Bureaucracy Encourages Fragility
Jensen Huang is the man of the moment, The CEO of Nvidia is riding high on the rise of AI. Some people call him lucky, but his company’s success is systematic: gaming, cryptocurrency, and now artificial intelligence. He leads a company with a deep technological moat in designing and selling semiconductors that are purpose-built for some of the hottest trends in the market.
This is not a coincidence.
Here is a snippet from an interview he did at Stanford.
“One of my great advantages is that I have very low expectations. And I mean that. Most of the Stanford graduates have very high expectations. And you deserve to have high expectations because you came from a great school. You were very successful. You’re at the top of your class. Obviously you were able to pay for tuition. And then you’re graduating from one of the finest institutions on the planet. You’re surrounded by other kids that are just incredible. You should … You naturally have very high expectations. People with very high expectations have very low resilience. And unfortunately resilience matters in success. I don’t know how to teach it to you except for I hope suffering happens to you. And I was fortunate that I grew up with my parents providing a condition for us to be successful on the one hand but there were plenty of opportunities for setbacks and suffering and to this day I use the words pain and suffering within our company with great glee. [Laughter] And the reason … and I mean that, Boy this is going to cause a lot of pain and suffering. And I mean that in a happy way. Because you want to train .. you want to refine the character of your company. You want greatness out of them. And greatness is not intelligence. Greatness comes from character. Character isn’t formed out of smart people. It’s formed out of people who have suffered. So if I could wish upon you … I don’t know how to do it … for all of you Stanford students I wish upon you ample doses of pain and suffering. [Laughter]”
Huang alludes to a concept that Nassim Taleb popularized as antifragility. It’s not just people. It’s systems.
“Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty … 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 specie on this planet.”
That which does not kill me makes me stronger.
As we wrote previously, bureaucracy suppresses volatility. One of the consequences is to favor the large incumbent over the smaller upstart.
“Regulation stifles volatility. That might be its principal aim. In doing so, the shakeups from competitive disruption become less likely. This might be the ultimate protection for the incumbent. But the barriers to competition that regulation put into place and the way in which the big influence the development and application of policy reinforce the power of incumbency. For the regulator, Big Is Beautiful.”
The Big sacrifice the good of the broader whole to serve their own interests and the bureaucratic regulator is only too happy to help.
It’s as if we designed our economy around protection from volatility, the social forest fire from which we can build anew, better and stronger.
This is a problem.
“Crucially, if antifragility is the property of all those natural (and complex) systems that have survived, depriving those systems of volatility, randomness, and stressors will harm them. They will weaken, die, or blow up. We have been fragilizing the economy, our health, political life, education, almost everything … by suppressing randomness and volatility … stressors. Much of our modern, structured world has been harming us with top-down policies and contraptions (dubbed ‘Soviet-Harvard delusions’ in the book) which do precisely: an insult to the antifragility of systems. This is the tragedy of modernity: as with neurotically overprotective parents, those trying to help are often hurting us the most (see iatrogenics).”
Bureaucracy is pernicious because it appears to be beneficent. In trying to protect us from the natural entropy of human relations, it makes us more vulnerable to the ineluctable shocks that are a natural by-product of the complexity of the modern world. We have described it before as sclerosis, a thickening of the social arteries. To advance, we need volatility in tolerable doses. It purports to inoculate us against the vicissitudes of life, even as bureaucracy provokes all manner of larger, more dangerous, unintended consequences. It’s like trying to avoid suffering from a cold by sequestering, only for the body’s immune system to atrophy, making us more susceptible to other illnesses.
“Man-made complex systems tend to develop cascades and runaway chains of reactions that decrease, even eliminate, predictability and cause outsized events. So the modern world may be increasing in technological knowledge, but, paradoxically, it is making things a lot more unpredictable. An annoying aspect of the Black Swan problem – in fact the central, and largely missed, point – is that the odds of rare events are simply not computable.” [Emphasis added.]
As Taleb said, “Complex systems are weakened, even killed, when deprived of stressors.”