Money Energy Law #34:
Antifragile your finances. Create multiple sources of wealth that are not correlated.
Antifragility: A performance gain when exposed to adversity.
Antifragility is a concept outlined in a book with the same name authored by Nassim Taleb. It is used to describe systems that benefit from shocks, and thrive and grow when exposed to volatility, randomness, disorder, and stressor. They love adventure, risk, and uncertainty.1 Taleb advances the notion that antifragile systems need to be built and designed to not only survive, but to thrive.
A classic visual example of something antifragile is Hydra, the serpentine water monster with numerous heads in Greek mythology. When one is cut off, two grow back in their place. It is essential to understand the principle of antifragility when it comes to your assets and income, whereas in the event of a decline in one, another may increase in value. However, antifragility is not the same as traditional diversification of assets.
What’s the difference between antifragility and diversification?
Both concepts are related to risk management and resilience (and to improving your Money Energy potential), but they approach the problem from two different angles. Antifragile systems become stronger and more resilient when exposed to stressors or shocks and have the potential to benefit from different types of market conditions. These are investments that tend to be more flexible and adapt to a changing environment, which can create more opportunities and feed your Money Energy.
For instance, in the 2020 pandemic, people with multiple businesses suffered losses in entertainment, but gained in another that supplied medical equipment. Or, in investing, let’s say a commodities-based stock went down, increases in technology may more than compensate for any losses. Think of it as a counter-cyclical wealth creation strategy.
On the flip side, diversification involves spreading investments across a variety of assets and asset classes. The intention is to reduce risk by avoiding exposure to any single investment or sector of the market. The goal is to minimize the impact of negative events on an overall portfolio. Anyone who is involved with a financial planner or self-taught is more familiar with this concept. It’s about allocating resources across stocks, bonds, ETFs, and alternative investments. It’s also about seeking the inclusion of investments that have a low or negative correlation to one another, and having a mix of assets based on risk tolerance, financial, goals and time horizons. Sound familiar?
An easy way to remember the difference is anti-fragility seeks to benefit from volatility and uncertainty, while diversification aims to reduce risk by spreading your money out across different assets. The former embraces volatility and adapts to it. The latter seeks to protect against the negative effects of market volatility.
Why It’s Important to Understand Your Money Energy
Discovering your personal identity will help you know when and how to respond to volatility in your life energies, and not just financially. It means going beyond how to survive unexpected events, but more importantly to seize opportunities that arise in periods of turmoil. Being anti-fragile requires planning and knowing your inherent behaviors and talents to incorporate them into your decision-making process. Get to know your innate responses and behaviors to such events. You’ll be surprised by what you can learn and plan for when you know yourself.
Reinventing Yourself
Let’s look at a case study observed during the pandemic. Paul and Ginny Havers are both 34-year-old parents to two-year-old twins. They have each completed a DNA Natural Behavior Discovery and know their behavior styles. Paul is a Strategist who excels by blending his strong drive to reach key goals with sound knowledge, high-quality processes, and quality-control standards. Achieving results is a priority through setting ambitious goals. He is a retail operation executive. Therefore, the amount of work he could do remotely was limited, leaving him with time on his hands. During the height of COVID, he was determined to take advantage of the stay-at-home situation.
Ginny, a primary school teacher, is an Engager. She enjoys new opportunities and meeting people. She uses her people skills to promote, engage, and build relationships. Both had their working hours reduced due to the pandemic, but one advantage was that they got to keep their twins at home.
Paul and Ginny were big fans of YouTube. With 247 million users, this is of little surprise. But suddenly faced with home, work, family, kids, and chaos, YouTube became a source of entertainment…and a source of learning which gave the couple an idea. After a little research, they created a YouTube education channel. He and Ginny saw this as a subtle nod to the current trend and papers about anti-fragility.
Seeing themselves under stress, they began to vlog their days, presenting them as a system or process that benefits from volatility, anxiety, and uncertainty. From morning until night, they recorded their day and learned how to benefit from shocks, thrive, and grow when exposed to volatility, randomness, disorder, and stressors. They educated the viewers in a loving, adventurous way, facing and dealing with risk and uncertainty.
Their viewing audience reached over 1.7 million by the end of the fourth month. Not only did it produce an income stream from YouTube, but it was also based on their daily lockdown life. Further, they had become well-respected educators on how to use YouTube to make money and write stories based on their own experiences in a familiar way. Proving that, out of necessity, they had built several strands to their current careers that would ensure they were financially solvent regardless of what challenges they were faced with in the future.
Key Takeaways
Anti-fragility goes beyond robustness; something does not merely withstand a shock
but improves because of it. Many used the pandemic to venture into new business opportunities.
Ask and answer these questions:
If your primary source of income dried up – could you survive?
Do you have assets you could employ to take advantage of an opportunity resulting from a world event?
Do you have a fight or flight response to unforeseen events?
Can you see opportunities where others see doom and gloom?
Thinking back over the past few years of world turmoil, what did you miss out on in terms of potential new income streams?
How you respond is dependent on your personal identity and ability to exponentially grow opportunities. That’s a part of building your Money Energy.
I hope you’ll take your journey one step further and explore the Money Energy Discovery Process, which includes completing the DNA Natural Behavior Discovery Process. Isn't it time you learned an improved method to achieve better financial wellbeing? Stay tuned every week as we continue to reveal all 40 Laws of Money Energy.
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1Taleb, Nassim Nicholas. Antifragile: Things That Gain From Disorder. Random House. November 27, 2012.