Sunday, January 5, 2014

Digital Shift: An Antifragile Organization

Antifragility is beyond resilience or robustness. -Taleb

Digital organizations are hyper-connected and interdependent in face of volatility, uncertainty, complexity and ambiguity. Antifragile written by Taleb may provide the other angle to perceive future of business and its key characteristics, in order to adapt to the continuous digital disruption.

Antifragility is beyond resilience or robustness. The resilience resists shocks and stays the same; the antifragile gets better. The anti-fragile loves randomness and uncertainty, which means crucially, a love of errors, allowing organizations to deal with the unknown, to do things without understanding them and do them well. By grasping the mechanisms of antifragility, people can build a systematic and broad guide to non-predictive decision making under uncertainty in business and life in general.

Digital organizations are organic, complex and living; whereas industrial organizations are mechanical and hierarchical. Where simple is more sophisticated. Complex systems are full of interdependencies, hard to detect and nonlinear responses. A complex system, contrary to what people believe, does not require complicated systems and regulations and intricate policies. The simpler, the better. Complications lead to multiplicative chains of unanticipated effects. The complication of traditional organizations is caused by layering, units, hierarchies, fractal structure, and the difference between the interest of a unit and those of its subunits.

Digital organization as a whole is optimal than sum of pieces. Antifragility gets a bit more intricate and more interesting in the presence of layers and hierarchies. A natural organism is not a single, final unit; it is composed of subunits and itself may be the subunit of some larger collective. And some parts on the inside of a system may be required to be fragile in order to make the system antifragile as a result. Or the organization itself might be fragile, but the information encoded in the genes reproducing it will be antifragile.
Mechanical, Noncomplex                    vs.          Organic, Complex
Needs continuous repair & maintenance                Self-healing
Hates randomness                                                 loves randomness
No need for recovery                                            Needs recovery between stressors
Noor little interdependence                                   High degree of interdependence
Time brings only senescence                                 Time brings aging and senescence

Antifragility equals more to gain than to lose; equals more upside than downside; equals asymmetry, likes volatility; and if you make more when you are right than you hurt when you are wrong, then you will benefit in the long run from volatility. That means if a digital organization has anti-fragile characteristics, it can have much better ability to tolerate volatility or even thrive from it, as anti-fragile means the harm from errors should be less than the benefits. Those that do not destroy a system help prevent larger calamities. 

For the anti-fragile, shocks bring more benefits as their intensity increase. For the fragile, the cumulative effect of small shocks is smaller than the single effect of an equivalent single large shock. At traditional organizations, treating a business organism like a simple machine is a kind of simplification, or approximation or reduction. Where simplification fail, causing the most damage, is when something nonlinear is simplified with the linear as a substitute. Why is fragility nonlinear? The answer has to do with the structure of survival probabilities; conditional on something being unharmed, then it is more harmed by a single rock than a thousand pebbles. Nonlinear means that the response is not straightforward and not a straight line, so if you double the dose, you get a lot more or a lot less than double the effect. That is by a single large infrequent event than by the cumulative effect of smaller shocks. The difference between a thousand pebbles and a large stone of equivalent weight is a potent illustration of how fragility stems from nonlinear effects.

The other point the author made is that an OPTION is the weapon of antifragility. Many things people think are derived by skill come largely from options: Option = Asymmetry + Rationality. The difference between the antifragile and fragile lies there. The fragile has no option. But the antifragile needs to select what’s the best, the best option. 1). Look for optionality; 2). Preferably with open-ended, not closed-ended, payoffs.3). Do not invest in business plans but in people, for examples, look for someone capable of changing six or seven times over his/her career or more.

Time & Fragility: Anti-fragility implies, contrary to initial instinct, that the old is superior to the new and much more than you think. No matter how something looks to your intellectual machinery, or how well or poorly it narrates, time will know more about its fragilities and breaks it when necessary. The foundational asymmetry is that the antifragile benefits from volatility and disorder, the fragile is harmed.

The digital organizations with ‘antifragile’ characteristic can better survive and thrive in volatility and uncertainty of digital dynamic, well adapt to the business nature of complexity and interdependence, and lift overall business maturity significantly. 






1 comments:

This is interesting, because it illustrates some of the characteristics of evolution, which Taleb considers a prime example of antifragility. One would thereby say that antifragile systems eventually thrive after undergoing change due to stressors. I try to investigate this too, from a high level admittedly, in relation to Big Data.

http://thecombedthunderclap.blogspot.com/2014/01/antifragile-data-handlers.html

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