I was thinking recently about COVID-19, and stocks, and the concept of antifragility, which was coined by Nassim Taleb.
Here’s how he introduces it in his book with that title:
Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.
Using that, let’s say that something is Antifragile when it improves from adversity. Not just survives. Improves.
So I was thinking about all these factors that we’re facing—many of which I talk about in my recent piece called COVID Will Accelerated Trends That Were Already Coming. Some of these include:
- A move to automation, resulting in lost jobs
- A move to remote work
- A push for basic income
- Consolidation of fewer winners
- A rise in surveillance
At first I tried to imagine what stocks could survive in this situation. And I think it’s fairly easy to do that, although the question always has to be: survive at what timescale? Maybe the airlines will be fine eventually, but when exactly is eventually? I’m not willing to find out.
So here’s a more interesting question: when it comes to pandemics and economic slowdown, which stocks improve the most if things go poorly, yet still do fairly well if things don’t get that bad?
I came up with three.
- Amazon. They’re becoming planetary infrastructure, and they have a CEO who appears to be interested in everything from movie theaters to pharmacies to education. He basically wants to become what the government should have been. And while that’s scary and exciting, it’s also going to make their stock one of the best picks for a long time. If things go poorly, they’ll be there to keep things running. And if things go well, they’ll be there to expand into new spaces. Win, win.
- Zoom. They seem to have captured the space of doing things remotely. Of course there will be competitors, but the way they’ve set themselves up to succeed is pretty impressive. If things go horribly regarding pandemics and declines, we’ll all need them more. And if things go well, they’ll still do fine. Win, win.
- Facebook. Regardless of what you think about their effect on humanity, it’s clear that Zuckerberg is a voracious businessman. His purchases of Instagram and WhatsApp were phenomenal, and once again we have the dual benefit. If the world craters for a bit, everyone will be on Facebook. And if the world shakes it off quickly, the world will still be on Facebook. Win, win.
The internet (and the unemployment line) is full of people who think they “figured something out” about the stock market, right before they lost it all.
I have very little faith in my stock picks above because they’re stock picks, in the stock market. There’s also another whole line of thinking from smart people that say the NASDAQ is going to get pummelled in the next few months or years.
I honestly don’t know enough about this space to even tell who’s an expert and who isn’t. So I have very little money invested in this, and I’m doing it mostly for fun.
I’m basing my picks on what I think I know about human psychology, sociology, and what people are likely to do if things crash or if we recover quickly.
I honestly think these three stocks could do well either way. Hence, antifragile.
I’m marking this post as unalterable, because I want to measure just how lucky/unlucky/stupid/brilliant I am going forward in time. All edits to this post will be in the notes below, not in the prediction text above.
We’ll see how it goes.
- You know how some people try to actually make you listen even more to them by prefacing things with, “I’m not an expert but…”? Well, this isn’t one of those situations. I’m seriously not qualified to give stock purchasing advice. Hell I made my first stock purchase like 5 years ago. I’m a noob. And even worse, I don’t even think being an expert makes you safe. So, seriously. Consider this post to be a thought exercise and nothing more.