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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (2001)

by Nassim Nicholas Taleb

Other authors: See the other authors section.

Series: Incerto (1)

MembersReviewsPopularityAverage ratingMentions
4,014552,722 (3.89)32
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… (more)
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» See also 32 mentions

English (52)  Italian (2)  Dutch (1)  All languages (55)
Showing 1-5 of 52 (next | show all)
Not so enamoured with this popular book. Taleb finds himself incredibly intelligent for stating that hedging one’s bets is a good idea and that randomness exists. Much of the book is spent on autofellatio and disparaging complex philosophy. It starts being a worthwhile read at about page 206. The typeface is the book’s greatest achievement. ( )
  HundredFlowersBloom | Jan 27, 2023 |
Some good arguements here and there but presented in a total mess of utterly bad writing. If this book was written in a better, more organized fashion, then it probably would be a must-buy. ( )
  nonames | Jan 14, 2022 |
Fooled by Randomness is a short book that has triggered a lot of discussion in some circles and I can see why. It's very provocative and the author has a air of superiority that can easily make you want to disagree just because he is annoying.

The theme of the book is this:

1. You cannot prove that success in markets is not luck or that the movement of markets is not random.

2. In the random set are included extraordinary events with very low probability.

3. If the markets are random, then the successful people at trading are probably just lucky and we should not give them any attention because their luck will eventually run out anyway.

My criticism to this book, apart from the literary style, is that it is based on hypothetical premises and if you don't agree or believe those premises are true or relevant, then the whole book loses its meaning. Personally I do believe there are things here to consider, but I would not recommend this book to anyone.

My belief is that there is a large portion of luck in success. Being at the right place at the right time with the right attitude and training to take advantage of the opportunity style luck. Not being at the wrong side of a sudden unexpected event style luck. But there is also a lot of bad skills so when you look at failure, it can be either bad luck or bad skills. Then the other way around, lack of bad skills could be considered a skill. So success has one portion of skill.

Taleb's main argument in the book is that people he knew and that did well, sooner or later lost it all. His interpretation is that when they did well, they were lucky, and when the luck ran out, they were puppets and could not prevent their personal crashes. To me that is a very thin argument. He refers a lot to Daniel Kahneman ([b:Thinking, Fast and Slow|11468377|Thinking, Fast and Slow|Daniel Kahneman|https://d.gr-assets.com/books/1317793965s/11468377.jpg|16402639]) (who in turn refers to Taleb's previous book, [b:The Black Swan: The Impact of the Highly Improbable|242472|The Black Swan The Impact of the Highly Improbable|Nassim Nicholas Taleb|https://d.gr-assets.com/books/1386925471s/242472.jpg|2157806]) but those references are not an argument. You can name drop people all you want, it's still not an argument.

To be fair, there is an extensive literature list at the end and he starts the book by saying he wanted to write a book about philosophy, not a scientific paper. Still, doesn't make it more believable.

In summary: bonus points for pointing out how much of success might be randomness. Points deducted for basing it on ramblings.

I will read [b:The Black Swan: The Impact of the Highly Improbable|242472|The Black Swan The Impact of the Highly Improbable|Nassim Nicholas Taleb|https://d.gr-assets.com/books/1386925471s/242472.jpg|2157806] at some time, because that book seems to have much of what this book lacks.

( )
  bratell | Dec 25, 2020 |
Not what it purports to be, it's mostly autobiographical in nature. Some self-aggrandizement is fine given his job but the book is also full of cheap digs at his colleagues and since I don't really know the author or his friends it's all lost on me. The book starts out with a disclaimer that it will not attempt science or reason (research is hard!) because it's more about anecdotes and gut feelings and then continues to point and laugh at all those pseudo-science done by other traders.

The contempt for people earning less money was also off-putting. I got so used to the praise of people who make and do things as valuable to society in books that touch on economical issues that this view of the world actually managed to shock me. Although some of them were funny:

"He just has a rulebook and, over a career spanning forty to forty-five years, he will just stamp documents, be mildly rude, and go home to drink nonpasteurized beer and watch soccer games. If you gave him Paul Krugman’s book on international economics he would either sell it in the black market or give it to his nephew."

Not only because the author thinks used books are sold on the black market. ( )
  Paul_S | Dec 23, 2020 |
Informed view of randomness and how we oftentimes dramatically disregard it. Author is quite cynical, which was somewhat distasteful during the read, but his points are well taken and thought provoking. Recommend. ( )
  bsmashers | Aug 1, 2020 |
Showing 1-5 of 52 (next | show all)
The lesson here for investors is powerful and frightening. How much can you rely on the track records of investment advisers, mutual fund managers, newspaper columnists, or even the market as a whole in making decisions about your investment portfolio? Not nearly as much as you probably think.

 

» Add other authors (10 possible)

Author nameRoleType of authorWork?Status
Nassim Nicholas Talebprimary authorall editionscalculated
Sergio, ChristopherCover designersecondary authorsome editionsconfirmed
Welch, ChrisDesignersecondary authorsome editionsconfirmed
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This book is the synthesis of, on one hand, the no-nonsense practitioner of uncertainty who spent his professional life trying to resist being fooled by randomness and trick the emotions associated with probabilistic outcomes and, on the other, the aesthetically obsessed, literature-loving human being willing to be fooled by any form of nonsense that is polished, refined, original, and tasteful.
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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

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Book description
Table of Contents from Worldcat:

Preface -- Acknowledgments for the updated second edition -- Chapter summaries -- Prologue -- pt. I. Solon's warning : skewness, asymmetry, induction -- 1. If you're so rich, why aren't you so smart? -- Nero Tulip -- Hit by lightning -- Temporary sanity -- Modus operandi -- No work ethics -- There are always secrets -- John the high-yield trader -- An overpaid hick -- The red-hot summer -- Serotonin and randomness -- You dentist is rich, very rich -- 2. A bizarre accounting method -- Alternative history -- Russian roulette -- Possible worlds -- An even more vicious roulette -- Smooth peer relations -- Salvation via aeroflot -- Solon visits Regine's nightclub -- George Will is no Solon : on counterintuitive truths -- Humiliated in debates -- A different kind of earthquake -- Proverbs galore -- Risk managers -- Epiphenomena -- 3. A mathematical mediation on history -- Europlayboy mathematics -- The tools -- Monte Carlo mathematics -- Fun in my attic -- Making history -- Zorglubs crowding the attic -- Denigration of history -- The stove is hot -- Skills in predicting past history -- My Solon -- Distilled thinking on your PalmPilot -- Breaking news -- Shiller redux -- Gerontocracy -- Philostratus in Monte Carlo : on the difference between noise and information -- 4. Randomness, nonsense, and the scientific intellectual -- Randomness and the verb -- Reverse turing test -- The father of all pseudothinkers -- Monte Carlo poetry -- 5. Survival of the least fit, can evolution be fooled by randomness? -- Carlos the emerging-markets wizard -- The good years -- Averaging down -- Lines in the sand -- John the high-yield trader -- The quant who knew computers and equations -- The traits they shared -- A review of market fools of randomness constants -- Naive evolutionary theories -- Can evolution be fooled by randomness? -- 6. Skewness and asymmetry -- The median is not the message -- Bull and bear zoology -- An arrogant twenty-nine-year-old son -- Rare events -- Symmetry and science -- Almost everybody is above average -- The rare-event fallacy -- The mother of all deceptions -- Why don't statisticians detect rare events? -- A mischievous child replaces the black balls -- 7. The problem of induction -- From Bacon to Hume -- Cygnus Stratus -- Nordhoff's -- Sir Karl's promoting agent -- Location, location -- Popper's answer -- Open society -- Nobody is perfect -- Induction and memory -- Pascal's wager -- Thank you, Solon -- pt. II. Monkeys on typewriters : survivorship and other biases -- It depends on the number of monkeys -- Vicious real life -- This section -- 8. Too many millionaires next door -- How to stop the sting of failure -- Somewhat happy -- Too much work -- You're a failure -- Double survivorship biases -- More experts -- Visibility winners -- It's a bull market -- A guru's opinion -- 9. It is easier to buy and sell than fry an egg -- Fooled by numbers -- Placebo investors -- Nobody has to be competent -- Regression to the mean -- Ergodicity -- Life is coincidental -- The mysterious letter -- An interrupted tennis game -- Reverse survivors -- The birthday paradox -- It's a small world! -- Data mining, statistics, and charlatanism -- The best book I have ever read! -- The backtester -- A more unsettling extension -- The earnings season : fooled by the results -- Comparative luck -- Cancer cures -- Professor Pearson goes to Monte Carlo (literally) : randomness does not look random! -- The dog that did not bark : on biases in scientific knowledge -- I have no conclusion -- 10. Loser takes all, on the nonlinearities of life -- The sandpile effect -- Enter randomness -- Learning to type -- Mathematics inside and outside the real world -- The science of networks -- Our brain -- Buridan's donkey or the good side of randomness -- When it rains, it pours -- 11. Randomness and our mind : we are probability blind -- Paris or the Bahamas? -- Some architectural considerations -- Beware the philosopher bureaucrat -- Satisficing -- Flawed, not just imperfect -- Kahneman and Tversky -- Where is Napoleon when we need him? -- "I'm as good as my last trade" and other heuristics -- Degree in a fortune cookie -- Two systems of reasoning -- Why we don't marry the first date -- Our natural habitat -- Fast and frugal -- Neurobiologists too -- Kafka in a courtroom -- An absurd world -- Examples of biases in understanding probability -- We are option blind -- Probabilities and the media (more journalists) -- CNBC at lunchtime -- You should be dead by now -- The Bloomberg explanations -- Filtering methods -- We do not understand confidence levels -- An admission -- pt. III. Wax in my ears : living with randomitis -- I am not so intelligent -- Wittgenstein's ruler -- The Odyssean mute command -- 12. Gamblers' ticks and pigeons in a box -- Taxi-cab English and causality -- The Skinner pigeon experiment -- Philostratus redux -- 13. Carneades comes to Rome : on probability and skepticism -- Carneades comes to Rome -- Probability, the child of skepticism -- Monsieur de Norpois' opinions -- Path dependence of beliefs -- Computing instead of thinking -- From funeral to funeral -- 14. Bacchus abandons Antony -- Notes on Jackie O.'s funeral -- Randomness and personal elegance -- Epilogue. Solon told you so -- Beware the London traffic jams -- Postscript. Three afterthoughts in the shower -- First thought : the inverse skills problem -- Second though : on some additional benefits of randomness -- Uncertainty and happiness -- The scrambling of messages -- Third thought : standing on one leg -- Acknowledgments for the first edition -- A trip to the library : notes and reading recommendations -- Notes -- References -- Index.
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