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Fooled by Randomness: The Hidden Role of…
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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto) (original 2001; edition 2005)

by Nassim Nicholas Taleb (Author)

Series: Incerto (1)

MembersReviewsPopularityAverage ratingMentions
4,187602,812 (3.89)32
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 |
English (56)  Dutch (2)  Italian (2)  All languages (60)
Showing 1-25 of 56 (next | show all)
260 pages of sarcasm is more than I can stand, all to tell us that Wall Street can predict everything except the unpredictable. ( )
  MylesKesten | Jan 23, 2024 |
Castalia Library, Cowhide Leather 900 ( )
  TomLopez | Dec 9, 2023 |
Very enlightening! I am so stoked that I signed up for a course on Probability and statistics after reading this book ( )
  harishwriter | Oct 12, 2023 |
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. ( )
  kenshin79 | Jul 25, 2023 |
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 |
All of Taleb's books are stunningly original, iconoclastic and useful. Worth reading!

On a side note: "THE FOOL" remains my favourite tarot card because of its cool symbolism that I can identify with 🐐🐬🐙 ( )
  AlexejGerstmaier | May 26, 2020 |
Excellent. Recommended. ( )
  ErrantRuminant | Mar 13, 2020 |
Interesting idea badly executed. So badly, in fact, I was left wondering who it was written for; it was neither coherent enough for an academic audience nor clear enough for a general one. The book is suffused with trivial errors of fact and usage, to the point where no statement (trivial or otherwise) retains any credibility. It is filled with the most glaring contradictions: the author will condemn an act on one page and commit it on the next, without any appreciable shred of self-awareness. This bizarrely paradoxical presentation is further exacerbated by the author's own explicit claims to possess the very self-awareness which is no where in evidence.

Lastly, I should note that this is a claim about the text, not the author. He may very well be a genius-wizard of the highest of high orders. Whether this is or is not the case, this book conceals it very well. His fans, however, are demonstrably fools. They admire the book based not on its contents, but on the author's own financial successes, while the book itself makes precisely the opposite point
--that admiring people who happen to be successful without regard to their underlying thinking is itself foolish.

Ug, business majors.... ( )
  ralphpalm | Nov 11, 2019 |
I think I picked this up from our building's swap shelves. It's an advance uncorrected proof, and wow does it need corrections. I hope a copy editor and/or the author got hold of this in galley and fixed the grammar, typos, etc. and made sure the charts showed up!

Talib, of course, wrote [The Black Swan] to describe the same theme of randomness, or the impact of the improbable, and he makes his living trading derivatives with just that in mind. This book is almost a screed against what he sees as the refusal of economists and traders to see the folly of their quest for patterns, even in the face of financial disaster. It's a little like getting into an Uber with someone determined to convert you to his religion. I felt at once mesmerized and battered.

Of course, it is true that people don't understand statistics, and don't see how their biases and emotions make it hard to understand true risk. Talib is searching for a scientific appreciation of risk to balance those biases and emotions. Going back to the image of a black swan, he explains that just because no European had seen a black swan did not make the statement 'All swans are white' true. Understanding that rules must be refutable goes hand in hand with his emphasis on randomness, on clarity between correlation and causation, sorely lacking today.

I read it fast, which is probably not the ideal approach. We learn a lot about Talib, at least what he wants us to learn, from his own perspective, and a lot about how snarky, insulting, and uncompromising he can be when randomness is discounted. Some of it is even fun. ( )
  ffortsa | May 11, 2019 |
Taleb is the thinking man's 'smart person for stupid people' ( )
  leahlionheart | Oct 26, 2018 |
The author discusses his observations about how we are fooled by random events into make false causal links. Many of his examples are from his financial trading experience. Well worth the reading, though the author is a bit pugnacious and critical of other folks and their opinions. He is not over-endowed with humility! He did confirm my suspicion that the ups and downs of the stock market, for the most part, have no relationship to reality and to say a stock price, or market, went up (or down) because of a particular event is pretty much pure guesswork and journalistic filler. ( )
  addunn3 | Dec 3, 2017 |
I was very disappointed in this book. I thought the writing was obtuse at best. His premises were not well backed up with statistics. His dislike of journalists came through but with little reason, other than he thinks he is smarter than they are. I would definitely not recommend it. ( )
1 vote fmcdonald1044 | Nov 1, 2017 |
Probability and chance fascinate me. Many people believe in fate, or argue over the role of chance in the course they have taken in their lives. Those of us who operate in the world of financial speculation find ourselves at the 'cutting edge' of randomness, chance and the un-knowable future in a very tangible way day by day. It is odd then that humans seem to be poorly programmed to win at the probability game. In fact in most situations we usually make the mathematically irrational choice, often choosing a poorer but certain outcome rather than one which mathematically generates a better expected return or outcome.

This important book highlights the centrality of probabilistic outcome in almost everything we do. It emphasises our exaggerated tendency to claim or allocate credit to people (e.g. CEOs of successful or unsuccessful companies) on the basis of ability rather than luck. This tendency is not only myopic, it is also dangerous. Taleb particularly highlights the false sense of security that exists in distorted situations where a highly likely beneficial scenario is paired with an unlikely, but extremely dangerous outcome. The classic example is in the market, where naked option sellers are able to pursue a 'reliable' strategy with steady small profits, but place themselves in a situation where extreme market movements can erase years of profits in days. These 'hidden risks' are explored in more depth in Taleb's later book The Black Swan which was especially prescient as it was published immediately before the 2007-08 financial crisis. The Black Swan revealed massive hidden risks concealed behind commonly accepted but flawed risk calculation models such as VAR.

Taleb writes in a conversational style that at times is a little indulgent. It is a very personal book with many asides regarding artistic preferences, and which invokes some of his pet subjects such as philosophy and poetry. I enjoyed this however others might feel this detracts from the central argument. It is a very personal argument as well, with examples that appear to be based on individuals known by Taleb and largely based on his expertise in the financial markets. It will provoke contemplation about both the source of our own success and also about the risks that we may not have considered. As an example it would have been (and may still be) valuable for instance to many who have highly leveraged themselves in purchasing property but who have not thought through the consequences of unemployment.

Action on these ideas will encourage a more robust investment strategy, and indeed life in general. Perhaps Taleb could have given a few more 'real world' examples from outside the world of finance to help people considering these ideas in a wider sense. Certainly he has written an eloquent and colourful account highlighting important concepts which may influence philosophical thought in years to come, and will hopefully have a practical impact on risk management and regulation in financial markets. ( )
  bevok | Jul 31, 2017 |
This is the type of book that needs to be read slowly. There are also a number of sections in the book that need to be re-read in order for the reader to understand the points being made. That being said, Taleb writes very well – – I don't want to give the impression that the author is unclear – –Taleb writes economically. Others have summarized in their reviews what this book is all about better than I can....

He wrote a book of aphorisms The Bed of Procrustes that I really enjoyed. I also highlighted some words of wisdom below from this book shown below..

That all millionaires were persistent, hardworking people does not make persistent hard workers become millionaires.

This book has two purposes: to defend science (as a light beam across the noise of randomness), and to attack the scientist when he strays from his course (most disasters come from the fact that individual scientists do not have an innate understanding of standard error or a clue about critical thinking, and likewise have proved both incapable of dealing with probabilities in the social sciences and incapable of accepting such fact).

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.

Lucky fools do not bear the slightest suspicion that they may be lucky fools—by definition, they do not know that they belong to such a category. They will act as if they deserved the money. Their strings of successes will inject them with so much serotonin (or some similar substance) that they will even fool themselves about their ability to outperform markets (our hormonal system does not know whether our successes depend on randomness).

Any reading of the history of science would show that almost all the smart things that have been proven by science appeared like lunacies at the time they were first discovered.

Gray hair signals an enhanced ability to survive—conditional on having reached the gray hair stage, a man is likely to be more resistant to the vagaries of life.

The wise man listens to meaning; the fool only gets the noise.

When I see an investor monitoring his portfolio with live prices on his cellular telephone or his handheld, I smile and smile.

I do not know if it applies to other people, but, in spite of my being a voracious reader, I have rarely been truly affected in my behavior (in any durable manner) by anything I have read. A book can make a strong impression, but such an impression tends to wane after some newer impression replaces it in my brain (a new book). I have to discover things by myself (recall the “Stove Is Hot” section in Chapter 3). These self discoveries last.

Remember that nobody accepts randomness in his own success, only his failure.

You attribute your successes to skills, but your failures to randomness. This explains why these scientists attributed their failures to the “ten sigma” rare event, indicative of the thought that they were right but that luck played against them. Why? It is a human heuristic that makes us actually believe so in order not to kill our self esteem and keep us going against adversity.

But CEOs are not entrepreneurs. As a matter a fact, they are often empty suits. In the “quant” world, the designation empty suit applies to the category of persons who are good at looking the part but nothing more. More appropriately, what they have is skill in getting promoted within a company rather than pure skills in making optimal decisions—we call that “corporate political skill.”
( )
  writemoves | Jul 16, 2017 |
Interesująca książka. Pokazuje przykłady losów ludzkich w przypadkach indywidualnych jak i w świecie giełdy papierów wartośćiowych, gdzie losowość jest dość dużym czynnikiem. Czyta się szybko i przyjemnie, nawet osobie takiej jak ja, która posiada bardzo ubogą wiedzę na temat finansów i ekonomii świata giełdy. ( )
  AdamFrancke | Feb 23, 2017 |
Never boring, but sometimes a bit obtuse. I got the impression that he admits in this book that he does want to enlighten but not to enlighten everybody. In this book I do enjoy his comment that math is for meditation not for computation. ( )
  joeydag | Jul 23, 2015 |
Fooled by Randomness: The Hidden Role of Chance in Life and the Markets by Nassim Nicholas Taleb. It and its sequel, The Black Swan, have been on the BusinessWeek bestseller list for the past year. This book had a bigger impact on my year than any other, and changed how I view things.

Taleb is a true eccentric. A mathematician/statistician/options trader who fills every page with parenthetical ramblings. "This eccentric and highly personal exploration of the nature of randomness meanders from the court of Croesus and trading rooms in New York and London to Russian roulette, Monte Carlo engines, and the philosophy of Karl Popper." He quotes heavily from ancient Greek and Persian literature, philosophical works, physics research, psychology journals, and studies in statistics. He inspires you to read difficult texts.

(I think) One of his main points is that we ascribe success to those who have done nothing but been on the right side of the odds. There might be 1,000 new bond traders entering the business after college. If they have a 50% annual success rate purely due to random chance, then after 10 years there will be 2 guys that people will clamor to for advice simply because they "must" have some knowledge to allow them to "beat" the market, when it is all due to randomness. There are 998 other guys who have "blown up" or been fired b/c they lost due to the same randomness, and no one is offering a book deal to them.

I've often wondered what it would be like to be Spock and think purely logical and without emotions. Taleb looks at some research and finds that emotions are what actually help us make decisions. There are times in mathematics when you solve an optimization problem and come up with multiple solutions that would all be equally good. A purely logical person would be unable to decide between the options and would be stuck forever, like a computer program stuck in a loop. Emotions are important.

He gives several real-life examples to illustrate these phenomena. He also delves into the psychology of how successful people in the right circumstances feel inferior and unsuccessful.
He gives examples of firms who bet heavily on a probable outcome, but don't take insurance against the improbable and lose billions (like in our current market troubles).

A question to ask yourself:
Would you play Russian roulette if there was only a 1/6 chance of dying, but a 5/6 chance of winning $1 million for every time you survived? It's pretty good odds. If enough people play then chances are that someone is going to play a lot and end up with several million dollars. But, the vast majority will eventually lose everything. So it is in business when what looks like a good bet might ignore the (sometimes very slim) chance that something will go wrong.

Taleb is also quite critical of modern-day economics, claiming that economists are trying to camouflage their inability to explain things in mathematics that are too limited to do what economists need it to do. I found those criticisms highly interesting.

He is also critical of regression analysis, particularly time-series models because of the problem of stationarity. Over time, there are countless unobserved things that could change, therefore it becomes less likely to learn what you want do by doing a long time series.

I give this book 4.5 stars out of 5. It is a difficult read because of all the parenthetical ramblings, but the points the way the book stretches the mind is definitely outstanding. I'm very eager to read The Black Swan. ( )
  justindtapp | Jun 3, 2015 |
appears that we are not so much fooled by randomness as that we refuse to recognize it; really like his ideas, but his presentation is often difficult to get through; his anecdotes don't always support (or even relate to) his point but are just stories that he likes to tell
  FKarr | Oct 11, 2014 |
I didn't find any novel ideas in this book. It's more for people who trust numbers without understanding where or how they were formed. I agree with Taleb on many points, but wish the book were more coherent and organized. He writes like a monkey at a typewriter. It was an interesting read that I would recommend to those who enjoy decision making and statistics. ( )
  CassandraT | Oct 10, 2014 |
I read Nassim Taleb's "The Black Swan" a couple of years ago, and now I got around to reading his previous book, "Fooled by Randomness". This is the book that made Taleb famous for his theory about the role of chance in markets. Taleb says that humans tend to explain away random events by rationalising them, instead of accepting that life has an element of randomness in it. He examines biases such as causality, "survivorship" (learning only from winners) and skewed distributions. Fortune magazine named "Fooled" as one of the smartest books of all time. I'm not so sure. While I share Taleb's contempt for the inhabitants of Wall Street, I feel the pendulum has swung too much in the opposite direction. True, not everything can be explained and rationalised; but not everything in life is down to Lady Fortuna either. ( )
  ashergabbay | Jul 8, 2013 |
An excellent book that explains clearly how probability and statistics affects everyone, or rather how not understanding randomness causes most people to over or under-estimate the likelihood of events.

In particular he demonstrates how irrational human beings are when it comes to understanding:
- black swan (rare) events and planning for them,
- that events with (seemingly) positive correlations do not necessarily mean that one causes the other, and,
- that randomness and uncertainty (i.e. luck) have a greater influence on the outcomes of human activities than most people, even those who think they act rationally, care to believe.

While written fairly clearly, I will admit that I had to read some sections more than once before I understood exactly what the author was saying, even though I have, or thought I had, a better than average understanding of probability and statistics.

Now at least I have a good understanding of why I act irrationally even when I know the true probability of success in some activities, such as when buying lottery tickets. ( )
  Davros-10 | Apr 13, 2013 |
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