The Thalesian and the Aristotelian
Taleb contrasts a Thalesian focus on payoffs and consequences, including asymmetries and nonlinear effects, with an Aristotelian focus on whether a proposition is right or wrong.
THE IDEA
The Thalesian and the Aristotelian
Now some philosophy. As we saw with the exposition of the Black Swan problem earlier in Chapter 8, the decision maker focuses on the payoff, the consequence of the actions (hence includes asymmetries and nonlinear effects). The Aristotelian focuses on being right and wrong—in other words, raw logic. They intersect less often than you think.
Aristotle made the mistake of thinking that knowledge about the event (future crop, or price of the rent for oil presses, what we showed on the horizontal axis) and making profits out of it (vertical) are the same thing. And here, because of asymmetry, the two are not, because profits depend on the payoff structure. As Fat Tony will assert in Chapter 14, “they are not the same thing” (pronounced “ting”).
When to use it
Buying options to obtain exposure to an upside while limiting the loss to the amount paid.
Entrepreneurship: launching a startup with asymmetric potential for massive upside and manageable downside.
Strategic planning: prioritizing actions that have positive nonlinear outcomes rather than just avoiding mistakes.
FROM THEORY TO EVERYDAY LIFE
In practice
Thales and the Oil Presses
Thales of Miletus predicted a bumper olive harvest and secured option contracts on all olive presses in the region, making a fortune. He focused on the asymmetric payoff (limited downside, huge upside) rather than predicting the exact harvest, exemplifying the Thalesian approach.
A MOMENT TO REFLECT
Put it to work.
In your own decision-making, do you focus more on being right or on the consequences of being wrong?
Can you think of a situation where you were correct in a logical sense but still lost out due to asymmetry?
How might you reframe a decision to emphasize payoff asymmetry rather than simply being right?
CONTINUE THE CONVERSATION
Source texts
- Antifragile (Nassim Nicholas Taleb)