June 15, 2012 nassim-taleb
Last week I emailed Nassim Taleb, the philosopher/trader/author of The Black Swan, to ask if he’d considered infrastructure. If you’re unfamiliar with Taleb’s work, he opposes forecasting, as typically understood. Instead he advocates people design systems to be “antifragile,” which is the subject of his forthcoming book and means something like “able to benefit from unpredictable volatility.” I emailed him because I can’t imagine an infrastructure policy without forecasting. Infrastructure is really expensive, so it only makes sense to build if the benefits accrue over decades. However, as Taleb points out in other fields, forecasts are not actually very accurate, even when you spend a lot of money on consultants. So what are we to do?
To my surprise, Taleb emailed me back a link to a PDF of a draft of a chapter of his new book. If you’re used to Strunk and White-style economy in prose I’ll warn you to focus on the ideas and ignore Taleb’s (intentionally ?) meandering style. Taleb emphasizes using stressors to make sure something is resilient; and I’ve wondered if he tests his work by including doses of insult, stereotyping, and health advice. Anyway, I don’t mean to praise with faint damning. An excerpt:
Let us start as usual with a transportation problem, and generalize to other areas. Travelers (typically) do not like uncertainty —especially when they are on a set schedule. Why? There is a one way effect.
I’ve taken the very same London-New York flight most of my life. The flight takes about 7 hours, the equivalent of a short book plus a brief polite chat with a neighbor and a meal with Port wine, stilton cheese and crackers. I recall a few instances in which I arrived early, about twenty minutes, no more. But there have been instances in which I got there more than two and three hours late, and, in at least one instance, it has taken me more than two days to reach my destination.Because travel time cannot be really negative, uncertainty tends to cause delays, making arrival time increase, almost never decrease. Or it makes arrival time just decrease by minutes, and increase by hours, an obvious asymmetry.
Anything unexpected, any shock, any volatility is much more likely to extend the total flying time.
Later he makes the same point about large projects: they can take much more time than you expected but there is a limit on how much less, because they can’t take less than zero months. Does this lesson apply to demand?
Here he is on airport delays and capacity:
This is a hint to a central problem of the world today, that of the misunderstanding of nonlinear response by those involved in creating “efficiencies” and “optimization” of systems. For instance, European airports and railroads are stretched, seeming overly efficient. They operate at close to maximal capacity, with minimal redundancies and idle capacity, hence acceptable costs; but a small additional congestion, say 5% more planes in the sky owing to a tiny backlog can set chaos in airports and cause scenes of unhappy travelers camping on floors; their only solace the sight of some bearded fellow playing French folk songs on his guitar.
Although Taleb blames optimization, the troublesome tendency to go near to capacity is actually symptomatic of political pressure from carriers. Most economists and civil engineers would love to lower demand with pricing schemes, but pricing schemes are extremely unpopular. Airports slots are rationed.If they were priced, then we would see some extra capacity and even an incentive to expand capacity as in US toll roads. This is related to the value of travel time reliability. Here is Dr. David Levinson on travel time reliability and HOT lanes in Minneapolis. Dr. Kenneth Small found that women value reliability twice as much as men on the SR91 Express Lanes, which is interesting.
As a back-of-the-envelope attempt, I would say applying antrifragile principles to transport means:
- More buses; fewer trains. Bus systems can be rerouted quickly.
- Less worry over idle capacity in HOT lanes. The extra capacity is helpful during a major disruption.
- More focus on extreme-but-possible scenarios like oil embargoes, war, and widespread adoption of autonomous vehicles; less focus on the mean Value of Travel Time Savings (gulp! putting myself out of a job there.)
- Denser cities, where people can walk around.
- Continued emphasis on multi-modal systems, getting people familiar with several ways to move.
- Wariness of public-private partnerships if governments assume the tail-risk of a private port/toll road/airport.