When buying something new, there are always three options - go for the very best that money could buy, go for something nice (moderately expensive but not too obscene) or buy the cheapest possible thing.

Imagine you are buying earphones for yourself. The cheapest reliable ones are readily available for as low as 1000 bucks. You can get ones that work pretty well most of the time for around 2500 bucks. The best in class might cost 5000 or more.

Which ones should you buy?

Some things are worth spending a lot of money on. Others aren’t. Like, buying a designer T-Shirt for daily wear might be a bad idea, even if you are rich.

How do you decide when to break the bank and when to go for the cheapest one?

Naseem Taleb talks about a fascinating mental model that can be applied in many such everyday decisions. It’s called The Barbell Strategy.

Barbell-ing or the Barbell strategy is an investment model that has been popularised by Naseem Taleb through his books (Antifragile and The Black Swann).

The barbell (a bar with weights on both ends 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 of two extremes, with nothing in the centre. One can also call it, more technically, a bimodal strategy, as it has two distinct moves rather than a single, central one.

I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas and taking a lot of small risks in others, hence achieving anti fragility. 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 error).

A barbell can be any dual strategy composed of extremes, without the corruption of the middle - somehow they all result in favorable asymmetries.

Let me explain it with an example from personal finance. Suppose you put 90 percent of your savings into a safe but low-return investment instrument like a Fixed Deposit and a 10 percent into a very risky maximum-risk-maximum-reward instrument like equities. In that case, you cannot possibly lose more than 10 percent, but you are exposed to a big upside. Someone with 100 percent in the so-called “medium” risk option has a risk of losing everything.

Taleb suggests targeting the two extreme ends of the spectrum at once, with nothing in the middle. On one end of the barbell, you play safe by investing in safe and secure options and protect your downside. On the other end, you take a lot of risks by investing in options that have a chance of yielding a very high return.

Applying the same concept to our shopping example at the beginning, here is the barbell strategy for buying things.

Buy the best quality products, without worrying about the price, for a small set of things that are important to you, and the cheapest possible stuff for everything else, and avoid the middle ground altogether.

Buy the best-in-class earphones if you are someone whose job requires you to be on the phone a lot. Else go for an ordinary reliable one is you are just a casual music listener.

Likewise, there could pretty much be a barbell for everything in life.

Reading - Read things that are either up to this minute or things that are timeless. Read Hemingway and Kafka, or read the latest news but certainly avoid Chetan Bhagat.

Netflix - Watch the all-time best movies (Oscars, all-time hits, etc.) or the new releases to explore new genres; avoid the down-the-middle IMDB 6.5-7.5 movies.

Diet - Follow a super strict healthy diet (with the right mix of protein, fiber, and carbs) with occasional cheat days instead of eating a small amount of junk food every day.

Sleep - Sleep 8+ hours on most days with occasional night outs for work or fun but avoid 5 hours daily sleep schedule, the long term impact of which are catastrophic.

Drinking - Skip alcohol on most days with an occasional drinking night with close ones; avoid sipping few drinks daily before hitting the bed, which is neither healthy nor helpful.

Relationships - Spend most of your quality time with a select set of close friends building meaningful relationships or meeting new people for networking or learning; avoid wasting time with people who are neither very close nor interesting.

The hidden insight in this model is that it is more rewarding to be operating in two extremes of opposite nature than being average. But the idea is only a model and would certainly need to be adapted when applied in personal life.

Best,
Kaddy

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