Negative Convexity (Squeeze Effect)
Systems can become fragile under stress when a small increase in demand leads to disproportionate negative outcomes, often due to bottlenecks. The example of movie theater exits illustrates this negative convexity effect where additional people exiting cause more trauma.
THE IDEA
How to Exit a Movie Theater
Another example of the costs of a squeeze: Imagine how people exit a movie theater. Someone shouts “fire,” and you have a dozen persons squashed to death. So we have a fragility of the theater to size, stemming from the fact that every additional person exiting brings more and more trauma (such disproportional harm is a negative convexity effect). A thousand people exiting (or trying to exit) in one minute is not the same as the same number exiting in half an hour. Someone unfamiliar with the business who naively optimizes the size of the place (Heathrow airport, for example) might miss the idea that smooth functioning at regular times is different from the rough functioning at times of stress.
It so happens that contemporary economic optimized life causes us to build larger and larger theaters, but with the exact same door. They no longer make this mistake too often while building cinemas, theaters, and stadiums, but we tend to make the mistake in other domains, such as, for instance, natural resources and food supplies. Just consider that the price of wheat more than tripled in the years 2004–2007 in response to a small increase in net demand, around 1 percent.3
Bottlenecks are the mothers of all squeezes.
When to use it
Designing emergency exits in large venues
Managing supply chains and inventory for peak demand
Planning infrastructure (like airports or power grids) to handle stress scenarios
Investment and risk management in financial markets
FROM THEORY TO EVERYDAY LIFE
In practice
Movie Theater Exit
Someone shouts 'fire,' and you have a dozen persons squashed to death. A thousand people exiting (or trying to exit) in one minute is not the same as the same number exiting in half an hour. Someone unfamiliar with the business who naively optimizes the size of the place might miss the idea that smooth functioning at regular times is different from the rough functioning at times of stress.
Wheat Price Surge
The price of wheat more than tripled in the years 2004–2007 in response to a small increase in net demand, around 1 percent.
A MOMENT TO REFLECT
Put it to work.
How might optimizing for average conditions create fragility in your own life or work?
Identify a bottleneck in a system you rely on. What would happen if demand increased sharply?
Why do we often overlook the costs of squeezes in planning?
CONTINUE THE CONVERSATION
Source texts
- Antifragile (Nassim Nicholas Taleb)