Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto)

by: Nassim Nicholas Taleb (0)

Fooled by Randomness is a standalone book in Nassim Nicholas Taleb’s landmark Incerto series, an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we don’t understand. The other books in the series are The Black Swan, Antifragile, Skin in the Game, and The Bed of Procrustes.

Fooled by Randomness is the word-of-mouth sensation that will change the way you think about business and the world. Nassim Nicholas Taleb–veteran trader, renowned risk expert, polymathic scholar, erudite raconteur, and New York Times bestselling author of The Black Swan–has written a modern classic that turns on its head what we believe about luck and skill.

This book is about luck–or more precisely, about how we perceive and deal with luck in life and business. Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill–the world of trading–
Fooled by Randomness provides captivating insight into one of the least understood factors in all our lives. Writing in an entertaining narrative style, the author tackles major intellectual issues related to the underestimation of the influence of happenstance on our lives.

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

However, the most recognizable character of all remains unnamed–the lucky fool who happens to be in the right place at the right time–he embodies 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 by chance.

Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover nonexistent 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.

Named by Fortune One of the Smartest Books of All Time

A Financial Times Best Business Book of the Year

The Quotes

A mistake is not something to be determined after the fact, but in the light of the information until that point.

Mild success can be explainable by skills and labor. Wild success is attributable to variance.

Heroes are heroes because they are heroic in behavior, not because they won or lost.

The Reviews

I can tolerate the ego-maniacal writing style, but I cannot abide the enormous errors the author commits when he delves into science.To wit: Taleb posits that Einstein proved Newton wrong. Not true. Einstein showed that Newtonian mechanics failed at the extremes - extremely large (cosmologic) and extremely small (atomic distances). Further, he posits that the poor schlep scientist's odds of success continue to increase as he does more mouse experiments. Untrue if the hypothesis under which the scientist is proceeding is ultimately incorrect. And finally, the author accepts global warming as a given and castigates science for not having recognized the truth of it from random weather events. Taleb, stick your knitting. It's one thing to be ignorant, but another to open one's mouth and remove all doubt.

I have to confess that I stopped reading this book around page 130. The author says that many successes in investment may just be due to luck, that unexpected events can completely ruin a person, and that prudence in investing is a virtue. Fine. But this should take one paragraph not 130 pages. Yes, Talib quotes Solon, Descartes, Popper and all kind of philosophers. Yes he can speak 10 languages, he has a huge amount of knowledge. Still in this book, which seems to have been written in a hurry, he does not say anything of importance. Do not read it!

Bad news. You are a fool about to be fooled. Again. And again. Just like everybody else. We are a species of fools. What a circus! But Taleb is a special kind of fool, foolish enough to write an essay on how randomness fools us. Interesting fool, nay? The whole thing feels like a foolish attempt to make us better fools. Even his methodology writing this book is foolish. Speaking his mind and having fun. Fool, fOOl, FOOL! Outrageous even for a brave fool. If you don't take yourself too seriously (say a foolish fool), this book is damn entertaining. Otherwise, this book is very insulting for serious fools. Seems that our carbon-based machinery fails us dealing with the abstract tools (say probability theory) we have been developing to understand nature (say since Pythagoras; just to finish with a foolish guess). Enjoy, you fool.

While The Black Swan (due to the superior hook) is what put Taleb on everyone's map, I've found his first book Fooled by Randomness to be the better read. It's one of the few books on my bookshelf that I feel the need to dust off every few years and read on a long work trip just to have some critical thinking time. In fact a lot of what's in Taleb's later works are repetitions or riffs on the themes he outlines in this particular book, so best to get the thinking in its first distillation.At its heart, it's a book about humility - people are terrible at receiving information, finding discernable patterns, sorting the wheat from the chaff in information - with a touch of Stoicism intertwined about accepting fate and not bemoaning the role of chance in our lives, a message certainly worth thinking about from time to time. Always important to understand that there's a constant need for improvement so you don't get lazy and think tomorrow will be like today and the day before.Many people will be turned of by Taleb's writing style, which admittedly can be pompous at times and deliberately obfuscatory at others. But if you can tone that out when it gets to you, you'll certain find this a worthwhile read. My advice for this book, like Taleb's other books, is to read it in manageable chunks a chapter or section at a time and then take a break for the day to give it some thought. People I think are tempted to power through a 250 page book in an afternoon and that's not the best mindset to approach something this dense (or to get through the more difficult sections). Strongly recommend!

NN Taleb will go down as one of the foremost philosophers of our times.I don't exaggerate. I think he's that insightful.He combines a cool, rational stoic mind with a deep Continental intellectual with a mouthy New Yorker."Fooled by Randomness" is the answer to the question: "Why did that guy make it, but those other guys who are just as good didn't?"Why Google, and not Yahoo or some other type of Google we never heard about?Why Amazon and Bezos, and not one of the 100s of other guys selling books out of their garages who didn't make it?We as humans are full of cognitive biases. The Survivorship Bias is one of the most prevalent in our minds. No one is immune, but the more you know about it the easier it will be to catch.Taleb goes into detail in what is basically a whole book on the Survivorship Bias, in his own unique style.TL;DRPros:-Basically a cognitive psychology book infused with a memoir-I really like Taleb's writing/voice, and his true intellectual tangents that always come full circle-Nice standalone to his "Incerto"/Black Swan seriesCons:-You need to not compartmentalize the theme and concept into your mind. You might reach the end of the book and think "Well, everything is all chance and randomness. Why bother pursuing any worthwhile goal?"-I believe he goes over this at the end, but not in enough of a lengthy manner to help less-read or less-willful readers realize his true intentions: to allow you to see the world for what it really is, and that luck plays a role in success. BUT, one way you succeed is by playing into luck, and then hedging your bets to keep your gains (as his successful friend did in one example).-I like his writing style, but more sensitive readers may not like his style.Fortuna Favors the Bold.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto)
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