About the author Nisin ses Tt thoi Cai LLG 2 ‘risishaning hedge find operator, anda fellow atthe Courant Instat of Mathematial Sciences of New York University. He hashed {variety of derivative eading position in New York ad London and ‘worked a a independent flor wader in Chicago, Taleb was inducted in February 2001 inthe Deriatves Strategy Hall of Fame. “Taleb received an MBA from the Wharton Schl anda PhD. from University ParieDauphine. He is the ator of Dynamic Hedging: Managing Vanilla and Exotic Options (Wily, 1997) FOOLED BY RANDOMNESS The Hidden Role of Chance in the Markets and in Life + NASSIM NICHOLAS TALEB TEXERE New York # London.CONTENTS + Preface and Acknowledgments Chapter Summaries Prologue Mosques the Clouds PART I: Sovons WARNING - SKEWNESS, ASYAMETRY, INoucrioN ‘One: If You're So Rich Why Aren't You So Smart? Nero Tai Hit by Lighniog “Temporary Sanity Modus Operan No Work Eis “There Ate Always Sees Jol” the High Yield Trader ‘An Overpaid Hick‘The Red-Hot Sonmer Serotonin a Randomness ‘Your Det Is Rich, Very Rich . “Two: A Bizarre Accounting Method Alternative Hctory Russian Roulee [An Even More Vicious Roalewe ‘smooth Per Relatione ‘Savation Via Aerflt Solon Visits Repine's Night Cb George Will Is No Solon: On Countrinntve Tra Horse in Debates Risk Managers ‘Three: A Mathematical Meditation on History aroplayboy Mathematics The Tooke ‘Mente Carlo Mathematics nin My Aric ‘Making Hitoy glib Ceowsing the tic Dengration of History ‘The Stove I Hot My Solon Disiled Thinking om Your Palle Breaking News Shilke Redox GGeromoracy Phiostrata in Monte Carl: On the Difference Between Noise ‘and Information Four: Randomness, Nontense, and the Scientific Intellectual Rendomnses and the Verb “The Father of Al Peudotinkers Monte Carlo Poetry Five: Survival of the Leas Fit = Can ‘Randomness? Evolution Be Fooled by Carlos the Emerging Markets Wiard "The Good Years, Averaging Down Lines in he Sead Job he High-Yield Trader “The Quant Who Knew Computers and Equations ‘The Traits They Shared A Review of Marker Fools of Randomness Constants ave Evolutionary Theories (Can Evolution be Fooled by Randomness? Six: Skewness and Asymmetry “The Median le Not the Message ‘all and Baar Zoology ‘An Argan 29-YearOld Soa Rare rents Symmetry and Science “The Rare Event Fallacy ‘The Mother of All Deceptions Why Don't Statisisiane Detect Rae Events? A Mischievous Child Replaces the Blick Ball Seven: The Problem of Induction ‘rom Bacon to Hume ‘Coyne Aerats ‘Niederotfer, Victorian Geatleman Sir Karl's Promoting Agent ‘Location, Location Popper's Answer Open Soiety “ “ 6 oe a 2 7” 8 7” a 84 8% 8 93 96 7 9° 100 100 103 1s 106