درسنامه تعاملی دوم

Catastrophe – Interactive Lesson B

Hello and welcome to the interactive lesson, Part B. In part B I’m going to ask you questions. You’re going to learn the vocabulary more deeply.

The vocab in this one, the sentence structure, everything’s a little more advanced, a little bit difficult this one, so we’ll go slowly. Here we go.

This brings us to the solution in the form of a barbell. About all solutions to uncertainty are in the form of barbells.

Solutions to what?

Solutions to uncertainty.

He’s talking about solutions to uncertainty, the unexpected, unexpected disasters for example, catastrophes.

All solutions to uncertainties are in the form of what?

Barbells. Are in the form of barbells.

So solutions to uncertainty are in the form of barbells; meaning, they have three parts, right?

No, no, no, not three parts. He means they have two parts, two extreme parts. They’re in the form of barbells.

What do we mean by barbell?

The barbell is meant to illustrate the idea of a combination of extremes kept separate.

So, are the extremes close to each other or are the extremes very different, separate?

The extreme strategies, the extreme ideas are kept separate, kept apart from each other.

What should be avoided, according to the writer?

The middle. The middle should be avoided. Middle strategies, moderate strategies, moderate risk should be avoided.

In our context, in our situation, it is not necessarily symmetric, just composed of two extremes with nothing in the center.

So his barbell strategy is symmetric or asymmetric?

Typically asymmetric. Not symmetric.

So this double strategy he has, is it balanced and equal or unbalanced?

Unbalanced and unequal. So the two parts are not equal. The two parts are not the same. They are asymmetric. So it’s different than a normal barbell.

So his strategy is symmetric or asymmetric?

Asymmetric. Not symmetric. It’s composed of, made of, two extremes with nothing in the center.

So his strategy is it made of, is it composed of two or three extremes?

It’s composed of two extremes.

With what in the center, what in the middle?

Nothing, nothing in the center.

I initially, I first used the image of the barbell to describe a dual attitude.

What kind of attitude?

A dual attitude.

Is this a double attitude or triple attitude?

It’s a double attitude. Dual means two or double; having two parts.

So, what means having two parts?

Dual, dual.

He recommends what kind of attitude?

A dual attitude.

What is the dual attitude?

Well, it’s number one, playing it safe in some areas, and taking a lot of small risks in other areas.

So in some areas he recommends playing it what?

Playing it safe.

Does this mean to be careful or not careful?

Careful, very, very, very careful. Playing it safe means to be super careful, super conservative, super careful; playing it safe.

So what means, super careful?

Playing it safe. It means acting very carefully. Playing it safe.

You want to play it safe in areas with negative black swans, potential negative black swans.

A black swan is a predictable small event right?

No, no, no, the opposite. A black swan is an unpredictable huge, very big event.

So, what is an unpredictable big event?

A black swan. It’s unpredictable, you can’t predict it. And it’s big, potentially huge.

It’s called what?

It’s called a black swan.

There are negative black swans and positive black swans. A huge disaster, like a huge earthquake, is that a negative or a positive black swan?

A negative, obviously. It’s a negative black swan. You can’t predict it. You don’t know when it might happen and it’s very, very negative and big.

So you want to play it safe for negative black swans, be very, very careful, prepare for big catastrophes, big disasters. On the other hand, you want to take small risks in other areas where there might be positive black swans; hence achieving anti-fragility.

This strategy will help you achieve what?

Anti-fragility.

Will you achieve fragility or anti-fragility?

Anti-fragility. It means unbreakable or not breakable. You will be unbreakable or not breakable by using his strategy.

Then he says, he describes again his strategy— extreme risk aversion on one side and extreme risk loving on the other.

So, on one side you want to avoid risk right?

Right, risk aversion.

Aversion – means avoidance. It means to go away from, to avoid something.

So for disasters, for bad events, do you want to be risk averse? I’m using this adjective now (risk averse).

That’s right. You want to be risk averse, risk avoidant. You want to avoid the risk.

But on the other hand you want extreme risk loving.

What kind of risk should you love?

Well, you should love small risks with potentially big rewards. Small risks, meaning small possible downside, small possible negative, but big possible positives. You want to love that kind of risk.

And you want to avoid the beastly moderate risk attitude.

Does he think the moderate risk attitude is beautiful?

No, not beautiful, beastly. He thinks the moderate risk attitude is ugly.

Is the moderate risk attitude beastly or beautiful?

The moderate risk attitude is beastly, very, very, ugly; disgusting.

So what is beastly?

Moderate risk, moderate risk, attitude or strategy.

In fact the moderate risk attitude is a, what kind of game? What kind of game is it?

It’s a sucker game or a sucker’s game, either one is fine. It’s a sucker game.

Is a sucker a smart person, an intelligent person, a careful person?

No, no, no, no, sucker is the opposite. This is very common slang. A sucker is a fool. A sucker is someone easy to cheat.

So is a sucker a fool or very smart?

A sucker is a fool.

It’s different than stupid, it doesn’t mean stupid it means easy to trick, easy to fool. It can have the idea of naive, naive means too innocent. So a sucker could be intelligent actually. They could be smart. But still they’re easy to trick, easy to fool, easy to cheat. So a sucker has the idea of maybe they’re too innocent, too foolish.

So it’s a sucker game. What is a sucker game?

Moderate risk. Moderate risk strategies are a sucker game.

He says his barbell strategy results in the reduction, meaning reducing; making smaller, of what kind of risk?

Downside risk. Downside risk.

The first part of his strategy is reduction of, reducing what kind of risk?

Downside risk. Reduce the negative risk.

Reduce the downside risk.

Do you want to reduce downside or upside risk?

Downside, of course. You want to reduce the negative possibilities. Reduce the downside risk.

You want to eliminate the risk of?

Ruin. The risk of ruin.

What’s the biggest risk?

Ruin, the risk of ruin, the risk of total destruction.

Do you want to eliminate that or do you want to love that risk?

You want to eliminate it. You want to totally eliminate the risk of ruin or as much as possible, eliminate the risk of ruin.

So ruin means winning, right?

No, ruin means destruction, total destruction.

Next, let us use an example from vulgar finance.

Vulgar means what?

It means rude, maybe a little ugly. Less ugly than beastly. More of an ugly situation. It’s really more like rude, vulgar, meaning rude.

So some people think money is kind of rude or beautiful, which one?

Rude, vulgar; according to the writer. Some people think money is vulgar.

Is it vulgar or is it polite and beautiful?

It’s vulgar, kind of rude, kind of uncivilized; vulgar.

If you put 90% of your funds in boring cash.

So, for example, if you put 90% of your what in cash?

Your funds, your funds.

What are funds?

Funds, your savings, your money. It just means money. Your funds are your money.

So he’s saying one example, for example, you could put 90% of your funds in what?

In cash. 90% of your funds, of your money in cash.

Cash just means direct money, not really an investment. It’s direct money, things that can be used as money. Swiss francs that’s cash. Euros that’s cash. U.S. dollars that’s cash.

U.S. Treasury bonds are pretty close to cash. Some people will say gold and silver are very close to cash, or forms of cash. So these are things you can actually spend directly or almost directly as cash.

In the other part of the strategy, put 10% in very risk, maximally risky securities.

Should you put 10% of your money, according to him, in things that are a little risky?

Not a little risky.

How risky?

Maximally risky, the most risky, the highest level of risk.

What’s the word?

Maximally, maximally, the maximum risk. Maximally is an adverb, maximally risky.

Maximally risky what?

Securities, securities.

So maximally risky cash?

No, no, no, not cash, maximally risky securities.

Securities – very generally means investments. A little more specifically it means things like stocks and there’s even more technical definitions of that, but for most of us that’s enough.

So what kinds of securities should you invest 10% of your money in?

Maximally risky securities. Maximally risky securities, 10%.

If you do this, you cannot possibly lose more than 10%, while, at the same time, you are exposed to massive upside.

You’re exposed to massive, huge downside or upside?

Upside. Your 10% is exposed to, means connected to, involved with.

What kind of upside?

Massive, huge, super big; massive upside.

So you’re exposed to massive downside or upside?

Upside. You’re exposed to, you’re invested in massive upside.

On the other hand, someone with 100% in so-called medium risk securities has a risk of total ruin.

So medium risk securities, medium risk stocks for example, medium risk investments have the risk of total ruin, total destruction or near total; I think he’s exaggerating a little here but you have a very high risk. So he’s saying that a medium risk investment is something like the top 500 stocks. Most people call that medium risk.

So he’s saying the medium risk securities, stocks, investments have the risk of what kind of ruin?

Total ruin, total ruin, according to him. Total destruction. It means they could drop a huge amount and you lose most of your money.

This ruin comes from the miscomputation of risks.

From the what?

Miscomputation.

Computation – means to add or to do math. It comes from the verb ‘to compute’, to add up.

Mis – means like mistake, like the word mistake. So it’s a mistaken math, mistaken adding.

So miscomputation (noun) of risk means you add up the wrong risk. It means you think it’s medium risk but it’s not.

So, what’s the word again?

Miscomputation.

Investing in medium risk securities is a what of risks?

It’s a miscomputation of risks.

This barbell technique remedies the problem.

Does it make the problem worse?

No, no the opposite, it cures the problem. It remedies the problem. It solves the problem.

What remedies the problem of incomputable risk? What remedies that problem?

What solves that problem? What cures that problem?

The barbell technique. His barbell technique remedies the problem that rare events are incomputable.

According to him, rare events are what?

Incomputable, incomputable. It means cannot be predicted, cannot be added up.

Computable – means able to add up

In – means not. So, not computable.

So miscomputation means mistaken addition.

Incomputable means cannot be computed, cannot be added up.

So rare events, are they computable or incomputable?

Rare events are incomputable. We can’t predict them. We can’t add them up.

Because of that, the barbell strategy has a maximum known loss, you can only lose 10%.

It’s a maximum known loss.

Anti-fragility is the combination of aggressiveness plus paranoia.

Aggressiveness plus what?

Paranoia, paranoia.

So aggressiveness plus courage, right?

No, no, no, no, the opposite, not aggressiveness plus courage, aggressiveness plus paranoia.

Paranoia – means extreme fear. Extreme fear, extreme worry, extreme carefulness.

So he’s saying you want to be aggressive and what, at the same time?

Aggressive and paranoid. You want to be aggressive and paranoid, you want to be both.

You want to be paranoid about the what?

Downside risks. You want to be paranoid about downside risks, potential disasters. You want to be paranoid, very fearful of those. You have to prepare for them.

You want to be aggressive about what?

Small upside risks. Something with potentially a big upside but a small downside. You want to be aggressive about those.

He says, clip your downside, protect yourself from extreme harm.

Do you want to cut your downside?

Yeah, cut, clip. To clip means to cut a little bit.

So you want to what your downside?

Clip it, cut it. You want to clip your downside and protect yourself from extreme harm, extreme hurt, extreme damage.

So protect yourself from extreme harm and let the upside take care of itself. Let the upside happen by itself. Let the upside happen automatically.

That is the end of Interactive part B. See you in the commentary.