How Antifragility Increases Bitcoin’s Survivability

Let’s talk about antifragility: what it is, its consequences and how it relates to bitcoin and the dollar.

The term antifragile was first coined by Nassim Taleb. In the following quote, Taleb outlines the qualities of antifragile systems:

“Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.”

In the context of economics, antifragility suggests economies that are free of government protection, such as tariffs, subsidies and bailouts, are stronger and more efficient than economies that operate with government protection, which are fragile.

Whenever the government props up a company, that company becomes reliant on the government to stay in business. Companies could also begin to behave more irresponsibly, making highly-risky decisions, knowing that if something unfortunate happens, it could always go to the government for help. In a case like this, the government, the economy and the company’s resources are not being allocated to their best use, resulting in a fragile economic system.

To put antifragility in a real-world context, think about the immune system. When your body becomes infected with germs and bacteria, you get sick. But then your immune system strengthens to fight those germs and, on the other end, you have a healthier body. But if you were to stay huddled in your house and never go outside, you would have a fragile immune system and the first illness you encounter could be enough to cause a more serious illness.

The same idea is also true for an economy. An economy operating with government protection is fragile, inefficient and prone to crash. A prime example is the 2008 financial crisis. The 2008 crisis is pretty complicated, so to keep this as simple as possible, let’s talk about how it started. During the housing boom, banks were issuing risky, subprime mortgages because government-backed agencies, like Freddie Mac and Fannie Mae, wanted to buy those mortgages and sell them to investors as mortgage-backed securities. Fannie and Freddie knew these mortgages were risky, but they kept buying them anyway because they were also high-yielding. And Fannie and Freddie knew that if they ever took on too much risk and got into trouble, they could fall back on the government.

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