How to Become Financially Indestructible презентация

How to Become Financially Indestructible Benefit from future volatility

Which Would You Be?

The Inspiration The concept comes from Nassim Taleb’s best-seller Antifragile: Things that Gain from Disorder. Ideas presented here are either loosely or directly based on Taleb’s ideas.

A Working Definition Financial Antifragility: Not only being protected from personal or systemic financial stressors, but positioning one’s self to actually benefit from them.

1) Limit Your Downside Remember, this isn’t about maximizing your returns in the short-run. It’s about surviving and thriving in the long-run.

Two Key Ways to Limit Downside Emergency Cash

2) Avoid Debt In times of uncertainty and distress, nothing is more constraining than the burden of debt.

If another Great Recession occurred and you lost your job, consider: Housing debt (mortgage): This would prevent you from quickly moving for a new job, and you might be forced to either go through foreclosure or sell the house for less than you paid for it. Auto debt: For new cars, you’re immediately “under water” when you drive your car off the lot. If you lose your job, auto payments will need to continue, or you’ll be forced to sell your car. And since you were under water, you’ll lose money in the process. Student loan debt: Even if you declare bankruptcy, student loan debt stays with you. This can be a significant burden, and force you to take jobs (with higher pay) you ordinarily might avoid. You can also have your wages garnished for failure to repay these loans.

3) Live Frugally The less you need to be happy, the freer you are!

4) Have Redundancies in Place Planning for things to go wrong means that you’re prepared when they do.

Efficiency vs. Redundancy The business world is focused on making things as efficient as possible. Taleb argues that this can be a mistake. Nature doesn’t work that way—things that survive have many redundancies. The ideally “efficient” body would have one kidney, one lung, and so on. Therefore, it is somewhat counter-intuitive to have redundancies in place. It often means spending money for things that we may never use.

Are Your Redundancies In Place? If you lost your job tomorrow: Do you have a different employer in your field you are familiar with that you could call? Is there another field you’d like to get into that you’ve already started tinkering with? Have you done the requisite research to see what it would take to make such moves?

An Example From Real-Life

5) Use Convex Optionality to Your Benefit Tinker with ideas that have limited downside and unlikely—but unlimited—upside.

What is Convex Optionality? This graph shows what convexity looks like. The potential downside is limited to something manageable. Upside, however, is unlimited. One thing to understand: the upside usually has a small probability of occurring—you have the “option” of continuing or trying something else.

The Barbell Approach Taleb defines this as: “A dual strategy: one safe and one speculative, deemed more robust than a ‘monomodal’ strategy.” For working adults, this means having one stable income while tinkering with a passion on the side. Though the chances of one “tinkering experiment” being wildly successful are small, your chances go up markedly with repeated attempts.

Examples from Real Life Albert Einstein worked at the Swiss patent office (safe) while working on his revolutionary theories (speculative).

A Quick Review Limit Your Downside Avoid Debt Live Frugally Have Redundancies Embrace Convex Optionality

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