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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.
Published: Random House Publishing Group an imprint of Random House Publishing Group on
ISBN: 9781588367679
List price: $12.99
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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.more
Like The Black Swan, this is a book by/about a self-evidently nasty man with a message to send. We aren’t good at assessing risks, and we fool ourselves that we are. Though he doesn’t use the term “value at risk,” the concept that helped overleverage and then explode the economy, he viciously and presciently critiques the mentality that led to greater and greater risks for smaller and smaller percentages of return. Though published earlier, this book is shorter and contains less inside baseball score-settling than The Black Swan, though I might recommend just reading a couple of things from his website instead of either, especially if you’re already familiar with behavioral economics and the various heuristics that distort our decisionmaking.more
This book seems more esoteric than Black Swan. There were some great concepts presented here, but overall I found the book more difficult to follow than Black Swan. Some topics were discussed in both books.more
I started the book with high expectations. Fooled By Randomness was supposedly one of the classics of investing, or so I heard. After reading it, I am not sure what it was. It appears to be philosophy about philosophy and science. Basic conclusions drawn can be summarized as such: (1) beware of rare event i.e. black swan (2) don't just rely on historical data purely (3) decision should be judged by circumstances when decision was made and not by outcome (4) luck plays a huge part in success/failure in random environment (5) we are emotional fool and we can do nothing about it. Book is not difficult, but neither easy read since it delves into meta philosophy quite often. And if I can say my learning from it: nothing significant.more
Interesting stuff, particularly re how the findings from the risk analysis aspects of behavioral economics (that people don't behave and perceive in the rational manner economists have traditionally said they so) can be applied to investing. But what an obnoxious man. Who would want to meet him in person? If he's smarter then everyone else in the universe, why does he have to keep insisting on it?And for all his huffing and puffing, he barely addressed how to apply this knowledge to the market. OK, so he's betting against the odds, knowing such and such is actually much more like than most traders think and so on. But how does he know what the odds are? Vegas? Off-track-betting?I don't I would have understood this at all if I hadn't just read Michael Lewis's The Big Short. Taleb must have made a killing there (though it seems to me he would have nosed his way into Lewis's book somehow if he did, despite his revulsion re journalists and journalism). But that was a pretty rare case in which, if you were willing to listen and read, the odds of the subprime mortgage bonds collapsing were readily apparent. But even the guys that Lewis profiled who did make the winning bets don't usually invest that way. They generally want to go long and look for solid companies that will grow. Taleb doesn't seem to ever look at companies that.more
okay concept but I couldn't be bothered to read the book. Perhaps I should try againmore
Very interesting material by a great mind. Show how we can be fooled by others AND ourselves into false assumptions.more
the book makes a strong point about the role of luck, emotion & bias in markets - but makes it in a very long winded anecdotal way. Some amount of formal treatment of the subject would have appealed to me more.more
Interesting read about the unpredictability of events, and hence of markets. Market events that are supposed to be "Multiple Sigma" -- ie, less than once in several lifetimes -- have in fact occured several times within the lifetime of current market participants. The assumption that they happen less often than, in fact, they do, explains much of the instability of markets -- and much of our current economic pain.more
Though this was highly recommended by some bloggers I read, I found it to be pointless and meandering. I kept getting the feeling that the author had something to say . . . BUT HE JUST WOULDN'T GET AROUND TO SAYING IT. I gave up after 50 pages or so.more
One of the most insightful books that I have ever read about human behavior, statistics, and investmentsmore
Interesting but somehow not satisfying. I kept talking about it while I was reading it - this or that would remind me of something Taleb said - but by the time I was finished I was tired of it. Partly, I think, because he determinedly is not 'explaining' anything or giving any reasons or paths to follow; partly because my empirical experiences conflict with his; and partly because of the style of his writing and choice of illustrative incidents. A lot of the book is about how we, humans in general, are ill-equipped to properly consider probabilities - things like, we tend to be more worried about things we hear a lot about than less-publicized matters. So people are afraid of flying and not of driving, though in terms of miles traveled per death driving is several hundred times as dangerous (that's not one of Taleb's illustrations, it's one I've seen elsewhere). Taleb tends to use the stock market for his illustrations, which is another reason I found his book unsatisfying - I know very little about the stock market, and especially about the fancy variations of the stock market (selling short, selling and buying options, etc) that make up his life and to which he refers easily and with (apparent) full understanding. He does explain, a little, but few of his explanations conveyed much to me. Interesting book, and I want to read the Black Swan one too, but less fun to read than Stephen Jay Gould (who I started out thinking his style resembled).more
A skewed, bonkers and enjoyable look at the role of randomness in success. This brought out some neat key points, such as that performance should be determined not (just) by outcome, but on the basis by which the decision was made in the first place, and the long-run performance of a strategy. Coming more from the psychology side of things I know very little about trading and economics, and struggled a bit with the lingo, but nonetheless found this readable. One of the books I've recently read to make me shout out loud "Yes! That is *exactly* spot on!"more
A most enlightening and entertaining reading experience. The author provides a collection of mini-essays (musings if you will) that collectively expanded my world view. Mr. Taleb is now a favorite auther.more
Taleb isn't afraid to diss the pretenders in this field and hang them out to dry. I find his darkest black humour to be adorable though he does ramble rather. couldn't help chuckling at the various anecdotes: one memorable one, 'Now Yuri will have a word with you' when interviewing those MBA-ers who put chess skills on their resume - priceless! he's really too cynical though in the area of personal growth, so he'll never realise the detachment he seems to want ;-)more
Taleb tells as is in the markets and life in general. You can tell he has absolutely no tolerance for pretenders. I like the fact that he looks at things at a deeper level, at least he tries to but his style can be very blunt and sound arrogant at times.more
read this and feel better about your job, whatever it is. people are not as clever as they think they are - luck plays a big part in success.more
A rare example where the second book (Black Swans) is more interesting than the first (this one). Some good ideas buried in there, but the thread is sometimes hard to follow.more
Taleb's principal thesis is that humans in general, and financial journalists in particular, are remarkably blind to the random element in most events. They overemphasize results over process. They attribute great ability to great success. Taleb argues that success tends to be very non-linear: large successes often flow from slight differences, some of which are merely random. Many human activities, particularly market-oriented businesses, are subject to much random fluctuation. Because of this, much success in such activities can be attributed only to luck. Taleb contrasts such businesses with dentistry, which has little or no random element to its successful practice.People overemphasize frequency at the expense of total outcome. They prefer being right often, for small gain, than being occasionally very right about rare events ["black swans," in Taleb's shorthand] that allow very large gains. Maximizing the probability of winning [a little] does not maximizing the expectation from the game when one's strategy may include skewedness.One of the greatest barriers to valid or even effective inference is survivorship bias. We tend to infer properties of an entire distribution of events [who made money; who didn't] from those left over after a shakeout process has eliminated some of the members of the distribution. The shape of our inferences can thereby be markedly different from that warranted by the original distribution.Taleb's intellectual heroes include: 1. Solon--beware, King Croesus, your good fortune may not last; 2. Robert Shiller--financial markets overreact to late news; 3. Charles Pierce--infallibility is impossible; 4. George Soros--be aware of your own fallibility; 5. Karl Popper--real science consists in formulating principals that are inherently falsifiable: thus, it is invalid to infer the truth of any proposition from the fact it was correct any limited number of times; we can only infer its falsity [from one occurence]; history can not be not real science; 6. Daniel Kahneman and Amos Tversky--peoples' perceptions are distorted by immediate facts that inhibit them from making rational generalizations; and 7. David Hume--great rigor in drawing inferences from data. His bete noires include (1) journalists in general and George Will in particular, who infer much too general ideas from much too small samples and (2) mathematical economists, who believe their models genuinely mirror reality.A trader's mental construction should direct him to do what other people do not do. He is acutely aware of egodicity, i.e., that very long random sample paths wind up resembling each other. Thus even though some high risk strategies prove radically successful in the short run, they may eventually "blow up" in the long run. Taleb himself has made a good living as a commodities option trader by being aware of the randomness of market moves, and trading to protect his positions in regard to that randomness. He does not say explicitly what kinds of trades or techniques he uses; he only talks about his general philosophy.A very interesting debunking of some commonly held business lore. (JAB)more
Very insightful book. Condenses a lot of philosophical and mathematical knowledge into an easily readable book. It goes against modern financial conventions, yet is aimed at a broader audience and is not intended as a book on finance or the markets (and is not a book on either, although they play a prominent role.)more
By no means a well written book and a definately a poorly organized one - "Fooled by Randomness" presents a necessary thesis - that much of what is promoted in the business world as genius is actually random and, hence, irreproducible. Finally - an honest book in the busniess section.more
I got hold of this book (at a great deal of effort and expense) because of an interview with Taleb in New Scientist. I found reference to the concept of "Black Swans" fascinating. However, I couldn't find anything on the web explaining exactly what he meant by the term, or even whether he knew that black swans (as in melanistic forms of the swan) existed.From the book, he does point out the existence of actual black swans, but I think this doesn't quite fit in his usage of the term to mean statistical outliers.The black swan issue is by no means the only content of the book, there are some interesting ideas relating to risk management, that are applicable beyond trading. Still, there is something in his approach that doesn't quite sit right with me.more
Sometimes fascinating and sometimes annoying, as one gets the feeling the famous author is a bit too full of himself.more
Read all 24 reviews

Reviews

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.more
Like The Black Swan, this is a book by/about a self-evidently nasty man with a message to send. We aren’t good at assessing risks, and we fool ourselves that we are. Though he doesn’t use the term “value at risk,” the concept that helped overleverage and then explode the economy, he viciously and presciently critiques the mentality that led to greater and greater risks for smaller and smaller percentages of return. Though published earlier, this book is shorter and contains less inside baseball score-settling than The Black Swan, though I might recommend just reading a couple of things from his website instead of either, especially if you’re already familiar with behavioral economics and the various heuristics that distort our decisionmaking.more
This book seems more esoteric than Black Swan. There were some great concepts presented here, but overall I found the book more difficult to follow than Black Swan. Some topics were discussed in both books.more
I started the book with high expectations. Fooled By Randomness was supposedly one of the classics of investing, or so I heard. After reading it, I am not sure what it was. It appears to be philosophy about philosophy and science. Basic conclusions drawn can be summarized as such: (1) beware of rare event i.e. black swan (2) don't just rely on historical data purely (3) decision should be judged by circumstances when decision was made and not by outcome (4) luck plays a huge part in success/failure in random environment (5) we are emotional fool and we can do nothing about it. Book is not difficult, but neither easy read since it delves into meta philosophy quite often. And if I can say my learning from it: nothing significant.more
Interesting stuff, particularly re how the findings from the risk analysis aspects of behavioral economics (that people don't behave and perceive in the rational manner economists have traditionally said they so) can be applied to investing. But what an obnoxious man. Who would want to meet him in person? If he's smarter then everyone else in the universe, why does he have to keep insisting on it?And for all his huffing and puffing, he barely addressed how to apply this knowledge to the market. OK, so he's betting against the odds, knowing such and such is actually much more like than most traders think and so on. But how does he know what the odds are? Vegas? Off-track-betting?I don't I would have understood this at all if I hadn't just read Michael Lewis's The Big Short. Taleb must have made a killing there (though it seems to me he would have nosed his way into Lewis's book somehow if he did, despite his revulsion re journalists and journalism). But that was a pretty rare case in which, if you were willing to listen and read, the odds of the subprime mortgage bonds collapsing were readily apparent. But even the guys that Lewis profiled who did make the winning bets don't usually invest that way. They generally want to go long and look for solid companies that will grow. Taleb doesn't seem to ever look at companies that.more
okay concept but I couldn't be bothered to read the book. Perhaps I should try againmore
Very interesting material by a great mind. Show how we can be fooled by others AND ourselves into false assumptions.more
the book makes a strong point about the role of luck, emotion & bias in markets - but makes it in a very long winded anecdotal way. Some amount of formal treatment of the subject would have appealed to me more.more
Interesting read about the unpredictability of events, and hence of markets. Market events that are supposed to be "Multiple Sigma" -- ie, less than once in several lifetimes -- have in fact occured several times within the lifetime of current market participants. The assumption that they happen less often than, in fact, they do, explains much of the instability of markets -- and much of our current economic pain.more
Though this was highly recommended by some bloggers I read, I found it to be pointless and meandering. I kept getting the feeling that the author had something to say . . . BUT HE JUST WOULDN'T GET AROUND TO SAYING IT. I gave up after 50 pages or so.more
One of the most insightful books that I have ever read about human behavior, statistics, and investmentsmore
Interesting but somehow not satisfying. I kept talking about it while I was reading it - this or that would remind me of something Taleb said - but by the time I was finished I was tired of it. Partly, I think, because he determinedly is not 'explaining' anything or giving any reasons or paths to follow; partly because my empirical experiences conflict with his; and partly because of the style of his writing and choice of illustrative incidents. A lot of the book is about how we, humans in general, are ill-equipped to properly consider probabilities - things like, we tend to be more worried about things we hear a lot about than less-publicized matters. So people are afraid of flying and not of driving, though in terms of miles traveled per death driving is several hundred times as dangerous (that's not one of Taleb's illustrations, it's one I've seen elsewhere). Taleb tends to use the stock market for his illustrations, which is another reason I found his book unsatisfying - I know very little about the stock market, and especially about the fancy variations of the stock market (selling short, selling and buying options, etc) that make up his life and to which he refers easily and with (apparent) full understanding. He does explain, a little, but few of his explanations conveyed much to me. Interesting book, and I want to read the Black Swan one too, but less fun to read than Stephen Jay Gould (who I started out thinking his style resembled).more
A skewed, bonkers and enjoyable look at the role of randomness in success. This brought out some neat key points, such as that performance should be determined not (just) by outcome, but on the basis by which the decision was made in the first place, and the long-run performance of a strategy. Coming more from the psychology side of things I know very little about trading and economics, and struggled a bit with the lingo, but nonetheless found this readable. One of the books I've recently read to make me shout out loud "Yes! That is *exactly* spot on!"more
A most enlightening and entertaining reading experience. The author provides a collection of mini-essays (musings if you will) that collectively expanded my world view. Mr. Taleb is now a favorite auther.more
Taleb isn't afraid to diss the pretenders in this field and hang them out to dry. I find his darkest black humour to be adorable though he does ramble rather. couldn't help chuckling at the various anecdotes: one memorable one, 'Now Yuri will have a word with you' when interviewing those MBA-ers who put chess skills on their resume - priceless! he's really too cynical though in the area of personal growth, so he'll never realise the detachment he seems to want ;-)more
Taleb tells as is in the markets and life in general. You can tell he has absolutely no tolerance for pretenders. I like the fact that he looks at things at a deeper level, at least he tries to but his style can be very blunt and sound arrogant at times.more
read this and feel better about your job, whatever it is. people are not as clever as they think they are - luck plays a big part in success.more
A rare example where the second book (Black Swans) is more interesting than the first (this one). Some good ideas buried in there, but the thread is sometimes hard to follow.more
Taleb's principal thesis is that humans in general, and financial journalists in particular, are remarkably blind to the random element in most events. They overemphasize results over process. They attribute great ability to great success. Taleb argues that success tends to be very non-linear: large successes often flow from slight differences, some of which are merely random. Many human activities, particularly market-oriented businesses, are subject to much random fluctuation. Because of this, much success in such activities can be attributed only to luck. Taleb contrasts such businesses with dentistry, which has little or no random element to its successful practice.People overemphasize frequency at the expense of total outcome. They prefer being right often, for small gain, than being occasionally very right about rare events ["black swans," in Taleb's shorthand] that allow very large gains. Maximizing the probability of winning [a little] does not maximizing the expectation from the game when one's strategy may include skewedness.One of the greatest barriers to valid or even effective inference is survivorship bias. We tend to infer properties of an entire distribution of events [who made money; who didn't] from those left over after a shakeout process has eliminated some of the members of the distribution. The shape of our inferences can thereby be markedly different from that warranted by the original distribution.Taleb's intellectual heroes include: 1. Solon--beware, King Croesus, your good fortune may not last; 2. Robert Shiller--financial markets overreact to late news; 3. Charles Pierce--infallibility is impossible; 4. George Soros--be aware of your own fallibility; 5. Karl Popper--real science consists in formulating principals that are inherently falsifiable: thus, it is invalid to infer the truth of any proposition from the fact it was correct any limited number of times; we can only infer its falsity [from one occurence]; history can not be not real science; 6. Daniel Kahneman and Amos Tversky--peoples' perceptions are distorted by immediate facts that inhibit them from making rational generalizations; and 7. David Hume--great rigor in drawing inferences from data. His bete noires include (1) journalists in general and George Will in particular, who infer much too general ideas from much too small samples and (2) mathematical economists, who believe their models genuinely mirror reality.A trader's mental construction should direct him to do what other people do not do. He is acutely aware of egodicity, i.e., that very long random sample paths wind up resembling each other. Thus even though some high risk strategies prove radically successful in the short run, they may eventually "blow up" in the long run. Taleb himself has made a good living as a commodities option trader by being aware of the randomness of market moves, and trading to protect his positions in regard to that randomness. He does not say explicitly what kinds of trades or techniques he uses; he only talks about his general philosophy.A very interesting debunking of some commonly held business lore. (JAB)more
Very insightful book. Condenses a lot of philosophical and mathematical knowledge into an easily readable book. It goes against modern financial conventions, yet is aimed at a broader audience and is not intended as a book on finance or the markets (and is not a book on either, although they play a prominent role.)more
By no means a well written book and a definately a poorly organized one - "Fooled by Randomness" presents a necessary thesis - that much of what is promoted in the business world as genius is actually random and, hence, irreproducible. Finally - an honest book in the busniess section.more
I got hold of this book (at a great deal of effort and expense) because of an interview with Taleb in New Scientist. I found reference to the concept of "Black Swans" fascinating. However, I couldn't find anything on the web explaining exactly what he meant by the term, or even whether he knew that black swans (as in melanistic forms of the swan) existed.From the book, he does point out the existence of actual black swans, but I think this doesn't quite fit in his usage of the term to mean statistical outliers.The black swan issue is by no means the only content of the book, there are some interesting ideas relating to risk management, that are applicable beyond trading. Still, there is something in his approach that doesn't quite sit right with me.more
Sometimes fascinating and sometimes annoying, as one gets the feeling the famous author is a bit too full of himself.more
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