Building Antifragility in Life and in Business.

Introduction to the Barbell Strategy.

The Barbell Strategy is perhaps one of the most interesting ideas of reducing exposure to risk in life and in business.

It was proposed by the Wall Street trader and philosopher Nassim Nicholas Taleb for dealing with risks.

According to Taleb, there are three positions that you may find yourself with relation to risks:

? You may find yourself in a fragile position where your exposure to risk is very high.

? You may find yourself in a robust position. This is where your exposure to risk is minimal because you have put in place measures that cushion you from risk.

? The third position is a position of antifragility. This is where you are not only robust in the face of risks but where you also get better with exposure to risk.

Conservatism and Aggressiveness Explained.

Like a barbell, the Barbell Strategy comprises of two extremely opposite approaches: A conservative approach and an aggressive approach.

The strategy involves taking calculated risks in some aspects while being risk-averse in some.

Conservatism is akin to crossing the road at the Zebra crossing only when the sign says pedestrians can cross.

Aggressiveness is like crossing the road, not necessarily at the zebra crossing, but only after having checked both sides of the road and confirmed that it is clear.

To be safe in busy streets, the pedestrian would be safer crossing at the zebra crossing only when the walk sign indicates that they can cross. This is the conservative approach.

In the less busy streets, the pedestrian may cross the road when there is no oncoming vehicle

Applications of the Barbell Strategy.

In trading, conservatism involves investing where the probability of loss is very low. In most cases, the returns on such investments are low but the investor is guaranteed to sleep well at night.

Aggressiveness on the other hand, involves investing where the probability of loss is very high. In most cases, the returns on these kind of investments are high.

The goal of this model is to build optionality. The person making the decision can choose which approach to use based on how risky he thinks the situation is.

Going back to our pedestrian analogy. They have a way of crossing a busy street and a way of crossing a less busy street. They have optionality.

Having optionality is simply not be locked in one option but to have many options. This removes you from fragility to robustness, and ultimately to antifragility.

Another example of the Barbell Strategy in business is the initiative to invest in research and development while at the same time dealing with day-to-day business issues.

This mix of aggressiveness and conservatism enables the business to explore the unknown possibilities while solving the known day to day problems.

The business is able to create new opportunities while adequately reacting to the usual daily issues.

Call to Action.

Companies like Netflix have aggressively leveraged the internet, a fairly recent technological advancement, to exploit people’s drive to be entertained. As a result they have dominated their industry.

Maybe companies like blockbuster and Kodak were driven to exit their markets because they failed to use the Barbell Strategy, amongst other failures.

Maybe their undoing was the result of failure to be aggressive with exploring the unknown while exploiting the known.

In life and in business we must explore possibilities aggressively so as to create new opportunities. This is what drives progress.

On the other hand, we must fully exploit what has proved to work in the past to continue making the best use of it.