Final

Paper
The Antifragility Theory and its applications in our
everyday lives

Author
Raymundo Soto
Bachelor in Financial Management

Vienna, January 2015

1. Introduction
1.1. Objective
The aim of this paper is to provide the reader with an insight and an empirical test
of Nicholas Talebs (2013) Antifragility theory. This shall be attained Mirst, by
comparing this rather newly formulated approach to the classical Minancial
principles, and second, by presenting the results of the Antifragility Survey carried
out in the facilities of the Faculty of Economics of the Vienna University.
1.2. Research question
The idea of antifragility, as explained by Taleb, offers a practical and relatively
logical-rational way to see not only Minance, but everything from religious belief to
common interpersonal relations. Most of his ideas, expressed in a book trilogy that
leads to his ultimate proposition, neglect classical economic approaches and
explicitly reject others, while he claims that differentiating between fragile, robust
and antifragile is basically an innate human ability, which has been substituted
over time through other toxic, anti-natural ideological currents, socio-academic
syndromes and fallacies. For this reason, our research question in this paper can be
best described as follows: what are the implications of the antifragility theory in
real-life situations? Does it make a difference if a group of people is explained the
theory or not (i.e., will they decide similarly)? Since testing in real life proved
difMicult and costly, a survey was designed instead to address the research question.
1.3. Structure of the paper
Chapter two explains the objectives and basics of the classical Minancial theory,
including utility functions, risk aversion and individuals as proMit-maximizing,
rational economic actors. The third chapter presents these propositions with a
different focus: the idea of antifragility and how it (most unnoticed) rules our lives.
The fourth chapter describes the empirical study called the antifragility survey
carried out at the end of 2014 with a group of students at the Vienna University,
which was designed to test real-life accuracy of the mentioned theory. This paper
then concludes with recommendations for further experiments in this matter.
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2. Classical @inancial theory

Classical Minancial theory copes with the rationales behind the actions of economic
actors. A brief introduction shall be given to compare it with Talebs theories about
intrinsic human behavior.
2.1. Individual utility functions
Individuals pursue egoistic goals in every deal or trade, aiming to maximize the
output of their own personal utility function, which might have, as any other utility
functions, an expected proMit (based among others on subjective or objective
probabilities), some kind of cost (personal, economic or others), and a risk term1.
2.2. Attitude towards risk
Generally speaking, each member of a society, and more speciMically any market
participant, can be classiMied as either risk-averse (deMined as someone who prefers
the expected value of a lottery, i.e., a risky transaction over the transaction itself),
risk-neutral or risk-seeking (an actor that prefers every lottery to its expected
value). An individual with a convex utility function is risk seeking, whereas risk
averse participants exhibit a concave one.2
3. Talebs Antifragility Theory
The authors propositions, which were formulated before and tested during what
has been widely known as the global Minancial crisis of 2007-2008, were used for
our research in a relaxed environment, with the aim of understanding their
possible applications, while comparing them with traditional approaches.
3.1. The Triad
Most of our jobs, Minancial and personal decisions and even feelings can be well
classiMied as either fragile (concave, weak), robust (strong) or antifragile (convex)3,
but this classiMication should not be perceived as either deMinitive or absolute.
1 (Hens & Rieger, 2010, 20-23)
2 (Hens & Rieger, 2010, 26-27)
3 (Taleb, 2013, Prologue)

Traditionally, the term robust has been deMined as the antonymous of fragile
without considering that nature, in general, seems to pro>it from adverse events
rather tan being negatively affected by them, i.e., the real antonymous of fragile is
antifragile4. These ideas, and specially the possibility of economic actors innate
and unconscious interpretations of them, were the basis of our survey.
3.2. The Black Swan
Taleb was one of the intellectuals who foreseen the subprime crisis in the United
States, using his theory of the Black Swan, which in practical terms describes a
random, highly improbable (and therefore non forecastable) event which
ultimately leads (in its negative form) to drastic outcomes, like enormous Minancial
and social losses, as a result of over-exposure to risk, i.e., fragility.5
3.3. Practical applications in everyday life
Talebs ideas, not surprisingly, can be transferred from the Minancial world and
applied in a series of real life decisions, from travel planning to medicine, from job
search to public transportation and urban planning. Understanding the power of
these thoughts and researching their implications in the life of an average person
were the main incentives to conduct this experiment.
4. The Experiment
The survey took place in a controlled computer environment with a total of 14
participants, mainly from the Faculty of Economics at the Vienna University.
4.1. Hypotheses and model
Talebs main propositions were applied to develop the following hypotheses:
H1: Economic actors are unconsciously aware of the implications of the
antifragility theory (i.e. the theory is perfectly intuitive) in their daily life decisions.
H2: Every individual is more or less fragile in different aspects, comparing between
them will yield a similar propensity for antifragile behavior.
4 Ibid.
5 (Taleb, 2013, chapter 8)

H3: People who come from a heterogeneous background tend to grasp and apply
the theory more quickly than people with homogeneous background.
In order to make results relatively measurable and comparable, both between
individuals and groups, an antifragility index was created, which could standardize
and categorize each participants answers and preferences.
4.2. Setting and participants
The experiment was carried out using an automated software for economic
experiments (zTree) with a total of fourteen participants, from which there were
10 women and 4 men; 10 younger than 26 years of age and 4 older; 12 students of
the faculty of economics and 2 from other faculties; with no mixed nationalities or
migrational background, i.e., every Austrian citizen was a child of both Austrian
parents, and every foreigner was born to both foreign parents. This demographic
proMile of the participants unfortunately made impossible to test H3.
At the user interface level, the actual experiment, which lasted about 20 minutes,
was divided into 1) personal information stage; which made it possible to track the
basic personal characteristics of every individual, 2) decision stage, which was the
actual antifragility survey, and 3) personal competencies stage, where participants
were asked to assess their own competencies relating to stress management,
networking capabilities, self-fulMillment seeking and attitudes towards common
moral issues, like religion, altruism and spirituality.
Each individual was assigned a group, the participants of group one were explained
the antifragility theory, those of group two were not. The experimental design
allowed each group to have exactly seven participants. The survey was divided into
two parts: Mirst, the students had to make decisions in hypothetical (sometimes
very unrealistic) situations. After this stage, the participants answered a quick
personality questionnaire. Each one of them received a score in every part, which
was then summed up in a global score (the antifragility index). The index was
designed in a way that in every question, there was a fragile, a robust and an
antifragile answer (or fragile and antifragile in the case of dichotomy). In the global
analysis, each individual and its group could be rapidly classiMied as fragile, robust
or antifragile using the index value and comparing it with the attainable maxima.
4

4.3. The Survey

Participants had to take hypothetical decisions in the Mirst stage, regarding the
following aspects. This division was later used for the intra-stage analysis. The
experiment focused primarily in the Minancial category because the aim was to
foster the application of Talebs theories in the Minancial and organizational areas.

Social Familiar
7 % 14 %
Philosophical
14 %

Occupational
Financial
21 %
36 %
Health Care
7 %

In the second stage, the self assessment questions were divided as follows:

Self-fulMillment
33 %

Moral
42 %

Networking
17 %
Stress management
8 %

The focus during this second part of the survey is less obvious. Morality in its most
varied forms and appearances (religion, behavioral codes of conduct, spirituality,
the so-called golden rule and the concept of sin, among others), is one of the most
antifragile spheres in our daily lives, according to Taleb. This is for two reasons:
Mirst, they tend to last over long periods of time, while new ideals, fashions and fads
tend to have short length; second, they are usually antifragile in the strict sense, for
they are favored, with the exception of the roman catholic church, by black swans6.

6 (Taleb, 2013, ch. 20)

4.4. Results
Following is a summary of the individual antifragility indexes produced:
Subject Group

Decision Maximum Personal Maximum Global

score
attainable
score
attainable score

32

23

55

28

25

53

35

29

64

33

26

59

31

26

57

37

26

63

34

20

54

33

32

27

59

10

35

21

56

11

32

26

58

12

26

24

50

13

36

27

63

14

34

23

57

51

26

36

59

Maximum
attainable

87

In each stage, since every answer was measured on a scale from one to three (one
being fragile, two robust and three antifragile), these maximum values could be
conveniently divided by three to establish the boundaries between these
characteristics. For example, in the personal score, none participant was fragile,
there were 5 robust participants (i.e., personal score equal or higher than
(36/3)=12) and 9 participants whose personalities are antifragile (PS >=24).
Recalling the used categories in the Mirst stage, following results were observed:
Category

No. of questions

Average score

Max. attainable

Verdict

Familiar
Financial
Health Care
Occupational
Philosophical
Social

2
5
1
3
2
1

3,21
8,71
1,43
6,64
4,36
2,36

6
15
3
9
6
3

Practical

6,0

Total

17

32,714

51

Robust
Robust
Robust
Antifragile
Antifragile
Antifragile
Borderline
Antifragile
Robust

The highest average relative score was in the social and occupational categories,
but comparing them directly can be misleading since the number of questions
varied. On the other hand, scores in the personal stage are summarized as follows:
Category

No. of questions

Self assessment

Max. attainable

Verdict

Stress MGMT

2,36

Antifragile

Networking

3,93

Robust

Self-fulMillment

12

Antifragile

Moral

9,64

15

Robust

Total

12

24,93

36

Antifragile

Another index comparison was made between men and women. This, again, may
lack statistical signiMicance because women clearly outnumbered men in the
experiment (10 and 4 respectively).
Participants

Decision score

Personal score

Global score

Men

34,5

23,75

58,25

Women

32

25,4

57,4

Women assessed themselves better than men; in contrast, they took more fragile
decisions during the Mirst stage, which gave them a lower global average score.
Comparison at group level was the most important part of the analysis, since one of
the aims of the experiment was to prove that Talebs theories are downright logical
to follow and to apply. Following is the comparison between groups one and two:
Group/Stage
1
2

Criterion
Average Value

Decision

Personal

Global

31,714

25,714

57,42

33,714

24,14

57,85

Average Value

32,714

24,93

57,64

Minimum
observed

26

23

50

28

20

53

Maximum
observed

35

29

64

37

27

63

2
1
2

Since the border between robust and antifragile in the global index lies at exactly
58, it can be concluded that individuals, regardless of the group they were put (i.e.
if they were explained the basics of the antifragility theory or not) are borderline
antifragile. Furthermore, difference between the global indexes of both groups are
marginal. The fact that the antifragility theory matches logic and decisions under
normal circumstances is also found by comparing the two stages: in the decision
stage, the average, minimum and maximum values were lower in group one than in
group two, whereas in the personal stage we look at exactly the opposite.
Additionally, the individuals who reached the global minimum and maximum both
belong to the same group (one), proving as well that only the decisions and
personal characteristics of the individuals have an inMluence in their score.
This results allowed to accept H1 and H2 by proving that 1) the mentioned theory
is intuitive and applicable in real life decisions and 2) personal and group scores
are similar even though any individuals show higher values at some variables.
The following strengths of the used model were observed after the antifragility
survey was carried out with the group of students:
I.

The experimental design was simple and yet powerful to answer the research
question and to accept two of the three formulated hypotheses.

II.

Results could be easily interpreted by practically any outsider.

III. Model can be translated to other programming softwares for future research.
The experimental design proved to be useful to primarily test Talebs relatively
unusual propositions about behavioral Minance and other patterns. Nevertheless,
the following disadvantages and deMiciencies in the design should be noted:
I.

The antifragility index was built on a theoretical basis, but its accuracy should
not be overestimated since it was inMluenced by the personal understanding,
and even the own personal touch, of the author. Furthermore, many questions
had only two possible answers, which made it necessary to classify the
weakest choice as fragile, not as robust.

II.

A planned transitional part between the two main stages, consisting of three
short questions where participants were supposed to rank quotes from a non-
Mictional character which appears in Talebs book Antifragile, was poorly
designed and did not produce any useful data for the analysis.

III. There was a Milter question, which at the end did not allow direct comparison
with other subjects, for it would have resulted in extra points in the index for
the three participants who were able to participate in it. Fortunately, all of
them made the antifragile decision, which harmonized with the results.
IV. Because of the small number of participants, the results lack statistical
signiMicance. The same experimental design, correcting (II), with a greater
number of participants, preferably from diverse national and educational
backgrounds, can help test the reliability of this experiment, as well as H3.
V.

The self assessment format of the second stage could add all too much
subjectivity to the results of the experiment. This mechanism should be
reMined in future antifragility experiments.

5. Conclusions
This experiment came in handy for proving that individuals are naturally
antifragile and tend to take robust, and in the best case antifragile decisions under
normal conditions. Self-assessment of the participants also pointed out that they
(implicitly) perceive themselves to be antifragile in a number of areas, specially in
stress management and willingness to self-fulMillment. A further interesting, and
necessary, question to pose is how participants would react to stressors or to
extreme situations of danger, distress, hunger, war, etc. In this case, it would take
extensive resources to prove more complex versions of these hypotheses, so that
such a study can be well adapted to PhD theses. Furthermore, the mathematical
relation and the differences between traditional Minancial theory and Talebs ideas
about antifragility could not be documented through this experimental design; this
analysis would require extensive knowledge of mathematics and statistics (Taleb is
a well known specialist in both Mields), which would then again make more
personnel, time and resources compulsory.

It can be stated that the fragility theory, as well as its presumed applications, do
hold under non-distressing situations. No signiMicant difference was documented
between the fragility indexes of men and women, regardless of their group, but it
must be remarked that the collective of participants was unfortunately too
homogeneous regarding nationalities, sexes and backgrounds. It was also too small
to test for signiMicant, quantiMiable differences between: age groups (generations);
people with heterogeneous our multinational backgrounds; and Mields of studies;
even testing the same Mield of studies (economics) from different universities in
Vienna would have helped to shed more light on the primary topic of this research.
In addition to its vast number of applications, the antifragility theory seems to
explain remarkably well why we take decisions in the Minancial Mield as well as in
personal affairs without even noticing our internal reasons. It must be stated,
however, that proving that the theory is logical and fairly well applicable does not
necessarily mean that it is as innate and natural as Taleb states7. Insofar, the ability
to prove or reject one of Talebs main arguments is the biggest unMilled void in this
experiment: it was proved that a group of students of a certain age range behave in
a way that is borderline antifragile under non-distressing situations, while their
self-assessment also points in this direction, but the experimental design did not
allow to prove 1) how collective behaves, 2) how individual fragility or antifragility
transfers to society and/or vice versa, and 3) what causes systems to be fragile, or
if the fragility of the status quo makes individuals fragile.
Finally, further research in the antifragility theory is recommended, necessarily
focusing on individual decisions under pressure or distress, something that is
usually difMicult to test in a controlled, computer-based experiment. The new
research could then be compared with the results of this experiment in order to
provide the reader with a broader view of the implications of the propositions.
Hypotheses one and two were tested successfully, but budgetary and
organizational constraints made the third hypothesis untestable, which was
originally designed to enrich the results of this investigation.

7 (Taleb, 2013, Ch. 6)

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Bibliography
Fischbacher, U. (2007) z-Tree: Zurich Toolbox for Readymade Economic Experiments.
Retrieved on October 12, 2014 from http://www.iew.uzh.ch/ztree/index.php
Hens, T. & Rieger, M.O. (2010). Financial Economics- A Concise Introduction to
Classical and Behavioral Finance. DOI 10.1007/978-3-540-36148-0
Taleb, N. (2013). Antifragilitt- Anleitung fr eine Welt, die wir nicht verstehen (1st
german edition). Retrieved from Facultas Online.
Taleb, N. (2015). Nassim Nicholas Talebs Home Page. Retrieved on January 31, 2015
from http://www.fooledbyrandomness.com

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