Antifragility, Critical Rationalism and Serendipity Changed Everything

Three concepts or schools of thought have changed my life. Antifragility, serendipity and critical rationalism are all interrelated. They are mutually dependent and, at the same time, overlapping. This article is a little longer and not meant to be consumed on the subway or casually like a tweet. So read it with peace of mind and a little coffee, tea, or Lagavulin.

Critical rationalism – tear down that thesis

Critical rationalism is like a Copernican revolution in one’s own thinking. The founder of this school of thought is Karl Popper, and if there is a battle cry for critical rationalism, then perhaps it is “Tear down that fucking thesis.”

Tear down that fucking thesis

We know it from childhood to adolescence, and unfortunately, we often see it in adults. In discussions, we tend to want to be right. We are less interested in the truth than in defeating the other person and succeeding with our opinion.

We don’t even listen to the other side’s arguments, or they usually don’t interest us. They are obstacles we must clear to be right ourselves. We seek counterarguments to destroy theirs and insist on “I see it differently.”

Backtesting – a useful tool when handled properly

Critical rationalism turns all of this upside down. Based on critical rationalism, the primacy of thought is not to be right, but to recognize what is wrong.

It is a complete change of perception and methodology. Instead of trying to prove a thesis, the aim is to falsify and challenge a thesis. Those who are proven wrong win.

Why it is good to be proven wrong

The concept of critical rationalism is based on the search for truth, and it goes without saying that achieving an absolute state of truth is difficult.

History is full of aberrations of “truth.” Truth is only a temporary state. Until the discovery of black swans, anyone who claimed that swans were not necessarily white was lying. The fact that the earth is a disc and the center of the universe was also considered scientific truth for a long time.

Critical rationalism does not negate the fact that it is almost impossible to know the truth with certainty.

However, it tries to find ways to come as close as possible to it. The prerequisite for this is that we only consider a scientific statement valid (not true!) if it can be refuted by observation and experimentation.

So, we base discussions on empirical facts that can be falsified. This creates rationality and it brings us closer to what we consider truth.

Fat is bad, isn’t it?

We must always live with the risk that the theses on which we base our decisions are untrue and may break away. In this respect, it makes sense not to insist obsessively on the accuracy of our own theses. We have a vested interest in recognizing whether the theses on which we base our lives are right or wrong.

If we believe that swing trading or other investment strategies will enable us to outperform the broad market over the long term, then that is also a thesis. Knowing this thesis could be wrong would protect us from making wrong investment decisions.

If we believe that avoiding fat is good for our health because fat causes cholesterol disease, then the underlying thesis is that fat is unhealthy for this very reason. But what if this is only true for certain fats and other fats have favorable properties concerning cholesterol disorders?

Antifragility – what doesn’t kill me, makes me stronger

Oh, how much I value antifragility. Understanding antifragility as a concept has turned my life upside down. It was my Copernican revolution. Unfortunately, hardly anyone around me is blown away by the concept of antifragility like I am.

Antifragility sounds martial, but in the end, it’s just a name for a heuristic we’ve been using for a long time. What doesn’t kill me makes me stronger.

What doesn’t kill me, makes me stronger

There is no better book on the subject than the one written by Nassim Nicholas Taleb, who gave birth to the baby antifragility and coined the term. In short, antifragility is the opposite of fragility. It means that something improves in its properties when it is challenged. A fragile object breaks when it is stressed, an antifragile object becomes stronger.

Thoughts on Antifragility TEV Blog
More thoughts on antifragility

That sounds absurd because it doesn’t correspond to our experience. We are used to being protected. We try to protect ourselves from the world’s threats. And yet, there are many examples in our lives where we try to benefit from antifragility.

Autophagy, the body’s self-cleaning program

Sports and saunas are practical examples of how we stress our bodies to strengthen them. Intermittent fasting could be another example. Here, the aim is also to activate the body’s self-cleansing powers using autophagy.

In other areas, however, we fail miserably.

Most of our depots are fragile in the face of black swans. The Western world’s healthcare systems, which are designed for efficiency, are incredibly fragile and in no way able to cope with stressful situations such as the COVID-19 pandemic. But if you tell liberals that we essentially need overcapacitated and, therefore, inefficient healthcare systems, they will eat you up.

Antifragility and critical rationalism are connected

Critical rationalism and antifragility are excitingly intertwined. Nassim Taleb himself admits that Karl Popper had already identified antifragility as a phenomenon.

In the end, critical rationalism is just another method to achieve antifragility. The antifragility lies in the fact that we come closer to the truth with every falsification. We reduce our thinking by all that is fragile. We grow from the shattering of our thinking. What remains is antifragility.

Reduction Minimalism
If I want to create antifragility, I must use reduction

In other words, If I am open to my own mistakes and do not focus everything on enforcing my own beliefs, a falsification cannot shake me. On the contrary. I welcome it and consider it a gain if I have been wrong. It moves me forward. Thinking, the thing we do all day, thus becomes antifragile.

“Dialectics is antifragile. Wanting to be right all the time is fragile.”

If we all thought like this, the world would be noticeably more pleasant. Crash prophets would be either knowing liars or ignorant idiots. Private investors would never trust these people with their money.

Time will tell

Another element that additionally links critical rationalism and antifragility is time.

the two biggest assets investors have
Time is one of the two biggest assets investors have

Time is necessary for antifragility so that systems can benefit from disruptions. A system that does not have time to react and adapt to disruptions will remain fragile.

Systems must, therefore, be exposed to disruptions over a longer period of time to adapt and become more resilient.

“Time will tell” is, therefore, a very helpful heuristic when it comes to new hypes, supposedly disruptive elements, or fashion trends that pop up from time to time.

The factor that separates the wheat from the chaff

Time separates the wheat from the chaff. One example is evolution. Evolutionary systems are antifragile. They adapt to changes in the environment and become stronger as a result.

I have described this train of thought several times (for example, here).

Time allows evolutionary mechanisms to take effect … . Little by little, time exposes the unsuitable strategies that may have been successful for a few years but ultimately failed. A portfolio invested for the long term and broadly diversified also makes use of this effect, only it takes a little longer to have an impact. In such a portfolio, for example, an ETF, time will automatically weed out all the bad companies and let the good, strong, and successful ones prosper.

With “time in the market”, investors automatically benefit from this evolutionary mechanism. Their portfolio becomes antifragile without lifting a finger. So, in the long run, these investors with their broad investment style have good chances to be more successful than the typical investor.

Therefore, time is an excellent tool in many ways. It helps us to show which of the new-fangled theories or methods are bullshit and what has been able to withstand all the falsification attempts. Time smoothes out excitement. It also helps us reduce complexity because it peels away the fragile elements and leaves behind antifragility. And time teaches us to be patient.

For critical rationalism, time is necessary to falsify theses. If a thesis does not correspond to reality, it will sooner or later be falsified in an experiment or by experience. The more time passes, the greater the probability that this will happen. This is why it is so important to base a discourse only on theses and statements that observations and experiments can refute.

Serendipity – the power of randomness

Serendipity is not a concept. It is almost a thesis itself, based on empirical observations. There is probably a suitable battle cry for this, too: “long live the power of randomness.”

Long live the power of randomness

Randomness plays a decisive role in our lives. It can bring us luck or bad luck. It can also open up new opportunities or throw us off course.

Antifragility, Critical Rationalism
How serendipity can be your path to catharsis

Serendipity is a unique phenomenon of randomness that is characterized by unexpected and positive discoveries.

Horace Walpole coined the term “serendipity, ” which he used in a letter from 1754. Serendipity is about pleasant surprises that result from seemingly random events and lead us to new horizons.

This power of randomness can expand our thinking, offer us unexpected opportunities, and lead to groundbreaking discoveries. Many examples from history demonstrate this in very different areas of life.

Examples for serendipity

Serendipity plays an important role in various areas of our lives. In science, for example, many ground-breaking discoveries originate in seemingly random observations, such as the discovery of the effects of penicillin.

Artists, writers, and musicians often report that their best ideas and works have come from unexpected inspirations and chance encounters. Recognizing and using these random moments can create a unique creative process dynamic.

Serendipity is not only a stroke of luck but also an expression of the power of randomness. It shows that positive things can sometimes arise from unforeseen events.

Positive effects of serendipity

Serendipity can have a number of positive effects on our lives. It can help us to explore new paths, learn new things and meet new people. It can also inspire us to be creative and develop new ideas.

In science, serendipity can lead to new discoveries that can have a lasting impact on our lives. For example, Alexander Fleming’s discovery of the effect of penicillin led to a new drug that has saved millions of lives.

Serendipity can also lead to new ideas and inspiration in art. Recognizing opportunities and taking advantage of seemingly random situations requires attentiveness, openness and curiosity.

People who are willing to embrace the unknown and broaden their perspectives are often more likely to benefit from the positive effects of serendipity.

We can encourage serendipity by being open to new experiences and embracing the unexpected. We should not become too fixated on our plans and goals, but also leave room for coincidences.

Time will tell, again

The link between serendipity and time is complex. Time creates the space for new experiences, the development of ideas, and the maturation of discoveries.

Serendipity moments often occur when we are open to new experiences and move in different environments. This openness and willingness to embrace the unknown take time, as does exploring places, meeting new people, or entering unfamiliar situations.

Serendipity moments often require a mental ‘aha’ moment where information or insights are connected. Time is so important and I could write about it forever.

Antifragility, critical rationalism, and serendipity: and now?

The interplay between the individual concepts and schools of thought of critical rationalism, antifragility, and serendipity has had a huge impact on my life, far beyond the world of investing.

My very personal appreciation of serendipity

In my view, understanding serendipity helps us to go through life in a more relaxed way. Serendipity shows that we shouldn’t be too ambitious regarding our goals. Conversely, serendipity encourages us to go through life more openly and positively. We understand the power of coincidences. I have already written an article about this in the TEV Blog:

We have seen above that randomness is an essential principle of serendipity. Likewise, great discoveries are not pure luck, even though serendipity often gives that impression. I find the acceptance of serendipity as a governing factor in the quest for success incredibly liberating. Not every grain we put in the ground has to germinate. A setback is not a defeat. Chance and causal relationships are complex, and we rarely fully grasp them. What helps is a life of humble self-awareness and hard work. The rest will be decided by randomness.

My very personal appreciation of time as combining element

Besides this, it becomes again clear what an important factor time is. It will expose those who claim to know everything. Time will lead us closer to the truth if we are open to falsifying our own thinking.

“If you free yourself from the shame associated with changing your opinion, you get rid of the pain of having to be right all the time”

On the basis of critical rationalism, time will also make us wiser instead of more stubborn in many respects. We will live happier lives when we are freed from the burden of always having to be right.

Critical rationalism is also a first step towards making life more antifragile. When we are old and gray, we can smile benevolently when young people tell us about the next groundbreaking idea. We can even be open to it, because maybe the young are actually right, at least this once :).

Antifragility, Critical Rationalism

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Walter Leonhardt
4 months ago

“We have seen above that randomness is an essential principle of serendipity. Likewise, great discoveries are not pure luck, even though serendipity often gives that impression. I find the acceptance of serendipity as a governing factor in the quest for success incredibly liberating. Not every grain we put in the ground has to germinate. A setback is not a defeat. Chance and causal relationships are complex, and we rarely fully grasp them. What helps is a life of humble self-awareness and hard work. The rest will be decided by randomness.”

That’s the definition of Max Weber’s Protestant Work Ethic.

Last edited 4 months ago by Walter Leonhardt
Walter Leonhardt
4 months ago

A good example of a person which combines at least two three concepts you describe, is retired Manchester United icon Sir Alex Ferguson. I recently watched his interview after winning the Scottish Cup Final in 1983 after he won the European Cup Winner’s Cup the week before.
The game was awful and instead of celebrating the moment, Fergie couldn’t stop complaining how bad the match was.
He said, it’s a matter of standard his team Aberdeen FC must fulfil. Titles and success do not interest him if the basic for it isn’t given.

At least in 1983, serendipity doesn’t seem to be of too much interest in Sir Alex’ thinking. But in the later it was definitely, because people coined the term “Fergie time” for ManUs tendency for regularly making the winning goals in the very last moments of the game.
This means, you play your game, not too much interested in winning. This way you raise probability for the better end – a draw or winning.

I hope it’s okay to share two comments. It’s a fantastic article you finished.

Last edited 4 months ago by Walter Leonhardt
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