I'm reading Nassim Taleb's 3rd book, Anti-fragility after being impressed by The Black Swan. Anti-fragility is the opposite of fragility. Whereas fragile things are eventually destroyed by chaos, robust things are insensitive to chaos, anti-fragile things benefit from chaos.
Fragile things are things like architecture, over-leveraged accounts, debtors, machines.
This is characterized by The Sword of Damocles, a sword hanging over someone by a horse-hair.
Robust things are the same, except designed with more redundancy to withstand extreme events. Re-inforced glass, bullet-proof plating, data systems with backups, financial systems with adequate reserves (whatever 'adequate' means). For example, a banking system with a 1% reserve requirement ratio is more fragile than a more robust banking system with a 30% reserve requirement ratio.
This is characterized by the Phoenix, which resurrects itself to its former state when dead (this is an example of 100% robustness).
Antifragile things reap long-run benefits from volatility. For a fictional example, see Kevin Bacon's character in the terrible movie, X-Men: First Class. For real life examples, consider bone/muscle tissue, which over-compensate and grow stronger after a trauma that doesn't completely obliterate them. Bacterial populations, who evolve resistances over time.
This is characters by the Hydra, which grows two heads when one is severed.
Evolution, and thus nature, is the ultimate example of anti-fragility. Relatively minor trauma such as the death of a fraction of the population eventually results in the fitter survivors reproducing and replacing the previous generation with a population more fit to the environment.
Antifragile things are also negatively affected by peace. Immune systems, muscle tissue, and bone atrophy with disuse. Boxers suffer from "ring-rust". Antifragile systems must be continuously exposed to adversity to maintain or improve their robustness.
The concept of antifragility has applications to entrepreneurship. Successful entrepreneurs all have one thing in common- they have all failed. Some popular examples have failed hundreds of times. But they failed early, when failure was relatively cheap, and learned from their failures. It is cheap to start and fail a business in college, when your living expenses are low and you have no dependents. You can learn how to manage a business from this experience, or you can take on the cost of an MBA program and learn how to start a business in the classroom. In the latter case, there is a large, up front time and financial commitment, and the program does not provide you with real-world experience. Of course, you do end up with the prestige of a 3-letter acronym as a signaling effect, and it is up to the individual to decide whether or not that is worth the cost.
How this relates to me:
I occasionally practice stoic philosophy to become more robust. I spent most of last winter without heat or adequate electronics. I endured long stretches of linguistic isolation. I fast once every two weeks. These were small discomforts that taught me lessons I would never have learned otherwise. Things I thought I needed actually turned out to be things that are just "nice to have". My mental fortitude increased from exposure to adversity, so it is anti-fragile.
I earned my license to teach Physics while working full-time, and it only cost me about $5000. In the process, I learned a little bit about pragmatic teaching methodologies, and received enough motivation to teach myself Physics, a subject I had not studied since I was 16 (nor was I good at it). It was fun, and it was cheap. This was an anti-fragile move. It did not cost me much in time or money, and it increased my robustness as far as my employability and knowledge.
Going to graduate school is a fragile move. It is far more costly both in time and money. Unless I first find a full-time job, I will spend a year that I could've otherwise spent learning job skills in the real world. The type of skills and signaling from grad school are highly specific. The skills from a generic entry-level job are highly general.
Paying money to be taught specified skills (in an academic setting) reduces optionality.
Earning money while developing general skills (in a real world setting) increases optionality.
For some careers, an experience graduate school program is a requirement. Since I'm not interested in them, graduate school is not a good choice for me. Even compared to the uncertainty of unemployment, which is relatively cheap.
There is no substitute for sparring a better fighter. Drills are good for honing in on specific skills, but the real world punches back. Even when I drill combinations, I simulate a real fight as much as I can- Hands up, chin down, jaw closed. I do this because it is much easier to learn good habits than it is to unlearn bad ones.
Leveraged investments are fragile (and also tax-inefficient and always a bad-idea but that's a different article) and will never be included in my portfolio. I don't know when my stocks will crash, only that they will before I die, likely more than once. To reduce the fragility of my portfolio, I have invested the minimum amount needed in each fund to qualify for Vanguard's Admiral shares ($10,000). This gives me a discount on the expense ratio, which is the best predictor of future fund performance. My portfolio is diversified between domestic, international stocks, bonds, and cash. Due to the unpredictability of hidden randomness (black swans), I think liquidity is highly undervalued. Inflation is so low that keeping a large amount in a 0.9% APR savings account isn't a big deal. Also consider that I am not IRA-eligible so the benefits of investing in stocks and bonds right now is much lower than it would otherwise be. To me, the answer seems obvious- enjoy the robustness of a large cash reserve and wait for the next inevitable bear.
Conclusion- How Can I Be More Antifragile?
Learn from your mistakes before they become too expensive to make. Examine things in your life that benefit slightly from risk exposure but would be disastrous if something were to happen. (One trick-pony vs jack-of-all-trades). Expose yourself to volatility to temper your fortitude when the real thing happens. Stoic philosophy involves periodic denial of luxuries for extended periods to prove yourself that you don't need them, and thus become unafraid to lose them.
Oh yeah and also, don't have debt. The most practical form of anti-fragility is optionality, which is commonly bought by financial, social, or human capital.
For more on antifragility, I recommend this colorful article.