Living life with Barbell Strategy.

Nassim Taleb has done the world a huge favor by introducing us to the barbell strategy. A strategy to eliminate the risk of ruin completely from our lives. He has written a lot about it in his book Antifragile.

How does it work? Let’s understand from the horse’s mouth.

“The barbell (a bar with weights on both sides that weight lifters use) is meant to illustrate the idea of a combination of extremes kept separate, with avoidance of the middle. In our context, it is not necessarily symmetric: it is just composed two extremes, with nothing in the center.”

In simple words, using the barbell as a metaphor, take all actions in life on the extremes. On one side, be extremely conservative and on the other side, take extreme risks where you avoid the risk of ruin but have a huge upside.

Let’s deep dive in this post to understand how can we apply the barbell strategy in our lives to enjoy the upsides while always limiting our downsides and eliminate the risk of ruin.

In the world of Investing

In the world of investing and personal finance it could be used as 80% for slow and safe return, and other 20% for risky asset which could include buying crypto or trading in Futures and options in stock market.

If you are young and ready to take more risks like me, I have modified the barbell strategy for me.

My strategy consists of 50% risky asset, 30% mutual fund, Index fund, and 20% with least risk.

I think of my own money as barbelled. I take risks with one portion and am terrified with the other. This is not inconsistent, but the psychology of money would lead you to believe that it is. I just want to ensure I can remain standing long enough for my risks to pay off. You have to survive to succeed. — Morgan Housel, Psychology Of Money

While the barbell strategy is all about enjoying the upside in finance, if inverted, it can be used to protect the downside as well. Let’s understand from the perspective of living a good life by protecting the downside.

In the of desire.

We live a life full of hedonism. We chase to upgrade over lifestyle every single day.

On the spectrum of eudemonism on the left side and hedonism on the right, we are continuously sliding towards the right.

Here barbell strategy helps to balance. 90% eudemonic actions and 10% hedonistic actions. Living a 100% hedonic life has a huge downside.

Too much of anything is bad, including water. While one cigarette in a month may not do much harm to you, smoking every day is a sure-shot way of ruin.

Living A Good Life

We saw earlier how we can work on our desires through the barbell strategy. I believe it can applied everywhere. It can be applied in your relationships where you focus on strengthening a few relationships with 90% of your time and exploring and meeting new people with 10% of your time.

The strategy has huge application in your overall health and fitness. Small periods of heavy lifting followed by long periods of rest, eating in shorter windows and fasting for longer periods, avoiding sugar, processed foods, etc tend to work towards improving your chances of a better life.

To create the ultimate barbell, you have got to have some personal rules for yourself. Nassim Taleb is completely paranoid about certain risks. He has strict rules for no smoking, no sugar (particularly fructose), no motorcycles, no bicycles in town or more generally outside a traffic-free area such as the Sahara desert, no mixing with the Eastern European mafias, and no getting on a plane not flown by a professional pilot (unless there is a co-pilot). He avoids terminal injury religiously.

Ultimately, the barbell strategy is all about providing for the worst and let the best take care of itself. The focus must be to provide for the larger infrequent losses.

Closing Thoughts

A life without risks is a meaningless life. The risk of doing nothing is the biggest risk one should avoid. The thumb rule for risk-taking is simple.

Take multiple small risks. Avoid the risk of ruin. Take risks with large upsides and low downsides. Avoid the wrong risks that lead to a miserable life.

“A ship in harbor is safe, but that is not what ships are built for.” — William G.T. Shedd