Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets [NOOK Book]


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, and The Bed of Procrustes.

“[Taleb is] Wall Street’s ...
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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

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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, and The Bed of Procrustes.

“[Taleb is] Wall Street’s principal dissident. . . . [Fooled By Randomness] is to conventional Wall Street wisdom approximately what Martin Luther’s ninety-nine theses were to the Catholic Church.”
Malcolm Gladwell, The New Yorker

Finally in paperback, the word-of-mouth sensation that will change the way you think about the markets and the world.This book is about luck: more precisely how we perceive luck in our personal and professional experiences.

Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill–the world of business–Fooled by Randomness is an irreverent, iconoclastic, eye-opening, and endlessly entertaining exploration of one of the least understood forces in all of our lives.

From the Trade Paperback edition.
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Editorial Reviews

Paul Wilmott
A blast of common sense. From classical to modern philosophers, via cab drivers, businessmen, and dentists . . .
Marco Avellaneda
Intelligent, honest, and revealing. There exists a distinct Taleb way of thinking and it is contagious.
Robert J. Shiller
I really liked this book. . . It is fun to read, refreshingly independently-minded and at the same time playful.
Peter L. Bernstein
. . . Taleb will grab you. As a non-random consequence, your understanding of life (and your money will expand exponentially.
Donald Geman
Taleb's book is mathematically sound as well as entertaining and informative for the general public, which is quite an achievement . . .
Victory Niederhoffer
Whether you agree with Mr. Taleb or not, his book will leave you with many suggestive queries.
Publishers Weekly
In this look at financial luck, hedge fund manager Taleb (Dynamic Hedging) addresses the apparently irrational movement of money markets around the world. Using his own investing experience and examples of others' successes and disappointments, he discusses theories like Monte Carlo math (easy; considered cheating by purists) and the concept of Russian roulette. Taleb tells interesting, well-wrought stories about individual behavior: "While Nero has succeeded beyond his wildest dreams, both personally and intellectually, he is starting to consider himself as having missed a chance somewhere." While serious investors and mathematics enthusiasts will be intrigued, readers looking for practical investment strategies will be disappointed by this rambling intellectual discourse. Tables. 40,000-copy first printing; $150,000 marketing budget. (Oct. 30) Copyright 2001 Cahners Business Information.
From the Publisher
"[Taleb is] Wall Street’s principal dissident. . . . [Fooled By Randomness] is to conventional Wall Street wisdom approximately what Martin Luther’s ninety-nine theses were to the Catholic Church.”
Malcolm Gladwell, The New Yorker

“Fascinating . . . Taleb will grab you.”
Peter L. Bernstein, author of Against the Gods: The Remarkable Story of Risk

“Recalls the best of scientist/essayists like Richard Dawkins . . . and Stephen Jay Gould.”
Michael Schrage, author of Serious Play

“We need a book like this . . . fun to read, refreshingly independent-minded.”
Robert J. Shiller, author of Irrational Exuberance

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Product Details

  • ISBN-13: 9781588367679
  • Publisher: Random House Publishing Group
  • Publication date: 10/14/2008
  • Series: Incerto, #1
  • Sold by: Random House
  • Format: eBook
  • Sales rank: 98,720
  • File size: 904 KB

Meet the Author

Nassim Nicholas Taleb has devoted his life to problems of uncertainty, probability, and knowledge. He spent nearly two decades as a businessman and quantitative trader before becoming a full-time philosophical essayist and academic researcher in 2006. Although he spends most of his time in the intense seclusion of his study, or as a flâneur meditating in cafés, he is currently Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute. His main subject matter is “decision making under opacity”—that is, a map and a protocol on how we should live in a world we don’t understand.
Taleb’s books have been published in thirty-three languages.

From the Hardcover edition.
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Read an Excerpt

Chapter 1

Croesus, King of Lydia, was considered the richest man of his time. To this day Romance languages use the expression “rich as Croesus” to describe a person of excessive wealth. He was said to be visited by Solon, the Greek legislator known for his dignity, reserve, upright morals, humility, frugality, wisdom, intelligence, and courage. Solon did not display the smallest surprise at the wealth and splendor surrounding his host, nor the tiniest admiration for their owner. Croesus was so irked by the manifest lack of impression on the part of this illustrious visitor that he attempted to extract from him some acknowledgment. He asked him if he had known a happier man than him. Solon cited the life of a man who led a noble existence and died while in battle. Prodded for more, he gave similar examples of heroic but terminated lives, until Croesus, irate, asked him point-blank if he was not to be considered the happiest man of all. Solon answered: “The observation of the numerous misfortunes that attend all conditions forbids us to grow insolent upon our present enjoyments, or to admire a man’s happiness that may yet, in course of time, suffer change. For the uncertain future has yet to come, with all variety of future; and him only to whom the divinity has [guaranteed] continued happiness until the end we may call happy.”

The modern equivalent has been no less eloquently voiced by the baseball coach Yogi Berra, who seems to have translated Solon’s outburst from the pure Attic Greek into no less pure Brooklyn English with “it ain’t over until it’s over,” or, in a less dignified manner, with “it ain’t over until the fat lady sings.” In addition, aside from his use of the vernacular, the Yogi Berra quote presents an advantage of being true, while the meeting between Croesus and Solon was one of those historical facts that benefited from the imagination of the chroniclers, as it was chronologically impossible for the two men to have been in the same location.

Part I is concerned with the degree to which a situation may yet, in the course of time, suffer change. For we can be tricked by situations involving mostly the activities of the goddess Fortuna—Jupiter’s firstborn daughter. Solon was wise enough to get the following point; that which came with the help of luck could be taken away by luck (and often rapidly and unexpectedly at that). The flipside, which deserves to be considered as well (in fact it is even more of our concern), is that things that come with little help from luck are more resistant to randomness. Solon also had the intuition of a problem that has obsessed science for the past three centuries. It is called the problem of induction. I call it in this book the black swan or the rare event. Solon even understood another linked problem, which I call the skewness issue; it does not matter how frequently something succeeds if failure is too costly to bear.

Yet the story of Croesus has another twist. Having lost a battle to the redoubtable Persian king Cyrus, he was about to be burned alive when he called Solon’s name and shouted (something like) “Solon, you were right” (again this is legend). Cyrus asked about the nature of such unusual invocations, and he told him about Solon’s warning. This impressed Cyrus so much that he decided to spare Croesus’ life, as he reflected on the possibilities as far as his own fate was concerned. People were thoughtful at that time.

If You’re So Rich, Why Aren’t You So Smart?

An illustration of the effect of randomness on social pecking order and jealousy, through two characters of opposite attitudes. On the concealed rare event. How things in modern life may change rather rapidly, except, perhaps, in dentistry.

Nero Tulip

Hit by Lightning

Nero Tulip became obsessed with trading after witnessing a strange scene one spring day as he was visiting the Chicago Mercantile Exchange. A red convertible Porsche, driven at several times the city speed limit, abruptly stopped in front of the entrance, its tires emitting the sound of pigs being slaughtered. A visibly demented athletic man in his thirties, his face flushed red, emerged and ran up the steps as if he were chased by a tiger. He left the car double-parked, its engine running, provoking an angry fanfare of horns. After a long minute, a bored young man clad in a yellow jacket (yellow was the color reserved for clerks) came down the steps, visibly untroubled by the traffic commotion. He drove the car into the underground parking garage—perfunctorily, as if it were his daily chore.

That day Nero Tulip was hit with what the French call a coup de foudre, a sudden intense (and obsessive) infatuation that strikes like lightning. “This is for me!” he screamed enthusiastically—he could not help comparing the life of a trader to the alternative lives that could present themselves to him. Academia conjured up the image of a silent university office with rude secretaries; business, the image of a quiet office staffed with slow thinkers and semislow thinkers who express themselves in full sentences.

Temporary Sanity

Unlike a coup de foudre, the infatuation triggered by the Chicago scene has not left him more than a decade and a half after the incident. For Nero swears that no other lawful profession in our times could be as devoid of boredom as that of the trader. Furthermore, although he has not yet practiced the profession of high-sea piracy, he is now convinced that even that occupation would present more dull moments than that of the trader.

Nero could best be described as someone who randomly (and abruptly) swings between the deportment and speech manners of a church historian and the verbally abusive intensity of a Chicago pit trader. He can commit hundreds of millions of dollars in a transaction without a blink or a shadow of a second thought, yet agonize between two appetizers on the menu, changing his mind back and forth and wearing out the most patient of waiters.

Nero holds an undergraduate degree in ancient literature and mathematics from Cambridge University. He enrolled in a Ph.D. program in statistics at the University of Chicago but, after completing the prerequisite coursework, as well as the bulk of his doctoral research, he switched to the philosophy department. He called the switch “a moment of temporary sanity,” adding to the consternation of his thesis director, who warned him against philosophers and predicted his return back to the fold. He finished writing his thesis in philosophy. But not the Derrida continental style of incomprehensible philosophy (that is, incomprehensible to anyone outside of their ranks, like myself). It was quite the opposite; his thesis was on the methodology of statistical inference in its application to the social sciences. In fact, his thesis was indistinguishable from a thesis in mathematical statistics—it was just a bit more thoughtful (and twice as long).

It is often said that philosophy cannot feed its man—but that was not the reason Nero left. He left because philosophy cannot entertain its man. At first, it started looking futile; he recalled his statistics thesis director’s warnings. Then, suddenly, it started to look like work. As he became tired of writing papers on some arcane details of his earlier papers, he gave up the academy. The academic debates bored him to tears, particularly when minute points (invisible to the noninitiated) were at stake. Action was what Nero required. The problem, however, was that he selected the academy in the first place in order to kill what he detected was the flatness and tempered submission of employment life.

After witnessing the scene of the trader chased by a tiger, Nero found a trainee spot on the Chicago Mercantile Exchange, the large exchange where traders transact by shouting and gesticulating frenetically. There he worked for a prestigious (but eccentric) local, who trained him in the Chicago style, in return for Nero solving his mathematical equations. The energy in the air proved motivating to Nero. He rapidly graduated to the rank of self-employed trader. Then, when he got tired of standing on his feet in the crowd, and straining his vocal cords, he decided to seek employment “upstairs,” that is, trading from a desk. He moved to the New York area and took a position with an investment house.

Nero specialized in quantitative financial products, in which he had an early moment of glory, became famous and in demand. Many investment houses in New York and London flashed huge guaranteed bonuses at him. Nero spent a couple of years shuttling between the two cities, attending important “meetings” and wearing expensive suits. But soon Nero went into hiding; he rapidly pulled back to anonymity—the Wall Street stardom track did not quite fit his temperament. To stay a “hot trader” requires some organizational ambitions and a power hunger that he feels lucky not to possess. He was only in it for the fun—and his idea of fun does not include administrative and managerial work. He is susceptible to conference room boredom and is incapable of talking to businessmen, particularly the run-of-the-mill variety. Nero is allergic to the vocabulary of business talk, not just on plain aesthetic grounds. Phrases like “game plan,” “bottom line,” “how to get there from here,” “we provide our clients with solutions,” “our mission,” and other hackneyed expressions that dominate meetings lack both the precision and the coloration that he prefers to hear. Whether people populate silence with hollow sentences, or if such meetings present any true merit, he does not know; at any rate he did not want to be part of it. Indeed Nero’s extensive social life includes almost no businesspeople. But unlike me (I can be extremely humiliating when someone rubs me the wrong way with inelegant pompousness), Nero handles himself with gentle aloofness in these circumstances.

So, Nero switched careers to what is called proprietary trading. Traders are set up as independent entities, internal funds with their own allocation of capital. They are left alone to do as they please, provided of course that their results satisfy the executives. The name proprietary comes from the fact that they trade the company’s own capital. At the end of the year they receive between 7% and 12% of the profits generated. The proprietary trader has all the benefits of self-employment, and none of the burdens of running the mundane details of his own business. He can work any hours he likes, travel at a whim, and engage in all manner of personal pursuits. It is paradise for an intellectual like Nero who dislikes manual work and values unscheduled meditation. He has been doing that for the past ten years, in the employment of two different trading firms.

Modus Operandi

A word on Nero’s methods. He is as conservative a trader as one can be in such a business. In the past he has had good years and less than good years—but virtually no truly “bad” years. Over these years he has slowly built for himself a stable nest egg, thanks to an income ranging between $300,000 and (at the peak) $2.5 million. On average, he manages to accumulate $500,000 a year in after-tax money (from an average income of about $1 million); this goes straight into his savings account. In 1993, he had a bad year and was made to feel uncomfortable in his company. Other traders made out much better, so the capital at his disposal was severely reduced, and he was made to feel undesirable at the institution. He then went to get an identical job, down to an identically designed workspace, but in a different firm that was friendlier. In the fall of 1994 the traders who had been competing for the great performance award blew up in unison during the worldwide bond market crash that resulted from the random tightening by the Federal Reserve Bank of the United States. They are all currently out of the market, performing a variety of tasks. This business has a high mortality rate.

Why isn’t Nero more affluent? Because of his trading style—or perhaps his personality. His risk aversion is extreme. Nero’s objective is not to maximize his profits, so much as it is to avoid having this entertaining machine called trading taken away from him. Blowing up would mean returning to the tedium of the university or the nontrading life. Every time his risks increase, he conjures up the image of the quiet hallway at the university, the long mornings at his desk spent in revising a paper, kept awake by bad coffee. No, he does not want to have to face the solemn university library where he was bored to tears. “I am shooting for longevity,” he is wont to say.

Nero has seen many traders blow up, and does not want to get into that situation. Blow up in the lingo has a precise meaning; it does not just mean to lose money; it means to lose more money than one ever expected, to the point of being thrown out of the business (the equivalent of a doctor losing his license to practice or a lawyer being disbarred). Nero rapidly exits trades after a predetermined loss. He never sells “naked options” (a strategy that would leave him exposed to large possible losses). He never puts himself in a situation where he can lose more than, say, $1 million—regardless of the probability of such an event. That amount has always been variable; it depends on his accumulated profits for the year. This risk aversion prevented him from making as much money as the other traders on Wall Street who are often called “Masters of the Universe.” The firms he has worked for generally allocate more money to traders with a different style from Nero, like John, whom we will encounter soon.

Nero’s temperament is such that he does not mind losing small change. “I love taking small losses,” he says. “I just need my winners to be large.” In no circumstances does he want to be exposed to those rare events, like panics and sudden crashes, that wipe a trader out in a flash. To the contrary, he wants to benefit from them. When people ask him why he does not hold on to losers, he invariably answers that he was trained by “the most chicken of them all,” the Chicago trader Stevo who taught him the business. This is not true; the real reason is his training in probability and his innate skepticism.

From the Trade Paperback edition.

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Table of Contents

Pt. I Solon's warning
1 If you're so rich, why aren't you so smart? 5
2 A bizarre accounting method 22
3 A mathematical meditation on history 43
4 Randomness, nonsense, and the scientific intellectual 70
5 Survival of the least fit - can evolution be fooled by randomness? 79
6 Skewness and asymmetry 97
7 The problem of induction 116
Pt. II Monkeys on typewriters
8 Too many millionaires next door 139
9 It is easier to buy and sell than fry an egg 149
10 Loser takes all - on the nonlinearities of life 172
11 Randomness and our mind : we are probability blind 182
Pt. III Wax in my ears
12 Gamblers' ticks and pigeons in a box 226
13 Carneades comes to Rome : on probability and skepticism 234
14 Bacchus abandons antony 245
Epilogue : Solon told you so 250
Postscript : three afterthoughts in the shower 253
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Customer Reviews

Average Rating 4
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See All Sort by: Showing 1 – 20 of 44 Customer Reviews
  • Anonymous

    Posted April 8, 2006


    We are experiencing a dramatic shift in America where individuals are assuming greater risks. The old defined retirement benefits plans are being replaced by defined contribution plans (i.e. 401k plans). Under these contribution plans, it is the employee who makes the investments decisions and faces a loss in retirement wealth when these investments sour. Job security is not what it once was. Our future well being is becoming increasingly dependent on random events. This makes the topic in Taleb¿s ¿Fooled by Randomness¿ very timely. In order to make good decisions, we need to be both financially and statistically literate. Taleb¿s book gets us off to a good start. All too often we mistake random events with deterministic ones particularly when judging a person¿s past performance. If this book is worth buying it is because of the Table P.1 that summarizes how we can make faulty judgments by ¿being fooled by randomness.¿ After this, it deteriorates. He does not explain important concepts correctly, and he tries to give the impression that nobody accounts for randomness. He criticizes mathematicians for ignoring randomness, even though there is an entire field in mathematics devoted to understanding randomness. Taleb is confused. Risk adverse individuals attempt to avoid the potential ill effects of randomness however, this does not mean that they avoid the understanding of randomness. Randomness can be synonymous with vulnerability. The book is filled with contradictions where he says one thing and a few pages later reverses himself. For a PhD he has an amazingly poor grasp of probability theory. No wonder he does not like mathematicians, he does not understand the discipline. Although he claims that financial markets are unpredictable, he claims to have a trading strategy that guarantees him positive profits. Go figure. No where in his book does he discuss the concept of conditional expectation. His fictional characters are not convincing. The ¿risk averse¿ Nero is supposedly buying Treasuries when he could get a higher and equally safe after tax return with buying municipal bonds. The worst part of this book is the moral implications. All of life is uncontrolled randomness. Our decisions and our efforts do not matter and there is no role for personal responsibility. People who do try to explain randomness or who try to take responsibility are personally attacked. After writing this book, Taleb appeared on CNBC TV. He told the announcer that if a person comes into your office and uses the word ¿standard deviation¿, you should throw him out. The announcer asked Taleb why this should be done. And Taleb responded, ¿Because everything is not normally distributed.¿ Do I need to say anything more?

    7 out of 7 people found this review helpful.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted October 11, 2007

    Facts and.... falacy

    The author has his own ax to grind. His personal view is that markets are random. The more accepted view is that markets are chaotic. The difference, while subtle, is rewarding, both mathematically and financially. Taleb manages one or more funds which, as I understand it, are based on his view of the market. I have heard assorted reports as to the success of said funds. The short version is that his avowed approach requires huge amounts of patience and very large capitalization. That said, mathematically, his approach is sensible... in the long term. But as Keyens said, in the long run, we are all dead.

    2 out of 2 people found this review helpful.

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  • Posted July 26, 2009

    more from this reviewer

    Great Book

    What a great book! For all of us hard decision makers out there, this book really helps the psyche and will to "just do it." If you are looking for a book that will help you lose control and gain mental health, this is a good one.

    1 out of 1 people found this review helpful.

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  • Posted July 20, 2009

    Bring Sanity to Your Portfolio

    I would recommend those books for investors, who are above the beginning stage. This books emphasizes the role of planning for the unpredictable in your portfolio. This books could have more examples of the historical application of his view. Also, the author does come off conceited throughout the book, even though he admits that he does have his flaws later.

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted May 30, 2007


    If you can get past the first half of the book, where the author comes off as a very conceited and know-it-all type person, the book is well worth the time and money. I am an avid trader in stocks, currencies and futures, as well as an enthusiastic poker player. It addresses a lot of crucial ideas that people (most notably investors) today rarely have an understanding of, especially when it comes to probability.

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted December 17, 2005

    A book review while 'standing on one leg'

    What are some of the book¿s good points ? It communicates our deep flaws as decision-makers in a thoughtful and humane manner. It amusingly discusses `Risk Managers¿ as being clueless concerning randomness. The story of `Solon¿ is priceless in that it communicates true foundations for people who want to be risk managers regardless of its proximity to their business cards. Wittgenstein¿s Ruler story will change the way you think about econometrics, if you ever thought about it at all. It succinctly communicates the essence of why Karl Popper is worth understanding ¿. and does the same for simulation using the Russian roulette story. It inspired at least one entrepreneur.

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted September 12, 2014


    This is a great book

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  • Anonymous

    Posted September 1, 2013


    Great book

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  • Anonymous

    Posted February 17, 2012

    Excellent book about markets and about life

    Nassim Taleb brings out some of the most interesting and insightful ideas and observations that I've seen in a long time. If you read this book and "The Black Swan" it will change the way you look at the world around you and help you protect yourself from the vagaries of our unpredictable markets. It sheds light on why unpredictable events are so unpredictable, but also on why, at the same time, we are addicted to predictions and explanations, even though they are useless and impossible.

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  • Posted November 2, 2011

    How would i know

    I cannot rate and review a book i have NEVER received. I will not be doing any additional business with Barnes and Noble. I do not have any difficulty getting my books from Amazon, which i will be doing business with in the future. If you are going to do business with someone, make sure they are reliable, as this company, obviously is not! You got my money, but i do not have my book.

    0 out of 5 people found this review helpful.

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  • Posted July 5, 2011

    Seemed a little random

    I thought the book kind of rambled with a lot of anectdotal stories. He seems quite conceited in a humble sort of way and it grates on you after a while. There were a lot of interesting examples that explain most people's misunderstanding of probability. I think the way he explains the bigger payoffs/risks of big chance strategies vs the smaller payoffs/less risks, more pedestrian, yet more predictable strategies is the key point of the book (i.e. one out thousands of actors is successful and becomes a multimillionaire, the rest are poor waiters, but almost everyone that goes to school to be a dentist will make a respectable, reliable income. The total payoff for dentists if better than the total payoff for actors and more equitably distributed.) Frankly, by the end of the book, I could hardly wait for it to be over.

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  • Posted March 20, 2010

    Good Read

    Simply put, this book breaks down many of our preconceived notions of probability.

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  • Anonymous

    Posted December 2, 2009

    I Also Recommend:

    A Real Wow Book

    This may be the best self improvement book I have ever read -- even though the book is not marketed as such. It's an eye opening experience and one I learned a lot from. Just in my day to day life there is a tendency to rationalize bad decisions and attribute luck to my own skill. Getting a grip on what I can control and what is random can only help me make better quality decisions in all aspects of my life. Essential reading for anyone who want to understand how to compete more effectively.

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  • Anonymous

    Posted May 29, 2004

    Waste of Time

    This book is a complete waste to read. The analysis and arguments are extremely dull and elementary and are written in a very pedantic style. It is more one man's personal insults to all those who have far exceeded him in trading the markets. There is nothing of value in this book.

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  • Anonymous

    Posted January 14, 2004


    Taleb doesn't put as much math in the book as I'd like, or expected, but the point he gets across is awesome. Seemingly anecdotal, at times, he incorporates lots of stories which range from Roman rulers to traders on the exchange floor. Absolutely excellent.

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  • Anonymous

    Posted October 27, 2001


    The narrator may come across as having a big ego, but he is absolutely charming. He lulls you into his world with a totally different logic. He sees randomness where you suspect none and convinces you.

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  • Anonymous

    Posted September 19, 2001

    Managing Unpredictable Variations in Order to Prosper!

    Every person who is interested in investing should read this book! In investing, few can tell the difference between being lucky and smart. Being successful in the short term can come from either source. If it is coming from unrecognized sources of luck, however, the behavior that the investor associates with success can sink the ship. The cautionary tale of Long-Term Capital Management is cited in the book as an example of this point. ¿If you¿re so rich, why aren¿t you smart?¿ is the wonderful reversal here on the old saw. I see this effect all the time in my consulting practice with helping companies understand how their decisions affect their stock price. A large percentage of people feel that they know all the answers when their stock price is rising. They keep doing the same things when the stocks are falling. Few survive to still have top jobs when the cycle shifts again. Then a new group of self-confident people take over who often don¿t know any more than those who preceded them. It¿s just that their track records look better. Fooled by Randomness will help make you more knowledgeably humble about what you can expect to accomplish with investments. Not only do fewer than one percent outperform the market averages over long time periods, the ones who do are probably often being aided by luck as well. ¿Get thee to the index funds as soon as possible¿ is the message that most should take away from this book. Better yet, buy them when multiples are low! The book¿s fundamental point is that there is tremendous volatility in any investment. Ignore that volatility to your peril. At the same time, you should be cautious about how well you understand the volatility. Stocks at their lows can still go to zero. There are all kinds of events that can happen, that have not done so yet. When they do, throw out all the old rules of investing. The terrorist attacks on the United States last week are probably an example of this. So each investment must be made as though you could be totally wrong. This means that you have to manage your risk exposure to events you don¿t even know how to expect. I loved his example of the joint probabilities of having a rare disease if you get a positive result on a test for that disease. Even most doctors apparently don¿t know how to evaluate that one. If even well educated people cannot quantify two known risks occurring simultaneously in their own field, how can investors be expected to make good decisions? Dr. Taleb has some very good advice for how to handle the psychology of being able to do this. He upholds the Stoic ideal -- ¿the attempt by man to get even with probability¿ which encourages ¿wisdom, upright dealing, and courage.¿ This means not chasing the latest investment fad or fashion, not looking at your investments very often, and being open to both sides of any idea (it could go wrong as well as right --what are the consequences of both?). I especially liked his idea of watching CNBC with the sound off so that the ¿experts¿ seem humorous and you are less likely to hear and follow their advice. Even more poignant was his advice not to live on Park Avenue where living with all of the arrogant, temporarily lucky can make you feel small. Instead, live somewhere that the results of your cautious approach will cause you to be the envy of all. Dr. Taleb impressed me with his willingness to tell stories on himself about how quickly he can become superstitious when things are going well, take on excess risks, and start looking too short term. After all, we are only human! The importance of this book can only be appreciated if you go back and think about your biggest investing successes. How much was luck versus skill? A good way to test is to see if the same approach has continued to work for you whenever you use it. Another good test is to see how often it would have backfired in the past. In my research on good decision mak

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