, I mean, that’s. That’s a situation where you are just relying on somebody else’s knowledge with [00:35:00] investing, you know, should I do it? Warren buffet does probably not. He’s got a lot of practice. I’m going to be pretty bad at trying to consume all those, uh, all those K ones or, um, uh, That’s 11, K 10 K 10.

That’s the annual. Yep. Um, he’s just sitting around reading K tens all the time. Hard, fast. So, I mean, I get it. I did it in school. I was, I used to be into that. It’s boring. I’d rather look at rent rolls and build under any models for properties. I find that a lot more enjoyable, but anyways, um, next one next takeaway from me the Turkey problem.

A little bit tricky problem. I just, I like turkeys. They’re kind of cute. It tastes delicious.

[00:35:45] Anthony: He was such a, such a weird dude. You refers to people in this book as like turkeys. Well, because of the Turkey

[00:35:52] Dan: problem. Well, let’s, let’s discuss, cracks me up, but this ties in, I think really well with, uh, some of the stuff we were just kind of chatting about there with, you know, people kind [00:36:00] of discounting likelihood of certain things to happen.

This is. Turkey problems talking about, and that is, um, humans tend to misread the future based on their perception of the past. And, uh, he gives an example of a Turkey. Uh, who’s just hanging out, you know, on the farm, loving life farmers. Great. He comes up, gives him food every day. Great relationship they’ve gotten this Turkey is like, man, life is good farmers.

My best friend from a loves me. He feeds me every day and then Thanksgiving comes, he’s dead. So his perception of the future, the Turkey was way the hell off because he’s looking at oh, the past has always been this way. So the. It must be this way. It’s going to be the same. And, and this is how people are in general.

They look at the past and they try to extrapolate what the future is going to be based on that. And this also came up. If you guys listened to our most depressing episode ever changing world order by Ray Dalio, that’s the whole point of his book there, which is, uh, your limited view of the past, depending on how old you are, maybe it’s between 20 and 50 or [00:37:00] 60 years does not factor in all the stuff that happened for the hundreds of years before.

And your perception of reality is based on your very minimal experience in the world. And there’s, there’s a whole lot of stuff that happens all the time that you just haven’t experienced yet. So when it does happen, you shouldn’t be surprised. And this is kind of the same thing. It’s basically the it’s, it’s the warning you, you hear when you listen to financial videos online that will give some times past performance is not indicative of future results.

It’s basically the same thing. You cannot look at the past, assume the future is going to be the same. If you do that, uh, you’re going to be caught with your shirt off when those. Outlier events happen. So I love

[00:37:36] Anthony: the Turkey meat, Turkey. Don’t be a Turkey. Um, okay. Here’s my.

[00:37:40] Dan: I think you’ve done. I mean, you’ve given like six.

I know you went first.

[00:37:44] Anthony: Okay. I want, I want one more. I want one more just giving you this one. Okay. And then we’ll just maybe it’s number 11. I don’t know. Well, no, cause we, you and I both had number one together, so like I got to come up with a different one here. Okay. So. Nassim hates academics. First of all, you have to understand, he [00:38:00] hates people who live on theory and don’t actually practice what they preach or don’t have any like, experience with the thing I was in the, I was in the locker room the other day with this guy who like studied economics down in Chicago at the university of Chicago.

Um, and he, he said something he’s like, we had a saying around the, uh, around school, which was, well, it works in practice. But does it work in theory? And, and that’s in a nutshell, and this seems issue with an academic. He says this, he says an academic is not designed to remember his opinions because he doesn’t have anything at risk from them.

So an academic or a forecast, or an economist, people that you see on the news are like, oh, you should buy this thing. You should do that thing, like who are telling you what’s going to happen, but aren’t necessarily living and breathing and practicing that thing. They have no incentive to be right, because to be wrong.

We’ll forget if their rights, they get to like put that on their resume. So our boy, our home, our homie Robert Kiyosaki, who predicts [00:39:00] every other week that that’s going to be the next depression and that like the world is imploding. He will be right. Eventually die on that, on that hill. But until then, like every time he’s wrong, we just go, yeah.

Yeah, he’s wrong. Whatever.

But

[00:39:13] Dan: there’s no risk to his. Empire. Yeah, it’s the same. I mean, you know, like take a

[00:39:19] Anthony: weather, man. Now he came home and he said like, I’m going to bet. Like, if I’m wrong, we’re going to go into depression next month. If I’m wrong, I’m going to donate 50 million. I

[00:39:28] Dan: would, I would listen.

What would he need to do is put his money where his mouth is and put on a massive short position, which had he done, which he didn’t do. He’d be blown up by now. So like, if you want to have that strong opinion, like put your money, put your money on the table and let’s see, or you could just make videos that get clicked, which is what he wants to do.

Sorry, Rob,

[00:39:46] Anthony: hating on you, Robert, but you’ve gotten a little bit crazy in your old age.

[00:39:48] Dan: It’s kinda cringy. Um, yeah, I was going to say something and then Robert keeps out the weather people. I mean, yeah. I was just going to say that, I mean, they make 90% of the calls. They make a wrong and [00:40:00] no one cares don’t get fired.

Right. There’s no, there’s no skin in the game. Like they could be wrong all the time and no one

[00:40:05] Anthony: cares. Yeah. And I think, I think that’s super important is when you’re taking advice from people to understand, like, are they, do they make their money from giving advice or are they actually making their money from doing this?

Uh, because of the opinion that they have about the thing is going to be fundamentally different. And so I’m not saying that all economists or all academics are bad. I’m not saying, I’m not saying theory is wrong, but, um, if I had to choose, and this is the problem, I think that ends up happening a lot is most people, if they have to choose between the theory and the practice, choose the theory,

[00:40:36] Dan: probably easier.

It’s easier to sit around and read and talk. Doesn’t have to actually do the thing deal with the downside, right? This is hard. Yeah, it’s a lot of work. All right. All right. So that’s,

[00:40:46] Anthony: that’s, anti-fragile, I’m not even scratching this. There’s so many concepts that we didn’t even get to hear people. You have to read this book.

I’m sorry, this isn’t one of those, those podcasts where we’re going to be able to break down this book and give it just. [00:41:00] With just 10 takeaways. It’s

[00:41:01] Dan: just not going to, you know, you know what this book is perfect for like a book club where you like read a section and then discuss it thoroughly and then move on.

Because it’s like, like I said before, you really got to like, think about this stuff. You’re not just going to read it straight through and have everything. Like, how about

[00:41:15] Anthony: the quick. If you’re listening to this two things, one, did you know that we create sophisticated investor notes out of these podcast episodes where we do so read our baddest marketing guy.

He, um, he listens to us as a soul and then he takes like the 10 takeaways and he creates a beautiful visual out of it, like spark notes so that you can, instead of listening to us, you can just go get that. So if you want a copy of that, shoot me an email. Put a link on the website. It’s just not there yet.

So shoot me an email, anthony@invictusmultifamily.com. And I’ll send you a link to the Dropbox folder where we have like seven or eight of them at this point. Now here’s the other thing I just had the idea. If you guys are interested in doing a book club on antifragile, shoot me an email. And if we get enough, We’ll do we’ll

[00:41:58] Dan: put together a little book club.

That’d [00:42:00] be only like one or two. Honestly. We’ve tried many clubs, everybody flakes. So anybody is, you gotta be reliable. You

[00:42:07] Anthony: got to show up, you got to put some skin in the game. You got to pay. What do you think? 50 bucks if you want to be in a Buffalo quick. No, no, here’s the thing. If you want to be in the book club, it’s going to, it’s going to cost you 50 bucks.

I’m making this up as we go, guys, it’s going to cost you 50 bucks to get in the book club. If you make it and you show up every week and read the book and we’ll give you attribute meaningfully, you get your money back that’s

[00:42:26] Dan: plus a cookie. So you’ll do it for the cookie. I don’t know

[00:42:29] Anthony: if that, if anything, I just said sounds remotely interesting.

Reach out to me. We’ll we’ll arrange this and get it, get it happening. Um, you listen to all that and you’re like, I’m going to pay you to read a book, get it

[00:42:40] Dan: back, get it back. You just have to

[00:42:42] Anthony: not. So like what kind of scammy business model is this? Stay with us. It’s going to be worth it.

[00:42:48] Dan: Trust me, cookie.

It’s at a cookie. You get your 50 back. You Netflix. And you learn

[00:42:53] Anthony: and you learn and you get to read antifragile in the process, which is again my favorite book of all time. So right guys, that’s going to do it for us. Hopefully [00:43:00] you got some value out of this. Go drop a review. If you did, if you didn’t get any value out of this and you listened all the way to the end of this podcast, then still go leave a review because.

I don’t know what you made bad life choices. I don’t know

[00:43:14] Dan: what else, if you watching Johnny Depp and Amber heard recap

[00:43:16] Anthony: videos probably. Oh yeah. Um, make sure that you subscribe to the podcast because next week we’re going to unpack the, the trial in depth. Actually. We’re not. No worries. It’s all good. All right.

So that’s going to do it for us guys. We appreciate you taking some time out of your day to join us. We’ll see.

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