We all have different thinking tools that we operate with desiring to get the most out of life. The Barbell Strategy could be the most useful next one for you.
No, the Barbell Strategy isn’t a plan on how to get ripped in the gym (although it can be if you want it to). It’s a modern conception of the time old wisdom of doing something properly or not doing it at all. As poignant as that aphorism is, the Barbell Strategy encapsulates its essence plus enhances it. This makes it a VERY useful mental model that we can use to better our lives.
The term ‘Barbell Strategy’ was conceived by Nassim Nicholas Taleb in his book ‘Antifragile: Things That Gain from Disorder’. ‘Barbell Strategy’ was first applied in the world of finance and investing to refer to the ways that investors can allocate their stock portfolio.
However, like many mental models, this concept goes beyond a single domain and applies to so much more. I’ve come up with a development on the concept that improves its wider applicability.
Barbelling as antifragility
The ‘Barbell Strategy’ was coined by Taleb as a means of operating with ‘antifragility’, that is to grow stronger from perturbing events such as stressors, mistakes, randomness and more. When we’re antifragile, we’re more than robust since we develop and move beyond in the face of external pressures, not only maintain our present state.
The Barbell Strategy refers to the dual method of surviving from huge failures via low-risk approaches on the one hand coupled with exposure to outsized success via high-risk approaches on the other.
It’s a strategy designed to avoid the mediocrity of the middle in any domain. As Taleb himself puts it:
“I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas (robust to negative Black Swans) and taking a lot of small risks in others (open to positive Black Swans), hence achieving antifragility. That is extreme risk aversion on one side and extreme risk loving on the other, rather than just the “medium” or the beastly “moderate” risk attitude that in fact is a sucker game (because medium risks can be subjected to huge measurement errors). But the barbell also results, because of its construction, in the reduction of downside risk—the elimination of the risk of ruin.”
Taleb’s initial application of the Barbell Strategy was in his own investments. He explains barbelling in finance thus:
“If you put 90 percent of your funds in boring cash (assuming you are protected from inflation) or something called a “numeraire repository of value,” and 10 percent in very risky, maximally risky, securities, you cannot possibly lose more than 10 percent, while you are exposed to massive upside. Someone with 100 percent in so-called “medium” risk securities has a risk of total “ruin from the miscomputation of risks. This barbell technique remedies the problem that risks of rare events are incomputable and fragile to estimation error; here the financial barbell has a maximum known loss.”
Taleb understands that in many worlds including the world of finance, success is nonlinear—it tends to occur in quantum leaps than at regular intervals.
The idea of perpetual regularity and order is a soothing one. But it’s a fuzzy pipe dream. It’s a hope conceived by those who can’t stand inherent stochasticity and chaos in nature and want a psychological mechanism to protect themselves from the unknown. The reality is the universe doesn’t care what any of us thinks, whether you want universal order or not.
It’s better to operate with a means of not letting chaotic calamities take you out completely than to expect to never fail. On the other end, it’s wise to expose yourself to large returns than settle for mere decency.
Instead of expecting average investments (in whatever areas of life they might be in) to yield great results, barbell your way to big gains.
High upside/Marginal downside
At the heart of the Barbell Strategy is the notion of high upside and marginal downside.
Imagine an actual barbell. The areas with virtually all the weight are the ends. The weights on the ends are what make the barbell an effective tool for working out. Otherwise the object would be a regular old metal bar.
The Barbell Strategy operates the same way. On one end you have high upside—situations that lead to extreme success if they work. On the opposite end you have marginal downside—situations that don’t result in large losses in the event of a failure.
This process of dual heavy leverage gives an enormous advantage over the mediocrity of the middle.
The modern world has an asymmetrical view on what constitutes success. It has a disproportionate focus on what we do and obtain, forgetting that it’s just as important to know what to avoid and prevent from happening. Success is every bit as much about averting costly mistakes as it is about taking big action.
Marginal downside embodies this often overlooked aspect. With marginal downside, you’re never wiped out. You’re still in the game. If you’re still in the game in the long run, you can’t help but be a success:
“For antifragility is the combination aggressiveness plus paranoia—clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself. We saw Seneca’s asymmetry: more upside than downside can come simply from the reduction of extreme downside (emotional harm) rather than improving things in the middle.
A barbell can be any dual strategy composed of extremes, without the corruption of the middle—somehow they all result in favorable asymmetries.”
Exposure to mega upside is the other part of the equation. As mentioned, success often happens in inflection points rather than noticeable increments. We all know people who seemed to jumpstart into a period of success in their life almost out of nowhere. That person who received a promotion which doubled their authority and salary overnight. The friend who met the love of their life out of the blue and is already engaged to marry.
I used to work for a company of about 40 employees separated into two organisations. The main one where I was positioned relied on a main headline contract with the biggest healthcare contractor in the UK for its income. The other was a niche operator subsumed into the main organisation but able to operate with independent funding.
One year, the main organisation was told there was a risk that its headline contract may not be renewed in the next year. This contract constituted a huge 80-90% of its income and there was an immediate scramble by the executives to diversify its income streams. Panic ensued, nails were bitten and the whole office rental was sacrificed for cost-effective remote working. A couple of people were unfortunately laid off in further attempts to hedge against a future up in the air.
At the same time, the other organisation which operated mostly with independence, experienced no such troubles. Not only were they robust in the face of the vicissitudes of the healthcare sector at the time, they even experienced a boon from their projects. Far from laying people off, they were able to promote people into new positions. Two people jumped from non-managerial jobs to associate director level jobs overnight.
The difference between the two organisations wasn’t work ethic, better employees or superior planning—it was exposure to high upside. By being so dependent on a single contractor, the main organisation was more exposed to negative downside from over-reliance than the other one. The niche organisation was small but nimble enough to be antifragile with excellent exposure to high upside.
I voluntarily left before the headline contract situation reached a culmination (they managed to keep it) but I’d learned a valuable lesson in barbelling.
The problem with the middle
At this point, some readers might wonder what the denunciation of the middle is all about. Maybe you’ve heard of the Aristotelian Golden Mean or how you should stay in the middle because that way you’ll get the ‘best of both sides’.
Taleb notes that the middle is overrated due to the fact that middle risks can actually succumb to measurement errors. He doesn’t discuss this much further in ‘Antifragility’ but my interpretation of this is a simple one: we can never really know what the middle is.
Aristotle championed the idea of the ‘Golden Mean’ but in domains outside of mathematics, how do know what the true middle is? The idea is that you stay away from extremities in order to lead a ‘good’ life and become an ethical person.
Yet what is virtuous and moral is relative. In Aristotle’s time, legal slavery was normal and rarely questioned. In our era, it has fortunately been eradicated in the majority of countries around the world as an extreme moral failure. If it wasn’t for the Overton window shifting opinions over time, modern societies would still be exposed to unthinkable norms that were the ‘middle way’. The Overton window is one example of how the middle is never static and thus shouldn’t be relied upon as an orientation point for your life.
This isn’t to say that everything in the middle isn’t worth considering. But nobody respects people who sit on the fence, especially since that fence is an ever moving one.
Along with its place in antifragility, I later found out other parallels to the Barbell Strategy such as its surprising relation to Zen Buddhism.
The Barbell Strategy and Zen
Whatever your main language, you’ve probably heard the saying “If something’s worth doing, it’s worth doing well.” or a similar paraphrasing.
Whilst not being exclusive in origin to Zen, it’s embodied as a core tenet of Zen practice and living. Zen espoused doing something properly or not doing it at all as a way of life.
Renowned Zen practitioner and proponent of Zen to the West D.T. Suzuki put it thus: “So instead of having some object of worship, we just concentrate on the activity which we do in each moment,”. “When you bow, you should just bow; when you sit, you should just sit; when you eat, you should just eat.”
In Zen, a good life is a mindful life. A mindful life is doing one thing at a time with full awareness and dedication.
What is so ‘barbell strategy’ about this?
The act of doing something properly or not doing it at all is acting on the extremities to use them to your advantage without entering a saturated middle ground.
Giving something or someone your undying focus and attention until completed is the equivalent of the high upside weight of the Barbell Strategy. You can’t add any more of your mental force and effort to that entity than you’re giving.
Not doing something is of course the opposite extreme. You’re not engaging in an activity that might be suboptimal, wishy-washy or a drain on your concentration. Expert Zen practitioners are often happy to disregard an activity or thought that they cannot be mindful of. It’s a ruthless efficiency that one might not expect from a centuries-old religion.
Note that abstaining from an activity is not giving up or fleeing. Much of Zen practice that monks undertake is arduous and challenging even to the point of physical ‘punishment’. However the idea is that whatever you’re doing, you do it with full commitment, otherwise you’ll be snapped into it by your teacher. Therefore if you can’t give something your unbridled attention and effort nor have someone to make you do so, don’t bother doing it at all.
This concept has so much practical application in our lives.
Feeling long-standing disengagement at your current job? Find a way to engage or find another career. If you continue with the work you’re doing (the middle ground), you’re risking discontentment for future years of your life that might result in a life crisis later down the road. You’ll also risk regret of wasting time that you could have spent in another job had you transitioned earlier.
Unmotivated by the subjects you’re learning in contemporary education? Find approaches that help you enjoy the subjects more or drop them altogether. Maybe desk-based curricula aren’t getting the best out of you. Do your own reading on a subject, listen to podcasts or use an interactive course or video. On the flip side of considering not doing it at all, understand that if you lack intrinsic motivation with what you’re studying now, you’re likely to (a) not move into a position related to your studies as a career anyway, or (b) not do very well in a job if you did move into such a position.
Use the Barbell Strategy to provide Zen-like clarity when you find you lack it.
Summary
The Barbell Strategy is a useful heuristic in life. It’s a two-pronged approach to making decisions and operating in different domains. By minimising the downside risks we may face and maximising the upside returns we can gain, we place ourselves into a high performance trajectory.
The Barbell Strategy is a way operating with antifragility. Since you mitigate being taken out due to the built-in downside protection, you get stronger from exposure to volatility rather than being wiped out by it. When upside occurs, it happens in a big way.
Too often we’re taught that the middle is a ‘safe place’ and that the edges of our competencies shouldn’t be pushed. The problem is you can never really measure the middle since it’s never static. You don’t know what’s an ‘extremity’ that you should avoid unless you test it in the first place. It might be the exposure to high upside that you need.
The Barbell Strategy has parallels with Zen. For centuries, Zen has advocated a way of complete awareness and engagement with whatever we do. This dichotomy of complete commitment or abstinence is barbelling—either we get the best out of something by doing it properly or we refrain from doing it altogether and use that time to do something else.
Weights don’t have to be a burden. As with a workout, use the Barbell Strategy to make you stronger.
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