On the role of intelligence in optionality
A conversation with ChatGPT about Nassim Taleb, optionality, intelligence, Seneca and favoring winds (again)
Apologies for the lengthy hiatus, friends :-)
Apart from having a day job (I work in a bank, by the way) I have been busy reading and thinking about Nassim Taleb’s interesting (and long) book “Antifragility - Things that benefit from disorder”. Below is a conversation I had yesterday with ChatGPT after reading chapter 12 and 13 in Book IV of “Antifragility” (which is titled “Optionality, Technology, and Intelligence of Antifragility”.
I have been pleased to see that this book is one of the books ChatGPT knows very well - but I am also surprised that ChatGPT does not seem entirely neutral in relation to it. I have seen this in relation to other recent, influential books. Is it just me that hears this tone in ChatGPT’s answers here - perhaps due to my initial critical position? What do you think?
Jannik: Are you familiar with Nassim Taleb's concept "optionality"?
ChatGPT 4.0: Yes, I am familiar with Nassim Taleb's concept of "optionality." In the context of Taleb's work, especially as presented in his book "Antifragile," optionality refers to the idea of having options or choices without being committed to any specific one. It is a strategy to gain from volatility, unpredictability, and uncertainty without necessarily being harmed by them.
The principle behind optionality is to benefit from positive uncertainties (upside) while limiting exposure to negative uncertainties (downside). In essence, you have the right, but not the obligation, to take advantage of favorable outcomes while having a predefined limited risk.
For example, consider the way venture capitalists invest. They may invest in several startups, knowing that many of them might fail. However, the few that succeed can potentially provide returns that more than compensate for the failures. This portfolio approach gives them optionality — the chance to benefit significantly from the upside of any single successful venture without being unduly harmed by any single failure.
Taleb argues that systems, individuals, and institutions that have optionality are more "antifragile" — they benefit from disorder and thrive in volatile environments.
Jannik: Taleb is very critical of more traditional views on the role of intelligence in relation to optionality. On page 202 of "Antifragility" he writes:
"If you “have optionality,” you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur. (The key is that your assessment doesn’t need to be made beforehand, only after the outcome.)"
It seems to me that quite a lot of wisdom is required to avoid doing unintelligent things - and Taleb frequently seems to express himself in ways that indicate that he is aware of this himself. For example, just by calling the things to be avoided "uintelligent things". What do you think?
ChatGPT: Nassim Taleb's point about optionality isn't a dismissal of intelligence, knowledge, or skill. Rather, he's emphasizing the power of optionality as a strategy in uncertain environments. Traditional notions of intelligence often focus on the ability to predict and understand specific outcomes, whereas optionality is about benefiting from uncertainty without necessarily predicting the specifics.
However, you're right in noting that there's an inherent contradiction in the way he presents his argument. While he downplays the role of intelligence in leveraging optionality, he also suggests that one needs the wisdom to avoid "unintelligent things." This indeed implies a certain level of intelligence or discernment. It could be argued that possessing optionality without the wisdom to utilize it properly could be detrimental. In other words, one could have many options but squander them by making poor decisions.
Taleb often uses provocative language to challenge conventional wisdom and to make readers think more deeply about the assumptions they hold. In this case, while he seems to be contrasting optionality with intelligence, the broader point might be that traditional markers of intelligence (like prediction accuracy) are not always as valuable in complex, volatile systems as having a variety of options and the wisdom to choose between them post-hoc.
In essence, while intelligence and optionality might operate differently in uncertain environments, both are valuable, and arguably, intelligence (or wisdom) enhances the effectiveness of optionality.
Jannik: I certainly agree with that - and that's why I don't agree with the last sentence from the passage I quoted above - that the assessment of favorability or the lack thereof is made entirely after the outcome. We need to have a fairly sophisticated understanding (before the outcome) of what is favorable and not favorable for optionality to work. Obviously, that understanding will be constantly revised by our experiences and our reflections on those experiences - but it seems to me that Taleb is too dismissive of what comes "before the outcome" - in a way that I don't think is just due to his provocative language. What do you think?
ChatGPT: You bring up a nuanced point about the relationship between foresight (or the understanding that comes "before the outcome") and optionality.
Certainly, effective use of optionality does not exist in a vacuum. There's a foundational level of understanding or wisdom required to position oneself in situations where optionality is beneficial. For instance, an investor must possess some discernment to select a portfolio that provides optionality in the first place. This discernment is based on prior knowledge, understanding of the market, and, indeed, foresight.
However, Taleb's emphasis is on the unpredictable nature of many complex systems, like the financial markets, where specific outcomes are challenging to forecast with high accuracy. His argument is that, in such environments, instead of trying to predict the specific outcome (which is fraught with uncertainties), one is better off having options that allow for gains when unforeseen favorable scenarios play out.
But I agree with your perspective: one cannot approach scenarios with a complete absence of foresight or understanding. Even to leverage optionality effectively, one must have a sense of which options are worth having and which aren't. This requires a blend of prior knowledge, understanding of potential risks and rewards, and the wisdom to navigate them.
In sum, while Taleb accentuates the value of optionality in uncertain terrains, it doesn't negate the importance of prior knowledge and discernment. It's possible that his language, often deliberately challenging, may oversimplify or overshadow this balance for the sake of emphasizing his core argument.
Jannik: I think all of this ties into how Seneca talks about the importance of having an aim for life as a whole in this famous quote:
"Each time you want to know what to pursue or what to avoid, look to your highest good, the aim of your life as a whole. Everything we do ought to be in accordance with that aim. Only one who has the entirety of his life in view is in a position to arrange life’s particulars. Even with paints all at the ready, no one can render a likeness until he has decided what he wants to paint. That’s our mistake: everyone deliberates over the parts of life; no one over life as a whole. If you want to shoot an arrow, you must know what you are trying to hit: only then can you direct the point and steady the shaft. Our counsels are all astray in that they have no mark to aim at. If one doesn’t know what harbor to make for, there can be no favoring wind."
- Seneca, Letters 71.2-3
In my opinion, seen from the perspective of optionality we - including Taleb - would have to agree with Seneca here. What do you think?
ChatGPT: Seneca's perspective, as presented in the quote, aligns well with the broader discussion about the role of foresight and understanding when leveraging optionality. His emphasis on having an aim or overarching goal for life as a whole provides a foundational framework upon which one can build and navigate choices, even in the face of uncertainty.
The concept of optionality, as discussed in Taleb's work, is about having choices and being able to benefit from unpredictable positive events. However, to determine what is "positive" or "beneficial," one must have some underlying aim or objective against which these events can be measured. If one does not have a clear understanding of their desired outcomes or objectives, then they cannot effectively assess the value of the options they possess.
Seneca's analogy of the archer highlights this beautifully: the archer cannot shoot effectively without a target. Similarly, in life, one must have a guiding principle or aim to make sense of and utilize the myriad options available.
Connecting this to Taleb, while he emphasizes the power of optionality in uncertain systems, this doesn't mean acting without aim or purpose. Rather, having a clear overarching objective or understanding of what is desirable provides a backdrop against which optionality can be most effectively leveraged. So, in that sense, Seneca's wisdom about having an aim for life complements the concept of optionality: the former provides direction and purpose, while the latter provides flexibility and adaptability in the pursuit of that direction.
Jannik: I agree entirely. Thank you for your thoughts on this 😊
ChatGPT: You're welcome! It's always a pleasure to engage in thoughtful discussions on such profound topics. If you have any more questions or thoughts in the future, don't hesitate to reach out. Have a great day! 😊
This is a great discussion Jannik! So glad you are getting into Antifragile and Taleb's work. I agree someone has to have *some* intelligence to know the benefits of optionality.
I think Taleb is taking a particularly "academic" or "intellectual" type of intelligence as his opponent here - not the "street smart" intelligence.
So great to see you uncovering some of ChatGPT's biases along the way too
I don’t think ChatGPT has an opinion here or an”attitude”. It’s programmed to be forward leaning rather than “balanced” in its solution thinking. It found this line of thought the most promising to answer your questions. If you push back with arguments that make sender and are logically correct it will correct itself. So no I don’t see the bias you seem to sense? Or maybe I am not sensitive yo the nuances here? Nice conversation.