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Fooled by Randomness

The Hidden Role of Chance in the Markets and in Life, First Edition

By Nassim Nicholas Taleb

(135)

| Hardcover | 9781587990717

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Book Description

This book is about luck -- or more precisely how we perceive and deal with luck in business and life.

Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill -- the world of trading -- Fooled by Randomness is a captivating insight into one of the least uContinue

This book is about luck -- or more precisely how we perceive and deal with luck in business and life.

Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill -- the world of trading -- Fooled by Randomness is a captivating insight into one of the least understood factors in all our lives. Writing in an entertaining and narrative style, the author succeeds in tackling and explaining three major intellectual issues: the problem of induction, the survivorship biases, and our genetic unfitness to the modern world.

The book is populated with an array of characters, some of whom have grasped, in their own way, the significance of chance: Yogi Berra, the baseball legend; Karl Popper, the philosopher of knowledge; Solon, the Ancient World's wisest man; the modern financier George Soros; and the Greek voyager Ulysses. In addition we meet the fictional Nero, who seems to understand the role of randomness in his trading life, but who also falls victim to his own superstitious foolishness.

But the most recognizable character of all remains unnamed -- the lucky fool in the right place at the right time. The embodiment of the "Survival of the Least Fit." Such individuals attract devoted followers who believe in their guru's insights and methods. But no one can replicate what is obtained through chance. A monkey banging on a keyboard may eventually produce the Iliad, but would you sign him to write the sequel?

Are we capable of distinguishing the fortunate charlatan from the genuine visionary?

Must we always try to uncover non-existent messages in random events?

It may be impossible to guard ourselves against the vagaries of the Goddess Fortuna, but after reading Fooled by Randomness we can be a little better prepared.

14 Reviews

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  • 5 people find this helpful

    Life changing

    Reading this book has been a life changing experience to me. Granted, many of the concepts are, not exactly groundbreaking, but no one has ever been able to put together such an easy to understanding, entertaining, and, most importantly, RELEVANT framework for understanding the role of randomness in ... (continue)

    Reading this book has been a life changing experience to me. Granted, many of the concepts are, not exactly groundbreaking, but no one has ever been able to put together such an easy to understanding, entertaining, and, most importantly, RELEVANT framework for understanding the role of randomness in life. For example, similar concepts have been explored in "A Mathematician Plays the Market" by John Allen Paulos, but NNT manages to not only inform but CONVINCE me.

    This is not a nihilistic book. NNT's tenet is that we as human need to understand, through science, the limits of our mind in coping with randomness. Our brain is wired to understand and store things as narratives, with cause and consequence and meaning. We always unconsciously misjudge the meanings of probability and randomness, and the failure to anticipate for the worst is usually the gravest mistake a person can make. NNT's goal is to pound the evidence of human fallacy into the reader and to make sure that, while still complete idiots, the reader would be one of the few who are privileged with the knowledge of his idiocy.

    I am completely converted by NNT, because he manages to bring together many rules and evidences that I have always known to address a wide range of suspicions that I have always had. However, now that my understanding of the world has been thoroughly changed, I need some guidance on how I should behave. NNT has given plenty of examples in this book - e.g. if you're going to trade, never expose yourself to any possibility of a massive loss; or, just make small but steady money by being a broker - but it is difficult to apply them to the wider world. When I excitedly tell my husband about the brilliant and inspiring ideas in this book, he drove me speechless by three very simple questions - "How can all those improve my well-being? How can it help me in launching next Fall's product line?"

    I am positive that, in time, the answers can be found in this book or future works by NNT. "Fooled by Randomness" is definitely one of the several books that I am planning to read over and over again.

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    s tsui said on Jul 20, 2007 about the Paperback edition | Add your feedback

  • 2 people find this helpful

    According to 'Fortune', this is "one of the smartest books of all time". I can't agree to this point of view for at least three main reasons. First of all, no new ideas are presented. Secondly, the authors chose (?) a completely unsystematic writing-style which makes very difficult for the reader f ... (continue)

    According to 'Fortune', this is "one of the smartest books of all time". I can't agree to this point of view for at least three main reasons. First of all, no new ideas are presented. Secondly, the authors chose (?) a completely unsystematic writing-style which makes very difficult for the reader following his thoughts. Thirdly, I think the role of chance in life is even too overstated. If it is true that randomness plays a pivotal role in markets, it does not necessarily apply to real life, in which personal abilities can downsize chance effect.

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    Fabric said on Dec 25, 2010 about the Paperback edition | Add your feedback

  • 2 people find this helpful

    Wonder why there are so many jerks, bastards and simply disgusting people so lucky? Read this book, it shows the logic, maths, and truth behind it. For those not in maths, don't worry. Taleb meant it to be readable by everyone, and you will emerged with totally new understanding of many seemingly "u ... (continue)

    Wonder why there are so many jerks, bastards and simply disgusting people so lucky? Read this book, it shows the logic, maths, and truth behind it. For those not in maths, don't worry. Taleb meant it to be readable by everyone, and you will emerged with totally new understanding of many seemingly "unjust" happenings in your life.

    Well if you are a maths person, you might find the book not very mathematical at all. The point is that he has used simple maths concepts (mainly probability) to cut into a problem that is part of everyone's life. Now that's not easy.

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    Prof Nemo said on Jun 13, 2007 about the Paperback edition | Add your feedback

  • At least, be aware

    In his witty, informative, sober yet often ludicrous and sarcastic tone, Taleb expounds on the simple yet unsolvable problem of inference. This problem is as old as Solon at least, who already warned against the human tendency to infer from little empirical evidence rules and predictions expected to ... (continue)

    In his witty, informative, sober yet often ludicrous and sarcastic tone, Taleb expounds on the simple yet unsolvable problem of inference. This problem is as old as Solon at least, who already warned against the human tendency to infer from little empirical evidence rules and predictions expected to apply in general context, especially in the future. The echo of Solon's warning comes across the book and is embodied by Popper's (naive, as some say) falsificationism and his suggestion not to take science too seriously, as it may be erecting buildings on fragile fundations, to be continuously subjected to revisions or rejections. Popper had embodied Solon's call also in politics and socioeconomics with his vision of the open society, where tolerance of alternative or even competitive views is fundamental to avoid errors and be able to face sudden changes. Taleb observes that monotheisms may have a large part in the difficulty to establish a truly open society, as they foster the idea of infallibilism, monism and of absolute truth. This tendency was in fact new to the Mediterranean area where they arose, and were not totally successful in silencing the competitive attitudes, particularly stoicism, to which Taleb tributes an explicit apology toward the end, though his appreciation of Montaigne, Carneades and Zeno are evident throughout. In earnest, Taleb admits that he himself is no better than anyone else in not being fooled by randomness, but his advantage is that he is aware of that (he is a specialist in risk trading, and it is interesting to note that though the book was published in 2004, he was still able to made a large fortune in recent years using the tools he exposes. This is consistent with his claim that people can be said of how to behave for very short time (when they may even agree with the suggestions), but then revert to their innate habits; and he also state his personal paradox, for which he gains because other do not apply what he is explaining).
    Being a personal essay and not a treatise, Taleb is free from formal pressure yet conveys many concepts clearly and wittingly. He presents the results of Kahneman and Tversky at the base of behavioral finance, evolutionary psychology and brain modularity to try to explain why we may just be hardwired to be fooled by noise and not be able to behave according to our rational grasp of probabilities, as we are emotional beings - being emotional is fundamental, but has its downsides which need to be constrained, that is.
    Taleb assaults MBAs and professional traders for their apparent success based according to him more on luck than skill. He comments on the way data are easy to fit post factum, so stories to justify success are easy to accomodate though they may just be fiction. He supports the idea that heroism is to be judged on actions, not on their results - just the opposite of what historians normally do.
    The text is laden with Latin and Greek citations, which make a nice contrast to the Wall Street kind of setting of the action. His disgust for people compulsively checking news, fluctuations of prices and making judgments on easy to be scooped biases (hindsight, survivorship, anchoring, availability, endowement, and so on) is just lovely, admitted that he himself if occasionally the object of the attack, except for when that is tolerated for aestetic purposes.
    Very refreshing, intriguing, against the grain and smart. A must read.

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    Mangoo said on Jan 24, 2011 about the Paperback edition | Add your feedback

  • Excellent book. A personal rumination, but worth reading and well written.

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    Lenz said on Apr 2, 2010 about the Paperback edition | Add your feedback

  • Deliver us from ranting

    My god, what a bothersome windbag.

    He goes on and on telling useless stories and pretending to explain some (very very very basic) Statistics - only exposing his own very high self-regard.

    Totally unreadable, which is not strange for a book of >300 pages that could be easily reduced t ... (continue)

    My god, what a bothersome windbag.

    He goes on and on telling useless stories and pretending to explain some (very very very basic) Statistics - only exposing his own very high self-regard.

    Totally unreadable, which is not strange for a book of >300 pages that could be easily reduced to 10 with gain for everybody (except the author, I guess).

    The only good side is the black cat on the cover.

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    Yggdrasil said on Nov 25, 2009 about the Paperback edition | Add your feedback

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