#24 - Rethinking Redundancy

"It's only when the tide goes out that you learn who has been swimming naked.”

Redundancy is a dirty word in business. You definitely don’t want your boss to think that you’re redundant. What would you say you do here? 

Perhaps redundancy has a worse reputation than it deserves. In times of stress, it can be an asset. 

Author Nassim Nicholas Taleb points out in his book, Antifragile: Things That Gain from Disorder, that:

“Redundancy is ambiguous because it seems like a waste if nothing unusual happens. Except that something unusual happens - usually.”

When dealing with complex systems, catastrophes can happen for no discernible reason. Given a long enough time horizon, the unexpected will occur. The question becomes how it impacts you. Here redundancy can become a benefit.  

A very real example of this is how global healthcare systems are coping with an influx of patients sick from Coivd-19. Hospitals have a limited number of critical care beds and ventilators. This capacity is more than adequate for typical circumstances but is put under strain by surges in demand for critical care. The healthcare system is fragile to shocks. This is one of the reasons why there’s such a focus on social distancing and flattening the curve:

Source:  The New York Times, Flattening the Coronavirus Curve, March 11, 2020

In this case, increased redundancy would translate into higher system capacity and an improved ability to cope with unusual surges, moving that dashed line up. To be clear, there’s no free lunch. The trade-off is a higher expense base for capacity that’s not utilized 98% of the time.  

Mitigating fragility is important for survival, and survival is a prerequisite for success. This point can be overlooked, particularly during boom times. Returning to Antifragile:

“This fragility that comes from path dependence is often ignored by businessmen who, trained in static thinking, tend to believe that generating profits is their principal mission, with survival and risk control something to perhaps consider - they miss the strong logical precedence of survival over success. To make profits and buy a BMW, it would be a good idea to, first, survive.” 

One way to mitigate downside and reduce fragility is to focus on decreasing your downside. Redundancy helps here. A recurring theme of Antifragile is that:

“Nature likes to over-insure itself. Layers of redundancy are the central risk management property of natural systems.”

We have two eyes, two nostrils, two ears, two kidneys, etc. There’s a reason for that. Nature is a wise designer, planning ahead for contingencies. 

It’s unclear how thick the line between redundancy and failure is. What is clear is that in the coming months many businesses will come under stress. As Warren Buffett says: 

“It's only when the tide goes out that you learn who has been swimming naked.” 

With the economic tide going out, there will be plenty of businesses who find themselves wishing that they were operating with a spare bathing suit. 

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