Gaining Skills in a World We Don’t Understand for a Future We Can’t Predict

What should I be learning to get to where I would like to go?

This is a pretty common question, especially for a twenty-two year old college graduate with a large number of choices ahead. Intuitively, it seems simple enough. Go to school. Get a college degree. Pick a job. Work at that job, make good money, and then retire. If you follow your chosen career path you will be able to retire in X number of years — giving you unlimited happiness, time for your own interests, and a fulfilling life. What this type of thinking lacks is the complexity and impact of randomness on our lives and the fact that we really have not idea what the future holds. Quite simply:

We are not going to end up where we think we are going to end up and that’s okay.

I hold this to be both a realistic view of the world and a troubling one. Given that we are not likely to end up where we think we are going, how can we choose what skills to learn at all? How do we know if they are even going to be relevant in the future? I’d like to pose a different question. Are there universal skills that will transcend our choice of career fields and do these skills allow us to capture positive random events?

Before I go on to answer this question we need to get some terminology out of the way first. The first term to know is Optionality. Optionality is the property of asymmetric upside (preferably unlimited) with a correspondingly limited downside. A quick and dirty example of this property, and its applications, would be asking a person out on a date. The only potential downside is that the person might outright reject you, harming your ego but nothing more. The upside potential on the other hand is effectively unlimited; you could fall in love, get married, have kids, quit your job as a tax attorney, etc.

This article will attempt to apply some of Nassim Nicholas Taleb’s work on asymmetry, optionality, and anti-fragility to skill-set development. (For a more detailed discussion of his work read Antifragile: Things that Gain From Disorder). Among his many ideas , Taleb discusses the superiority of pay-off positioning over intelligence. In his own words:

“I would rather be convex than smart”
Borrowed From Anti-Fragile. This is the pay-off potential if you choose to ask some one out. Note the asymptotic downside potential and the unlimited upside potential.

You lose small and you may lose often, but when you win you win big time. This methodology allowed Taleb to benefit stupendously during the 08' housing market crash.

Taleb in particular has some rules on this topic. They are as follows:

(i) Look for optionality; in fact, rank things according to optionality
(ii) preferably with open-ended, not closed-ended payoffs
(iv) make sure you are barbelled, whatever that means in your business

I’d like to bridge the gap between finance and everyday decisions, with the end goal of allowing us to benefit from the asymmetric decisions in our everyday lives. This includes the decisions we make and the skills we choose to learn. My central proposition is as follows:

Learn skills and make choices that will increase your continual exposure to asymmetric pay-off opportunities, and then repeat. Pursue those in particular that may provide significant upside potential while also providing the possibility of mitigating downside pain.

This is as counter-intuitive as it is important. While it may seem perfectly rational to spend all of your time hyper-specializing with your chosen career path, this logic ignores the fact that we are exposed to our employer and the demand for our particular skill-set. Buying into the development of your specialized little skill-set may make you rich, sure, but then again your specialization — if you’re a banker — could very well disappear in ten years thanks to Bitcoin, Ethereum, and the development of smart contracts. As Jacob Lund Fisker (Author of Early Retirement Extreme) puts it, “ an employee only has one customer.” The point is that you have no idea where the world is going to be ten years from now, nor do you know if your skills are going to be relevant.

Because of this, we need to move beyond our specialist mentality (a fragile approach), gain skills, and make decisions that will allow us to benefit from positive randomness while also mitigating negative randomness.

Let me give a concrete example as to how we can gain a skill that will allow to benefit from optionality. Say you choose to learn a language; French, you decide. In this particular case your main and only downside is the time invested learning the language (but most of us spend multiple hours a day watching television as is … so there are some health benefits that make this worthwhile alone). Now what is the upside potential? Apart from being able to now speak a new language, tack on something to your resume, work in France, and order wine in Paris without embarrassing yourself — you’ve gained the access to a whole new social group of friends, business partners, and, possibly, the love of your life. This to me is the ultimate upside.

Because the possibilities of learning a new language are endless and the time needed to learn (your downside) is finite, you've gained access to the right type of payout curve. You’re convex.

Taking this a step further, let’s assume the same logic but now we’ve become proficient in five learned languages instead of one. By learning a variety of skills that allow us to capture randomness, we can increase the iterations of our asymmetric opportunities thus (a) increasing our chances through exposure and (b) giving chance to the interaction of variables. Think of the latter as capturing one positive event that leads to the capture of another otherwise unavailable event through the interactions of your skills (ie. Making French friends who take you on a trip to Germany. Luckily you speak German, which allows you to make a new business deal in Frankfurt on the whim, etc.).

Now let’s consider the other direction: can asymmetric decisions also help you avoid pain? Turns out this can also be the case depending on what type of negative event we are discussing. So let’s start with a simple one. Suppose you lose your job in America and, on top of that, you quickly realize that America really has no need for auto-manufacturers anymore. The good news (gifted by optionality) is that you, being a polygot, can now take your skill-set immediately to at least five different countries because you speak five different languages. If your girlfriend dumps you, you can flirt in five different languages. If time brings volatility (it will), you’ll be not only prepared for it, but you’ll be primed to benefit from it.