Humans Are Idiots And What We Can Do About It

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Last week I finished the book “Antifragility: things that gain from disorder” by Nassim Nicholas Taleb (NNT).  I came to a conclusion: NNT is an egotistical ass.  This is why it irks me to no end that his narcissistic rant is going to make a home for itself in my top 10 books.  Why?  Because he makes a great point.  Human beings are idiots when it comes to risk.  We have no idea how to manage it.  We see something uncertain and think to ourselves: “Hmmm… how can I control that?”  Then we go about creating systems to make it all shiny and smooth.  There is something in our nature forcing us to try and “fix” risk.  That’s not possible.  The only thing we accomplish is to make it much worse when it happens.  We need to take a cue from nature.  I’m going to explore some of NNT’s ideas and then explain how they apply to real estate.

I tried to fit this article into one post, but failed.  So, here is part 1 of…a number less than 10.

Antifragility: What Doesn’t Kill You…

When my cat, Barracuda, knocks over a vase on my dining room table, it shatters into a thousand pieces.  In other words, when you stress the vase it weakens and breaks.  Thus the vase is fragile.

What is the opposite of fragile?  Sturdy?  Robust?  No.  A sturdy vase  is not affected when it’s banged up.  That’s not the opposite of breaking/becoming weaker.

To be the opposite of fragile, the vase would have to get stronger when Barracuda topples it.

Sounds strange doesn’t it?  Roughing something up to make it stronger?

In English, we don’t even have a word to describer this concept.  So, NNT came up with the ever so clever “Antifragile.”

The surprising thing is more things are antifragile than fragile…unless humans have their way.

The Natural World is Antifragile

Natural processes are antifragile.

Everything fragile, or even strong, will be destroyed…It’s just a matter of time.

Nature as a whole endures.  If a species dies out, other species will fill in the gap.  If an asteroid wipes out all land life, marine life would evolve and inherit the Earth.

Saying we need to do x or y in order to “save the planet” is sheer arrogance.  What we mean is we want to save ourselves.  If the average temperature was 100 degrees warmer, life would continue.  Homo sapiens wouldn’t.  Nature couldn’t care less if humans continue to exist or not.

Not only is the natural process as a whole antifragile, but so are most natural creations.

Muscles – When you life a weight, you tear fibers in your muscles, which grow back stronger.

Immune Systems – When you catch a disease and survive, your immune system becomes more adapt at defending you from that disease.  If the disease kills you, you don’t pass your ineffective defenses to any offspring.

Evolution – Lions eat the slowest antelope, weakest elephants, and idiotic (or drunk) hunters.  Over time, all groups involved become faster, stronger, and/or smarter.

It ain’t pretty being antifragile.  It’s death and destruction at every turn, for the sake of the greater good.

Progress is Chaotic

For better or worse, human progress is antifragile.

In an ideal world, human advances would be some sort of smooth continual march towards greatness.  Every year we take last year’s accomplishments and improve on them.  We help each other out and sing kumbaya around the camp fire afterwards.

Not so much.

Progress comes from destruction and mayhem.  Innovation takes the people and things of today, spits on them, chucks them out the window, and does it better.

Let’s pick an industry at random: transportation.  My knowledge of this matter is limited, but I would trace the general timeline as: feet, boats, wheel/carts, horse, trains, cars, and airplanes.

I love fancy charts, so here is one showing what I’m talking about:


No, this isn’t to any scale. All I did was throw random numbers in Excel that felt good.

Each new disruptive technology has an exponential impact on growth.  Looks great doesn’t it?  We’re always improving.  That’s not the whole story.

Trains collapsed the covered wagon market.

Cars butchered the horses.

Airplanes decimated both the train and the car industries.

Every step of human progress, creates a huge wake of destruction.  Out with the old, in with the new.  If you and your family rely on the old…you’re going to have a bad time.

It doesn’t matter what topic you pick, the story is the same:

Medicine – human sacrifice, barbaric surgeries, bloodletting, starvation therapy, germs, anitibiotics, overmedication.

Astronomy – the sun is a god, earth is flat, earth is the center of the universe, sun is the center of the universe, the universe is always expanding.

Nutrition – hunter gatherers, farmers, orthodox diets, scurvy, understanding of vitamins and minerals, processed foods, fat is bad, the love of carbs, atkins diet, fat is good.

Real Estate – caves, thatch huts, clay houses, straw and wooden halls, limestone cottages, wooden multistory building, brick behemoths, iron high rises, steel and aluminum skyscrapers.

Information transfer – this one is too easy.

Try it for yourself.  Pick any topic you’re familiar with.  Anything at all.  How many advances can you list that shifted the entire industry?  How many people were hurt during these changes?

Well…sex is a counterexample, but the only person I know making charts about his sex life is this guy.

Why Humans are Idiots

The trouble with us humans is we’re too stupid, or maybe scared, to recognize the world isn’t safe and smooth.  We run from instability.  We use our big brains to create structures and systems designed to mask the underlying mayhem.  We fabricate a safety net where there is none.

And we’re good at it.

We construct dams to smooth out the rough waters.  The river becomes controllable but the water pressure on the other side of the wall builds.  When the dam collapses, and it always does, the destruction outstrips any harm a choppy river would ever have done.

How about some less rhetorical examples:


This is lifted straight from the NNT’s book.

Let’s look at two workers: Joe, a taxi driver, and Bob, a gainfully employed accountant.  Here are their annual incomes for the last few years.


Both of their incomes average ~30k per year.  Which person would you rather be?  Bob, right?  He’s got a steady salary he can count on.


Bob has a high probability of his income going to NOTHING.  His company might downsize.  He might get a new boss who doesn’t like him.  There might be some new laws passed which make his skills obsolete.  The industry might shift.

And none of these events are in under his control.

Joe on the other hand might have some variance in his income, but the downside is limited.  He has many more sources of income, instead of a single one.  He is better able to adapt to changing circumstances.  He can see larger trends and prepare for events before they happen.

The yearly ups and downs for Joe means the risk of an unforseen, catastrophic event, is much lower than for Bob.

Five Year Projections

The best way of summing up a five year projection is “You’re right when it matters the least.”

To make a projection you have to start with historical data.  That assumes smoothness, which isn’t there.  Sure, some stock went up 5% the last 10 years.  What does that say about next year?  Does it go up 5%?  Maybe.

Remember, the quality  of horses improved every year for a long long time…until they were turned into glue to make way for cars.

When you try and guess the future, you’ve got a shot at being right if nothing significant happens.  When the next big thing comes along you’re going to be very very wrong.

Compounding the problem is guess (and it is a guess) gives us a false sense of security.  We make decisions assuming the projections reflect reality.  Then when some disruptive shift comes along, we’re doubly  screwed.


I’m a technophile.  I love any and all labor saving machines.  Today, all of them rely on electricity.

Enter solar flares.

Within the last 200 years the sun has emitted solar flares strong enough to wipe electricity off the planet for an extended period of time.

This will happen again.  It’s not a matter of if, but when.  Human memory is short.  If something hasn’t happened recently, we tend to assume it won’t happen again.  The mayhem and deaths that will ensue will be extortionate.

Large Government

Nothing is forever…and that includes your government.  It could be this year or in 5000 years.  It might be because we overspend or because aliens attack.  I don’t know the details, but I can say with 100% certainty your government will cease to be.

People don’t think this way.  We don’t bake it into our decisions.  We don’t realize the larger the government becomes, the more we depend on it.

In America, we rely on the government for policing, foreign protection, retirement (via social security), infrastructure, farming (via subsidies), and soon healthcare.  What happens when all of that is swept away?  Again, notice I said when, not if.

A large government might make us feel warm and safe in the short term, but the more reliance we place on this single, fragile, entity, the more catastrophic a failure will be.

Remember what happened after the Roman Empire collapsed?  The good ol’ days of the Dark Ages?

Wrap It Up: We suck at understanding risk

What does this all boil down to?  Humans are idiots.

Or maybe we’re too smart for our own good.

We think we’re invincible and we create systems to make our lives easier and more stable.  We hide away from natural variation and delude ourselves that we’ve found a way to beat the system.

It just doesn’t work that way.  The smoother we make things in the short term, the more devastating the eventual backlash.

A saying I picked up from my trading days:

If you refuse to take a small loss, one day you’re going to take the mother of all losses.

Embrace the chaos.

Stay tuned for next week…

This idea of antifragility, stress being good, and people not understanding risk can be applied to most subjects.  However, this is a real estate blog, so I’ll go there next week in part 2.

Photo Credit: Vincepal

About Author

Kenneth Estes

During Kenny's decade in finance he bought many single family rentals in rural areas, as a hobby. Along the way, he talked some brave souls into joining him as investors and recently retired from finance to take his hobby to the next level. Find more by and about Kenny on his personal blog and his recently created twitter account!


  1. I am not sure what your underlying point is. Of course we marginalize RARE and catastrophic events. No one but a lunatic wants to run around all day yelling “The sky is falling, the sky is falling.” But many do prepare for the eventual emergency.

    Nothing lasts forevee, not even the universe itself. But many things last long enough for us to get good use of them. I am 53 and use many things made before I was born, including the house i live in.

    Our time on earth is finite and one day we will be gone, just like the dinosaurs. So what! I am not going to eat my next meal pondering the end of the human species.

    While I think your point is that humans are idiots when it comes to risk, i think the modern day problem is that people don’t keep their word and they don’t take personal reaponsibility for their own actions. If a teenager gets pregnant, she wants MY tax dollars to pay for her and her child. If a man becomes an alcoholic or drug addict, he wants MY tax dollars to pay for his rehab. If a person commits murder, thet want MY tax dollars for room, board, health care, education, etc…

    Progress will always push out the old ways with new ways. If Star Trek teleporters are ever invented, cars would become recreational instead of utilitarian, like horses are today. So what? New inventions are always coming, along with new jobs. Some people will have to learn new skills, but that has been that way for a while now. I went from Real Estate Broker to a Microsoft network Administrator to a Software Customer Service Technician to a Finance Director, all in less than 25 years. Change is inevitable and people that deny it are not being wise.

    I look forward to the rest of your story, maybe it will become clearer then?

    • Kenneth Estes

      Thanks for the comment Mike.

      I think we might be talking past each other a bit.

      I’m not saying that humans don’t get there are risks out there. They do.

      The problem is they don’t understand how to handle them. They think the best way to keep risk at bay is to create elaborate systems to “manage” the risk. This accomplishes three things:

      1 – It might create short term stability
      2 – Any amount of short term stability increases in our confidence that we fully understand the risks involved and we act more aggressively.
      3 – When the so called “catastrophic event” happens, it’s really really bad.

      It’s out-of-sight-out-of-mind. I’ve not seen much variance lately, so I can be confident it won’t happen in the future.

      The alternative is to be hands off and not try and oversimplify the short term risks. This creates continual stress on the system that will force us to act conservatively and more accurately evaluate risk.

      By embracing the short term variance, simplify our systems, the impact of a failures are less severe and more contained.

  2. I can tell that you’re trying to talk about entropy and natural selection.

    It’s known that everything (living and non-living thing) tries to be in a state that requires the least energy (maximum entropy). So a shattered vase is in its minimal energetic state than intact one, or decomposed body is at the minimal energetic state than a living human being (sorry for the analogy). It takes more energy to stay alive or be a nice vase and less energy to be just organic matter randomly dispersed everywhere. Houses are getting older and water always runs down to the first floor – these are all examples of maximal entropy, the matter likes to be in a state of minimum energy.

    An example with Joe and Bob is a natural selection one. The same way bacteria would reproduce in normal conditions, but only antibiotic resistant bacteria would survive in a body that takes antibiotics. In normal conditions everyone would survive, but Joe would survive in harder conditions because he is accustomed to variable income and probably has more savings or other sources of income for a rainy day.

    These two (entropy and natural selection) are laws of our life, they won’t dissapear just because we dont know about them. Humans are trying to overcome these laws, or cheat them, I would say, during the whole human evolution. None of us would be alive if we didn’t cheat them since first humans showed up on Earth. Why are we idiots? The same way, we can call people idiots if they don’t kill themselves, since they are going to die anyway.

    Progress does not cancel entropy and natural selection, these last two won’t go away. It’s like thinking that having more money will make us worry less. No, we don’t worry less, we worry about different things now. While in nature animals may not consciously take risks when adapting to a changing environment, we, humans, are conscious of taking risks and adapting to progress. Progress and natural selection are not constantly happening, there might be “stagnant” years and then whoops, we don’t use horses as a transport , and where are those saber-tooth tigers. During those stagnant years many non-adaptable species would flourish, that goes to humans too (Bob would feel great).

    Bottom line, humans are not idiots, or maybe they are, but not because they are trying to cheat entropy and natural selection. Lions, bacteria and viruses are not idiots. We’ve learned to live with them, they’ve learned to live with us.

    BTW, scarred tissue is not as elastic as an intact muscle, so the muscle won’t grow stronger after a tear. Might get bigger because of the scarred tissue, but not stronger.

    • Kenneth Estes

      Thanks for the comment Galya.

      I agree with a lot of your points. We have got where we are today thanks to natural selection.

      Where we disagree starts on your fifth paragraph. Progress and natural selection don’t stop. Ever. Inventors are always trying out new things. Lions are always eating the antelope. Not being able to point to a significant event over some time span doesn’t mean things were stagnant.

      The stress is there, churning away.

      The reason idiots are idiots is we’re trying really really hard to create systems to buffer us from this stress. You are correct, this “natural selection” is a law and isn’t going anywhere. Yet, we try and convince ourselves we’ve overcome it.

      The end result is the stress builds up and our systems become more and more complicated, until one day it all collapses. The net effect is way worse than if we had allowed stress to do it’s thing: prune.

      • Yes, I do agree with you that progress and natural selection don’t stop. That’s pretty much a philosophical question and depends on the definition of what movement is. Even the molecules in solid objects, table for example, move, just at the pace that we cannot notice. And theoretically, if all molecules in the table reach the minimal entropy or the maximal energy and move in one direction, then whole table can move by itself.

        The interesting thing is that we don’t know what qualities can become advantageous over the others, because there are so many factors involved. Sometimes completely unexpected triats end up being winning ones. Not sure if you watched “Forrest Gump.” Yes, I know, it’s a movie, but in real life we have examples everywhere of people who should be wealthy and aren’t and the other way around. According to natural selection Forrest Gump was not supposed to become rich and famous, but his mom wanted him to be in the same school as everyone else. And some can call it pure luck but he did make decisions, or followed someone else advise, when others didn’t. He did take risk and it payed off, like in real life, you need to be out of your mind crazy to take those risks.

        So, in my opinion, on the individual level we should not allow natural selection to weed us out, we should adapt and take risks because we don’t know what is the next advantageous triat would be. Everyone can find its niche that works to survive collapses. Once you survive the collapse, you may be the only one who has the boat to get shrimps (Forrest Gump). Our system tries to help the majority, if you’re a little different than majority, you may have a huge advantage in the next collapse. Pretty much every “survival movie,” where you have a disaster approaching, majority get extinct because they believe they are safe, where they are, 5 people get a different idea and 2 survive in the end. And you can’t save everyone, they won’t listen any way.

    • Kenneth Estes

      Thanks for the comment Douglas.

      Personally, I hope Congress never gets their act together. Going back to the point I make about a large government, I couldn’t imagine a better outcome from the current deadlock than a pruning of the entire state.

  3. Hi Mike, I disagree with your inference that folks DO take the common and rare risks into account in their daily affairs and business. I agree with the blog title from my life’s experience.

    I also have read Nassim’s books and he has a solid point, that systems are fragile because the designers do not take alot of the risks, let alone the rare risks, into account. IE the mortgage melt down where it was not in their models that folks would pick not paying their mortgages FIRST before not paying on their cable bill, and prior; landlords finding their rentals emptying out due to renters being given mortgages, then after; flippers getting stuck with too many hard money loans on flip houses that where suddenly under water. Too many REI examples of head in the sand business models. Not to hook in a toxic topic, but I believe that landlords who specialize in most of their property being rented by Sec 8 are inviting a lightening strike on the top of their head. Some day the County, State or Fed gov will mysteriously not be able to make those automatic bank transfers. Then what?

    This article tried to help us re-evaluate our business rules. Are they open to a surprise event that would be a game changer?

    Just an example: buying in poor high school districts because the house is cheap. What if all of a sudden parents wake up and move to good school districts? How cheap can you make the rent to still attract a renter, and then is that renter worth wanting? I think the Hedge funds have found the answer to this scenario. Or does your model factor in rising competition. IE Hedge funds renting more and more props in your area.

    • Kenneth Estes

      Cheers for the note Curt.

      I did like NNT’s comment about skin in the game, but I left it out as I think most readers of this blog don’t the problem of not having enough vested interest.

      Great point about people not getting that fundamental real estate market shifts happen all of the time. It’s almost like you knew where my next post is headed. 🙂

  4. Embrace the chaos — and take advantage of the opportunity it provides.

    Based on what I’ve seen the last several years, human beings are indeed idiots. Their refusal to practice any kind of risk management has amazed. For those of us real estate investors who were much more conservative and “kept our powder dry” until the right moment, recent times have been very rewarding and profitable.

    If people refuse to believe in the downside, or don’t understand how to manage risk, it’s our job as investors to take advantage of the situation.

  5. Kenny – love it. Having met you in person – love it lots!!!

    Has anybody ever told you that you overthink everything? They tell me that every day, so I’ll take the liberty to tell you lol

    I have a challenge for you Kenny. I believe you could boil this entire article down to 3 sentences: Major Premise / Minor Premise / Conclusion. Wanna try?

  6. Thanks for the article, Kenny.

    I just finished reading this book a few weeks ago and it’s in my all time top 10 books as well.

    A lot of good takeaways related to economics, politics, and simply life in general can be found in this book.

  7. Love the title.
    Not what I expected when I started reading it but very interesting.

    It is amazing the lengths that people go to “Mitigate” risks only to lulled into a false sense of security when sh*t actually hits the fan!

    That being said it would be foolish to go around fearing every catastrophic thing that could happen, and some things that people implement to guard against extremely rare events really hamper life, just accept that life CAN have this stuff happen and just be prepared that it might happen and you won’t actually be prepared for it.

  8. This is an article that is going to get me to read the book for real. I find a fascination with how humans work as a whole throughout history. After reading Ben’s comment, and realizing I’m very captivated by this article, I too must be an over thinker.

    I’m excited to read the following posts.

  9. Humans are idiots, because they need to buy countless books about subjects they already know the answers to and could have written themselves.

    Humans are idiots because they rely on others, actually thinking these others have their best interests at heart.
    A few examples Bernie Madoff, politicians, governments, religions of all kinds, and ones personal and business friends.

    I know the above seems like a horrible way to live life, but there are routes to allow one to trust the above. A quote Ronald Reagan coined “Trust but Verify”, but in the end he was a politician, so we need to make an adjustment.

    I use “Verify and then Trust” the ultimate risk mitigation rule. If you cannot verify then tread lightly, drop some bread crumbs along the path so you can have some hope to extricate yourself.
    Sorry to say, all people (and human systems) are self serving, including our closest family members. The world enjoys human idiots who blindly rely on their systems.

    I can imagine folks are saying “Oh my can you imagine his poor wife?”
    After 28 years I don’t need to verify, if something was to go wrong in our relationship I long ago decided it would be my fault and she would be allowed all. I would simply start over again.

    The only person if you could look upon him that way that I strive to trust and rely upon without verification is God. To get to this point doing so needs to be done outside of an construct created by man.

    Back on subject, as humans we are trained to think the best will always happen “Everything turns out for the best” B.S. The opposite is true, things will most time turn out terrible or less bad, but almost never good, great, or exactly as we planned. Unless we are interacting with a fool who actually completely trusts us.

    Like getting on a plane and assuring yourself the trip will end well because in the past it did, or it’s a one in a million when a plane falls out of the sky.

    Before I get on a plane my affairs are in order, it makes the flight so much more enjoyable, actually my affairs are in order as I sit and type this reply, or at least in some order my heirs can figure out without much trouble.

    What is the statistic? 95% of Americans are not prepared to retire WT%&#??
    Why not? What was so important, not to at least have a plan for basic substance if the worst happens along the road of life?

    We love to fool ourselves it is basic human nature in our modern society. I don’t think in the past it was this way. Most knew they wouldn’t probably make it to 40. I know myself in contracting, tomorrow could by no fault of my own be the end of my working days.
    So I always planned for the worst, others seem to think the good times will never end, and yet we see things never stay the same.

    Humans would be a lot less idiotic if they thought this way. Just my non sarcastic 2 cents.

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