Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto) Paperback – August 23, 2005

Taleb is one of a kind and has ascended to becoming one of my very favorite thinker-writers. This is partly because I've myself been interested in this subject matter (uncertainty, probability, risk, judgement, decision making, etc.) for more than two decades, but also because Taleb makes original and valuable contributions to the subject, and does it with an immensely entertaining writing style.The book is too wide ranging to summarize its content in a review, but perhaps the main lesson is that we humans are inherently prone to being irrational in various ways (usually without realizing it), particularly when it comes to adequately judging risks (and opportunities) and thereby making appropriate decisions in the face of uncertainty. We're especially prone to underestimating how often outliers ("black swans") can occur and how severe their consequences can be ("blowing up" in the case of traders). A corollary is that we often underestimate the role of luck (good and bad) in shaping outcomes, and instead overestimate the role of our decisions. Though we can't eliminate our tendency toward irrationality, we can at least be aware of it, and thereby deploy some "tricks" to help control it or compensate for it.My thoughts on this book largely echo my review of Taleb's The Black Swan: The Impact of the Highly Improbable, and both books are similar in content and style, though The Black Swan: The Impact of the Highly Improbable is perhaps a bit more flamboyant (in a good way). To be more specific:- Taleb is confident and may sometimes seem condescending, but his erudition is undeniable, and a strong case can be made for his iconoclastic brilliance as well. In a book like this, perhaps the usual modesty and humility don't make sense.- He's dismissive of those he disagrees with (even Nobel prize winners), and could be accused of oversimplifying their positions, but his criticisms actually seem to have a lot of validity, and recent financial events seem to have significantly (and unfortunately) vindicated him.- He often circles around his points, but his refusal to get right to the point pushes you to think more deeply about the implications of his ideas, rather than just quickly saying "yes, that's obvious, so what?"- His frequent digressions make it harder for the reader to follow the thread of his narrative, but the digressions are fun and many are quite insightful. For an open-minded person with an intellectual inclination, this can be a very gripping book.- I do think the more technical discussions should have been more clear and precise. I guess Taleb tried to "dumb down" the book to reach a broad audience.- Many of the ideas in the book aren't original to Taleb, but the way he's woven them together and presented them with flourish certainly is, resulting in the ideas having lasting impact on the reader.- His suggestions on investing aren't very specific, but this is a book about being fooled by randomness in general, not investing in particular. And Taleb's general advice to arrange safeguards against financial disaster, and also get exposure to potentially huge opportunities, certainly seems sensible.As with The Black Swan: The Impact of the Highly Improbable, the bottom line is that this book is truly unique in its ability to intellectually entertain while conveying some deep insight and wisdom. Few people in the world have the right intersection of ingredients to produce a book like this, so we should cherish the fact that the book exists. Even if you don't fully agree with him, Taleb is worth engaging with. For readers who like this book and also have a strong interest in science, I also suggest Chance and Chaos by David Ruelle.Very highly recommended. In fact, ignore this book at your peril.

This is one the first books I ever read on markets and trading. However compared to its reviews it turned out to something completely different. It definitely was not a kind of a book where you can just read and move on but a kind that actually makes you stop and think. I always had the impression that books about the market or the economy come with a baggage of understanding the material and concepts beforehand. Fooled by Randomness threw me back by the way Nassim the author, portrayed the various facets in which randomness and probability not only rule markets or trading but everyone's life in general. It was fascinating to see that such a world even exists and that people who are driven by profit do not always take a straightforward path.Overall the book was interesting for a novice reader but definitely not an easy to follow book. There were many parts of the book where I had to stop and read twice or thrice to understand what the author is trying to say. It definitely shows you a different mindset of the Type A personality investment bankers and traders.The book walks through various phases of how randomness and probability affect people from all walks of life. It is well divided into three major parts, each explaining different angles in which people view probability and randomness in their lives and how they deal with it on an individual level. The author explains well how perception and biases are responsible for people making wrong decisions. He talks about the fact that even though we cannot completely ignore emotions, we cannot as well completely remove probability and randomness while evaluating decisions and risks. The author also explains about the Monte Carlos simulators and how they should always be used to predict outcomes in the future rather than just relying on data from the past. The author also has strong views about denigrate history suggesting that people feel that things that happen to others might not happen to them. Nassim has given a lot of examples to show the reader the various angles in which randomness and probability is perceived, used and interpreted by people. The author also draws light upon the fact that too much information might end up doing more harm than good as it blurs your decision and your ability to choose the right information. Nassim also strongly emphasizes on the fact that any individual should never get completely loyal to his position as it hinders him from looking at different points of views. This in turns affects his decision making and ability to adapt to the changes that come with the position. The author has given examples of people from his life, famous people throughout history as well as people from various field of work to prove his point in several occasions. The author finally suggests that it is inevitable to be affected by randomness as he himself has been affected by it. However whatever the effects of randomness in anyone's life, they never should blame anyone or get angry but just learn to deal with and change is always inevitable.The book has been written in a very personal format where it feels as if the author is trying to convey a message through a personal talk. Talking about experiences in his life and sharing his emotions definitely helps build that connection with the author. The author's style seems very straight and blunt as well. It feels like he has no qualms about how he has experienced life or what he has thought about some people who he has met in life. This is clearly seen in way he expresses feelings about some of his neighbors, coworkers or even people he has heard about. It gives a sort of raw understanding into the mind of the author. In doing so he has been able to sort of organize his book in to the various aspects of randomness, its effects and biases that come with it and finally how several people deal with it. This sort of structure helps in understanding the complex message that the author is trying to convey.There are quite a few quotes that got me thinking, some of which are: "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.", "A mistake is not something to be determined after the fact, but in the light of the information until that point.", "The only article Lady Fortuna has no control over is your behavior.". However my most favorite line from the book is "No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion." I love it because it made me think and realize that this applies to so many things in life. Your reputation that you build upon for so many years can all come crashing down with a major mistake. Nassim explains this with an example of a successful banker who earned millions for a bank however a single mistake that cost him millions got him fired and forgotten of the things he had done in the past.After reading through the entire book you have a sense of confusion mainly due to the fact that it does stay close to its name that there is a lot of talk about randomness that exists in the world and the market. However Nassims ability to convince the author is promising. He himself believes that he was fooled by randomness and consciously tries to make certain decision that help him in making the sound decision.Overall this book has great things to offer from head scratching content to knowledge to even humor at times and is definitely worth a read. It helped me step out of my comfort reading zone and challenge me in my thoughts and opinions that I had about various aspects in life.

It's not intuitive that life is laced with as much luck as Taleb claims, especially not while we're surrounded by so many experts providing an endless flow of narratives. Then again, if you took this book, held it up to his current expert musings on Twitter, you'd find yourself looking the other way at his behavior.His journey through the work of Kahneman and Tversky was great. We are hardwired to be biased in so many ways when it comes to data and its interpretation. We're not made for a world with so much randomness. People do suck at probability. You have to go out of your way to activate system 2 to truly understand something. My favorite bias, if that's something you can have a favorite of, was the survivorship bias. It had never occurred to me how much of the story we're missing simply by acknowledging the small sample of winners and survivors at the expense of the set that isn't in the winner's circle.I like to use the term mind blowing when I read a book I really enjoy, but this book is more mind melting, in that you end up questioning your own frameworks and paradigms. As a parent, after reading this book it's easy to view your kids' shenanigans as 'noise' and not necessarily as the 'true signal.' In fact, it's probably healthy to do that.I would say this translates to the work place as well. How often do coworkers annoy us? Well how much of that is noise surrounding a true signal? It's too easy to base so much on the noise while not actually searching for the signal.How much of human events are noise? The news? (Most of it really). But if you can discern the noise from the signal then odds are you're more perceptive than the average bear, or you're just lucky.