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Glossary

Rent Seeking: trying to use protective regulations or “rights” to derive income without adding anything to economic activity, without increasing the wealth of others. As Fat Tony would define it, it is like being forced to pay protection money to the Mafia without getting the economic benefits of protection.

Revelation of Preferences: the theory, originating with Paul Samuelson (initially in the context of choice of public goods), that agents do not have full access to the reasoning behind their actions; actions are observables, while thought is not, which prevents the latter from being used for rigorous scientific investigation. In economics, experiments require an actual expenditure by the agent. Fat Tony’s summary is “tawk is always cheap.” Regulatory Capture: situations where regulations end up being “gamed” by an agent, often in divergence from the original intent of the regulation. Some bureaucrats and businesspersons may owe part of their income to protective regulations and franchises, and lobby for them. Note that regulations are easier to put in than to correct and remove.

Scientism: the belief that science looks…like science, with too much emphasis on the cosmetic aspects, rather than its skeptical machinery. It prevails in domains with administrators judging contributions according to metrics. It also prevails in domains left to people who talk about science without “doing,” such as journalists and schoolteachers.

Naive Rationalism: Belief that we have access to what makes the world work and that what we don’t understand doesn’t exist.

Intellectual Yet Idiot: an idiot.

Pseudo-rationalism: 1) focusing on the rationality of a belief rather than its consequences, 2) the use of bad probabilistic models to naively decry people’s “irrationality” when they engage in a certain class of actions.

Agency Problem: misalignment of interest between the agent and the principal, say between the car salesman and you (the potential owner), or between the doctor and the patient.

Bob Rubin Trade: payoff in a skewed domain where the benefits are visible (and rewarded with some compensation) and the detriment is rare (and unpunished owing to absence of skin in the game). Can be generalized to politics, anything where the penalty is weak and the victims are abstract and distributed (say taxpayers or shareholders).

Interventionista: someone who causes fragility because he thinks he understands what’s going on. He is not exposed to the filter and discipline of skin in the game. Also, usually lacks sense of humor.

Green Lumber Fallacy: mistaking the source of important or even necessary knowledge—the greenness of lumber—for another, less visible from the outside, less tractable one. How theoreticians impute wrong weights to what one should know in a certain business, or, more generally, how many things we call “relevant knowledge” aren’t so much so.

Lecturing-Birds-How-to-Fly Effect: inverting the arrow of knowledge to read academia ➝ practice, or education ➝ wealth, to make it look as though technology owes more to institutional science than it actually does. See Antifragile.

Lindy Effect: when a technology, idea, corporation, or anything nonperishable has an increase in life expectancy with every additional day of survival—unlike perishable items (such as humans, cats, dogs, economic theories, and tomatoes). So a book that has been a hundred years in print is likely to stay in print another hundred years—provided its sales remain healthy.

Ergodicity: In our context here, ergodicity holds when a collection of players have the same statistical properties (particularly expectation) as a single player over time. Ensemble probabilities are similar to time probabilities. Absence of ergodicity makes the risk properties not directly transferable from observed probability to the payoff of a strategy subjected to ruin (or any absorbing barrier or “uncle point”)—in other words, not probabilistically sustainable.

Mediocristan: a process dominated by the mediocre, with few extreme successes or failures (say, income for a dentist). No single observation can meaningfully affect the aggregate. Also called “thin-tailed,” or member of the Gaussian family of distributions.

Extremistan: a process where the total can be conceivably impacted by a single observation (say, income for a writer). Also called “fat-tailed.” Includes the fractal, or power-law, family of distributions. See subexponentiality in the Appendix.

Minority Rule: an asymmetry by which the behavior of the total is dictated by the preferences of a minority. Smokers can be in smoke-free areas but nonsmokers cannot be in smoking ones, so nonsmokers will prevail, not because they are initially a majority, but because they are asymmetric. It is held by the author that languages, ethics, and (some) religions spread by minority rule.

Via Negativa: in theology and philosophy, the focus on what something is not, an indirect definition, deemed less prone to fallacies than via positiva. In action, it is a recipe for what to avoid, what not to do—subtraction, not addition, works better in domains with multiplicative and unpredictable side effects. In medicine, stopping someone from smoking has fewer adverse effects than giving pills and treatments.

Scalability: The qualities of entities change, often abruptly, when they get smaller or larger: cities are different from large states, continents are very different from islands. Collective behavior switches when the size of the groups increases, an argument for localism and against unfettered globalism.

Intellectual Monoculture: Journalists, academics, and other slaves without skin in the game in a given subject converge to a “bien pensant” mode that can be manipulated and often resists empirical backing. The reason is that penalty from divergence is often penalized with labels such as “Putinist,” “baby killer,” or “racist” (children are always used by charlatans as a sensationalist argument). This is similar to the way ecological diversity decreases when an island gets larger (see The Black Swan).

Virtue Merchandising: the debasing of virtue by using it as a marketing strategy. Classically, virtue needs to be kept private, which clashes with modern “save the environment”–style messages. Virtue merchandisers are often hypocrites. Further, virtue devoid of courage, sacrifice, and skin in the game is never virtue. Virtue merchandising is similar to simony, which in the Middle Ages allowed someone of means to buy ecclesiastical positions or indulgences, to expunge his or her sins by payment.

Golden Rule (symmetry): Treat others the way you would like them to treat you.

Silver Rule (negative golden rule): Do not do to others what you would not like them to do to you. Note the difference from the Golden Rule, as the silver one prevents busybodies from attempting to run your life.

Principle of Charity: Exercise symmetry in intellectual debates; represent the argument of the opponent as accurately as you would like yours to be represented. The opposite of “strawman.”