Antifragile resilient solutions for tactical and strategic planning

We recently discussed with a client Antifragile resilient solutions for tactical and strategic planning.

The theme is interesting and warrants publication this week as it raises a number of interesting issues.

We use Rx to indicate our client’s Remarks, and Ax to indicate the our related Answers.

Fragile – Robust – Antifragile systems

R1) I think there is value in characterizing systems into the three groupings that Taleb presented. That is, Fragile – Robust – Antifragile. Because it gets engineering thinking about the issue.   I think this point gets missed when people read Taleb’s work….

A1) It may be missed by readers of Taleb’s book, but many “flavors” of engineers such as structural, electronics, aerospace, power) didn’t need Taleb’s words. They knew already that redundancies and plastic/ductile failures (rather than fragile ones) are basic tools of good sense engineering. Redundancies and non-fragile failures are key ingredients to foster resilience and  reliability. Remember, there is that old refrain that tells: “never trust one material parameters to ensure safety”. And also “never trust one line of defence only”. And then “do not put all your eggs in the same basket”, etc. BTW, all these apply to investment too.

Black swans, foreseeability and predictability

R2) You present the Fukushima disaster as a counter to the “Black Swan” concept.  However, I think this is a classic example of a Black Swan, if the original definition by Taleb is used. That was an unforeseen event of significant consequence.  The issue is that people add the term “unpredictable” to the definition. Taleb never used that term.  Additionally, in his work, he specifically mentions that an event can be a Black Swan to one observer and not a Black Swan to another.

A2) The words foreseeability and predictability and their adjectives are to be used with care. They are not interchangeable. The terrible side effect of Taleb’s book was that “everyone”, including Bob, started talking about tailings dams failures as “Black swans”. That was absolutely nefarious, as it gave many companies a cheap alibi. Indeed, they developed the feeling that, since failures were Black swans, they did not need to manage them. Furthermore, in industry, there is an history of setting the credibility threshold to values of say 10^-6 . That quite considerably rarefies the legitimate Black swan cases!

Black swans and ethics

R3) In the case of the Fukushima disaster the event would be a Black Swan to the operators of the nuclear plant, as they incorrectly calculated the risk… The citation you have for tsunami stone markers is a classic example of observer reference with respect to Black Swans. Indeed the event was not a Black Swan to those in the village of Aneyoshi who built their homes on higher dwellings.

A3) Had the designers and planners of the plant listened to the inhabitants,  they would have understood that their parameters were wrong. Thus they would have had ample ways of altering their project. Allowing different views on Black swan can easily lead to unethical decisions.

Closing remarks

When evaluating tactical and strategic planning alternatives we have to consider a wide spectrum of possible events.

Real Black swans, i.e. events that lie at credibility thresholds are very rare. Hence we cannot arbitrarily exclude any failure mode or event from the analyses.

Ethics forbids us to change the definition of credibility from one project to another.

What we can change is our own risk tolerance threshold, but not the societal one, again on ethics grounds!

Tagged with: Antifragile, black swan, forseeability, resilient, strategic planning, Tactical planning

Category: Consequences, Crisis management, Hazard, Probabilities, Risk analysis, Risk management, Tolerance/Acceptability