Of #Risk – as the stakes keep getting higher

Nassim Taleb, whose book The Black Swan added a term to our vocabulary, has offered a brief discussion of how we might anticipate. As we continue to reflect on the enormous damage done in 2008.

His point is basically to draw a distinction between linear and exponential factors. As well we know, with Moore’s Law driving core aspects of technological change, the impact of exponential factors may be expected to increase, exponentially (my point, not Taleb’s).

Here is his key para:

So here is something to use. And the technique, a simple heuristic, called fragility (and antifragility) detection heuristic works as follows. Let’s say you want to check if a town is overoptimized. Say you measure that when traffic increases by 10,000 cars, travel time to grows by ten minutes. But then if traffic increases by 10,000 more cars, travel time now extends by an extra thirty minutes. Such asymmetry shows that traffic is fragile and you have too many cars, and need to reduce traffic until the acceleration becomes mild (acceleration, I repeat, is acute concavity, or negative convexity effect).

 

A Method of Detection of Fragility: How to Detect Who Will Go Bust — Nassim Taleb.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s