Nassim Nicholas Taleb is a renowned derivatives trader and author whose unorthodox methods enabled him to profit stupendously in 2007-08 when some of Wall Street’s smartest were getting burned. In his series of books he points out obvious but little understood concepts.
One is a black swan; an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict but is inevitable.
Another is the barbell strategy which is applied to investment.
Taleb explains it as:
“If you know that you are vulnerable to prediction errors, and […] accept that most “risk measures” are flawed, then your strategy is to be as hyperconservative and hyperaggressive as you can be instead of being mildly aggressive or conservative.
Put your eggs in two baskets. One basket holds extremely safe investments, while the other holds nothing but leverage and speculation.”
The concept of balance is seen to be desirable in society.
But the barbell strategy achieves balance through being heavily weighted on either end of the spectrum.
This strategy can be used effectively in many areas.
You will achieve more results in 4 hours of pure focused work then stopping completely than an 8 hour ‘work day’.
You will get fitter and stronger by 15 minutes of intense exercise followed by rest than 60 minutes slogging away on a treadmill.
Next time you’re feeling guilty about being extreme and committed re-assure yourself you’re doing it right.
It’s better to be extreme than conservative.