Nassim Nicholas Taleb’s book, Antifragile, proposed a new idea- that there are certain things that improve from disorder. To give a short example of how this concept works: if you dropped a vase on the floor and it shattered, it would be fragile. If you dropped a vase on the floor and it didn’t shatter, it would be robust. If you dropped a vase on the floor and the impact caused the vase’s walls to become more durable, we would consider it to be antifragile. The disorder made the vase better.
In the book, Taleb lays out an antifragile investment strategy that he dubs, “the barbell strategy.” You put 90-95% of your investment in safe vehicles in predictable environments. The other 5-10% you invest in chaotic environments that contain the possibility of dramatic positive swings. In this way, you avoid ruin, but still gain from the occasional upward spike of fortune.
I’ve often wondered how you might employ this strategy in a business. This past year, I benefited from a front row seat on an application.
I have a friend, Jim, who ran a typical freelance web development operation. Last October, he reached out and asked if we could take on his clients.
I said, “Absolutely, but why the change?”
Earlier in the year, Jim had been messing around with NFTs and launched his own run of tuxedo cat crypto-images. This coincided with a sudden trend in interest in crypto. Demand went through the roof and there weren’t enough experienced developers. It became clear that he could make more in a month than he would in three years if he just focused on NFTs.
No bakery is going to experience a surge in growth like Jim and NFTs. This is because established markets are not chaotic environments. But there are opportunities to employ a barbell strategy to access something like Jim’s experience. A bakery that figured out how to get into wholesale with an innovation on a classic good would see a huge spike in sales.
Similarly for your business, if you wanted to employ a barbell strategy, you might optimize your operations, your 90% safe investment, and spend 10% of your resources exploring innovation in a risky area with the possibility of extreme growth.
Image is aegis with the head of Sakhmet, from the Walters Art Gallery in Balitmore, used under Creative Commons
