Coronavirus Crisis and Antifragile Startups
The coronavirus is forcing people to go remote. Many expect different companies that are in this remote sector to thrive. Startups like Zoom that provide videoconferencing, and products such as Disney + that provide entertainment from your home will continue to see more activity.
The idea is that gaming, online entertainment, social media, food delivery, online education, and telehealth should be strong and robust sectors.
But I’m wondering if that makes these startups antifragile.
I don’t know if it does.
Let’s learn more about antifragility and its origins.
Taleb and Antifragility
Taleb is a notable author who has released a few noteworthy books. You might have heard about a few of these books.
Black Swan, Antifragile, Randomness, and Skin in the Game.
What is antifragility? The Farnam Street blog notes that “the classic example of something antifragile is Hydra, the Greek mythological creature that has numerous heads. When one is cut off, two grow back in its place.” The point here is that even after suffering a potential loss, the element comes back even stronger.
The opposite of anti-fragile are systems that promote heavy reliance a specific set of protocols or systems. For instance, the prevalent thinking is that if you become too big to fail, the government will bail you out. The current discussion is around the airline industry that did significant share buybacks in times of economic ease. Yet, now in times of economic doom, these companies have little cash on their balance sheet and lack the resources to withstand and thrive on shocks.
Cash would help them to stay robust and even antifragile if they had the balance sheet to purchase distressed assets in difficult times.
Taleb goes on to state:
“Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure , risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture, ideas, revolutions, political systems, technological innovation, cultural and economic success, corporate survival, good recipes (say, chicken soup or steak tartare with a drop of cognac), the rise of cities, cultures, legal systems, equatorial forests, bacterial resistance … even our own existence as a species on this planet. And antifragility determines the boundary between what is living and organic (or complex), say, the human body, and what is inert, say, a physical object like the stapler on your desk.”
Peer to peer platforms are more anti-fragile then. These platforms facilitate transactions between people and can learn much more about the world through this facilitation. Google, is in some sense, fragile and anti-fragile. It depends on revenues from advertising to fund a wide variety of operations. Advertising revenues have gone up over time because of its stronghold on the search market. Now, we can say that it is well diversified in the search market. For instance, it does text search and video search. Text search websites created by you and me that cater to people like you and me, Google is in between and provides that portal. For video, it has Youtube to cater to your visual search desires.
But take out advertising dollars and Google will have to conduct deep soul searching to find out another compelling revenue generator.
Conversely, it does have a variety of enterprises that it is investing in. These may, over time, become powerful revenue generators to rival that of advertisement. But how long will that take and when will that materialize?
“The antifragile loves randomness and uncertainty, which also means— crucially—a love of errors, a certain class of errors. Antifragility has a singular property of allowing us to deal with the unknown, to do things without understanding them— and do them well. Let me be more aggressive: we are largely better at doing than we are at thinking, thanks to antifragility. I’d rather be dumb and antifragile than extremely smart and fragile, any time.”
Antifragile Sectors over Companies
I think that different parties such as Zoom or Disney+ can gain from disorder but can also have choke-points such as low quality or downtime due to high use.
These specific sectors will gain from disorder.
You are seeing the rise in use of companies such as Teladoc, Ro, and other remote first health platforms or entertainment platforms.
Robotics, drones, software for creators, course sale sites, and other platforms that cater to various needs and enable disparate connections.
Large bets on themes such as remote work and streaming entertainment makes sense over choosing specific companies.
Bitcoin and cryptocurrencies may also gain from disorder. Indeed, that’s the idea. Many expect bitcoin to be sound money when other currencies are inflated at will and where assets are manipulated by interest rates and quantitative easing means. At the time of this writing, bitcoin is up while stocks are down. Further, it has other properties that it make it more anti-fragile such as decentralization. Placing a bet on bitcoin and ethereum is placing a bet on antifragility of cryptocurrency in the monetary space.
I think a characteristic that follows anti-fragility is adaptability. Great companies or networks are antifragile because they can adapt to, integrate, and learn from shocks. They have the wherewithal to roll with punches and still come out stronger.
When I think bitcoin or other entities that are antifragile, there’s levels of ability to absorb shocks and become stronger while growing. I also think that ecosystems may have more adaptability to change because of the inclusion of varied participants. Take for instance, the Apple Store, the firm expects it plus other services and hardware to become leading segments.
Open source systems,? Antifragile.
The concept of anti-fragile can get tricky, it’s not just about one company or concept hitting a stride or a headwind and growing while others flounder. It’s about being more than cockroach and not only surviving chaos but thriving through it.