ERGODICITY AND ANTIFRAGILITY
(thread)
1/ What is the link between ergodicity and antifragility?
Why do people participate to non-ergodic activities?
Why do they take so much risks in ergodic activities that they make them non-ergodic?
(thread)
1/ What is the link between ergodicity and antifragility?
Why do people participate to non-ergodic activities?
Why do they take so much risks in ergodic activities that they make them non-ergodic?
2/ First, a definition. Something is ergodic if its expected outcome coincides with the time average.
For a better definition, please check the picture below.
(Or read this excellent paper: …godicityeconomics.files.wordpress.com/2018/06/ergodi…)
For a better definition, please check the picture below.
(Or read this excellent paper: …godicityeconomics.files.wordpress.com/2018/06/ergodi…)
3/ Ergodicity is not only the property of an activity, but of an activity performed by an actor with a given exposure.
For example, Russian Roulette is non-ergodic for the Russian Roulette player but is almost ergodic for a company hiring Russian Roulette players.
For example, Russian Roulette is non-ergodic for the Russian Roulette player but is almost ergodic for a company hiring Russian Roulette players.
4/ Readers of the previous thread on adaptation mechanics and on exposure dynamics will have guessed where this is going:
The ergodicity relative to someone performing an activity changes over time as he adapt himself and his exposure to risks.
The ergodicity relative to someone performing an activity changes over time as he adapt himself and his exposure to risks.
5/ Hence, a bidirectional relationship between antifragility and ergodicity.
To benefit from its antifragility, an entity needs to survive the stressors it is exposed to.
The more an entity benefits from antifragility, the stronger it grows, increasing its ergodicity (*) (**)
To benefit from its antifragility, an entity needs to survive the stressors it is exposed to.
The more an entity benefits from antifragility, the stronger it grows, increasing its ergodicity (*) (**)
6/ (*) assuming exposure to environmental stressors is constant
(**) ergodicity is considered a non-binary concept here; justification in the next tweet
(**) ergodicity is considered a non-binary concept here; justification in the next tweet
7/ In theory, ergodicity is a binary concept: something is either ergodic or it isn't. Expected outcome either coincides with time average or it doesn't.
In practical life, individuals tend to have a non-binary perception of ergodicity.
In practical life, individuals tend to have a non-binary perception of ergodicity.
8/ For example, Russian Roulette is clearly a non-ergodic activity for a player.
But driving?
One could say that driving at 30 mph is more ergodic than driving at 70mph on the same road.
This is because human life expectancy is not ∞, so…
But driving?
One could say that driving at 30 mph is more ergodic than driving at 70mph on the same road.
This is because human life expectancy is not ∞, so…
9/ This is because human life expectancy is not ∞, so there is a limit to the probabilities that the time average of a moderate-risk activity deviates from its expected outcome.
(this concept is still not fully formed in my mind, so I excuse myself for the lack of clarity)
(this concept is still not fully formed in my mind, so I excuse myself for the lack of clarity)
10/ Back to antifragility & ergodicity.
According to tweet #5, the recipe to success seems to manipulate exposure so that it is as high as possible while maintaining ergodicity, to maximize antifragility gains.
This would be correct only if people were exposed to a single risk.
According to tweet #5, the recipe to success seems to manipulate exposure so that it is as high as possible while maintaining ergodicity, to maximize antifragility gains.
This would be correct only if people were exposed to a single risk.
11/ However, in real life, people are exposed to multiple risks at the same time: financial risk, social risk, health risk, career risk, reproductive risk, etc
And the resources to mitigate them (time, money, energy, reputation, etc) are shared across them.
Hence, …
And the resources to mitigate them (time, money, energy, reputation, etc) are shared across them.
Hence, …
12/ Hence people cannot afford to minimize their exposure to all risks. They need to take some risks in a domain in order to gain resources to mitigate all risks.
Back to the non-binary perception of ergodicity: people tend to maximize their ergodicity across all activities, …
Back to the non-binary perception of ergodicity: people tend to maximize their ergodicity across all activities, …
13/ …and this causes them to take enough risks to make at least some of the activities non-ergodic.
Hence most of what is considered "irrational risk" and "risk homeostasis": the attempt to maximize one's total ergodicity across all activities he needs to participate to survive
Hence most of what is considered "irrational risk" and "risk homeostasis": the attempt to maximize one's total ergodicity across all activities he needs to participate to survive
14/ Of course, not all risks affect ergodicity equally as exposure increases.
In particular, ergodicity decreases only as *exposure to ruin* increases, not as *exposure to damage* does.
In particular, ergodicity decreases only as *exposure to ruin* increases, not as *exposure to damage* does.
15/ So, the old advice "increase exposure to damage & minimize exposure to ruin"
gets expanded by "…so that you can reap the gains of antifragility & further decrease exposure to ruin, entering a vicious circle with the result of finally being able to refuse unwanted exposures"
gets expanded by "…so that you can reap the gains of antifragility & further decrease exposure to ruin, entering a vicious circle with the result of finally being able to refuse unwanted exposures"
16/ (I apologize if this thread is less clear than usual. The ideas presented here are not yet fully formed in my mind, and writing this thread is one of the steps that will improve this. Hopefully, I'll be able to rewrite this thread more clearly in a few months.
Feedback 🙏)
Feedback 🙏)
