Respect for Time and Nondemonstrative Knowledge
Taleb favors practices with long records of survival when short observation periods can hide rare failures. He argues that those proposing to disturb a complex system should bear the burden of proof; longevity is a heuristic rather than proof of safety.
THE IDEA
1. Have respect for time and nondemonstrative knowledge.
Recall my respect for Mother Earth—simply because of its age. It takes much, much longer for a series of data in the Fourth Quadrant to reveal its properties. I had been railing that compensation for bank executives, who are squarely in the Fourth Quadrant, is done on a short-term window, say yearly, for things that blow up every five, ten, or fifteen years, causing a mismatch between observation window and window of a sufficient length to reveal the properties. Bankers get rich in spite of long-term negative returns.
Things that have worked for a long time are preferable—they are more likely to have reached their ergodic states. At the worst, we don’t know how long they’ll last.*
Remember that the burden of proof lies on someone disturbing a complex system, not on the person protecting the status quo.
When to use it
Deciding whether to invest in a company with a 50-year track record vs. a startup.
Evaluating the longevity of a political system before advocating for major reforms.
Comparing the observed track records and changing conditions of established and new career paths before deciding how much weight to place on longevity.
When considering a new medical treatment, weighing the evidence from long-term studies against novel approaches.
FROM THEORY TO EVERYDAY LIFE
In practice
Bank Executive Compensation
Bank executives operate in the Fourth Quadrant, where risks materialize over long periods (5-15 years). Their compensation is evaluated annually, creating a mismatch between the observation window and the time needed to reveal true performance. They can appear successful for years while accumulating hidden risks, eventually leading to large losses.
Mother Earth
Taleb invokes the Earth’s age as a reason to respect systems that have survived for a long time. Survival provides a different kind of evidence from a short successful trial, but age alone does not establish ergodicity, stable conditions, or complete understanding.
A MOMENT TO REFLECT
Put it to work.
How can you apply the principle of respecting time when evaluating the effectiveness of a new business strategy?
Consider a complex system you are part of (e.g., your organization, your health). Why should the burden of proof be on those proposing change rather than maintaining the current state?
Think of a time when a short-term observation led you to a wrong conclusion. How would this heuristic have helped?
CONTINUE THE CONVERSATION
Source texts
- The Black Swan The Impact of the Highly Improbable With a new section On Robustness and Fragility (Nassim Nicholas Taleb)