Be Anti-Fragile in a Crisis

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Nassim Taleb describes systems that benefit from dis-order rather than fracturing, like glass, in the face of stress or uncertainty. Think of the superior information processing found in market capitalism (anti-fragile) versus communism (fragile). Now that it seems crisis is upon us again, it is worth revisiting why we created DealVector.

The 2008 GFC revealed a variety of weaknesses of the financial system. In particular for structured credit, many investor rights depended upon an ability to communicate and organize effectively. Because DTC does not make this feasible, the crisis also revealed that investors therefore were forced to depend upon the kindness of strangers or, rather, counter-parties and others with divergent interests to their own. Such a system was extremely fragile from the point of view of buyers of structured products. It failed just when it was needed.

A system that provides robustness in communication, especially in times of crisis, benefits all investors, and is a paradigmatic example of the Anti-Fragility we should build into our systems. It should be possible this time around – using DealVector as a robust enhancement of DTC – to more easily find the 25% or 50% or 67% of holders that you need to find in order to enforce your rights under the indenture. By distributing the matching mechanisms to a neutral platform with low on boarding costs and flexible architecture to accommodate many types of market participants, DealVector was designed with Anti-fragility in mind, and it works.

With other markets falling, the risk of disruption in structured markets is increasing. Don’t be Fragile. Join DealVector!