Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets Paperback – 3 May 2007
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'An iconoclastic tour de force ... nothing escapes his Exocets' -- Evening Standard
-- John Kay
'Excellent and thought-provoking ... an entertaining book' -- Financial Times
'One of the smartest books of all time' -- Fortune
'Wall Street's principal dissident' -- Malcolm Gladwell
About the Author
Nassim Nicholas Taleb is a radical no-nonsense philosopher for our times. He has spent his life immersing himself in problems of luck, uncertainty, probability, and knowledge, and he has led three high-profile careers around his ideas, as a man of letters, as a businessman-trader, and as a university professor and researcher. He is currently Distinguished Professor of Risk Engineering at New York University's School of Engineering. He is the author of the 4-volume INCERTO (Antifragile, The Black Swan, Fooled by Randomness, and The Bed of Procrustes). Taleb refuses all awards and honours as they debase knowledge by turning it into competitive sports.
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Top Customer Reviews
This book is about the Illusion of Control on a massive scale: a refusal to acknowledge blind luck's contribution to our success. Taleb is a trader as well as a scholar, and mixes his logical points with many tales about the "Masters of the Universe": traders who, with a run of successful investment, become rich, promoted and profiled in Fortune magazine. Given the huge numbers of people who become traders, the number of these high-flyers is pretty much what you would expect by chance. The logical conclusion is that there is no evidence that any of these traders have any real skill, or that any of the investment advice given by gurus and journalists has any value. This contrasts with other walks of life where skill and practice are necessary: you couldn't become a concert pianist by blind luck, for example.
Yet the finance industry refuses to acknowledge this. Noise (the natural volatility of the market) is mistaken for signal (understandable and predictable responses to events), and hence pure luck is mistaken for skill. When the hot-shot trader loses all his money, and is escorted from the building by security, it comes as a total surprise to him.
Embarrassingly for his targets, Taleb is not advancing some daring new theory. He just uses probability theory, basic statistics and a knowledge of the psychological research on biases: the toolbox of an informed critical thinker.Read more ›
Taleb has a clear admiration for Physics and adopts a physics approach. He dives right into the heart of the problem, finds the essential truth - that markets are random, the path we observe is only one of many, and that we cannot make proper assessments on trading strategies until a sufficient time-period has elapsed to give a significant sample which includes those rare but headline-making events that occur from time-to-time. He picks out several consequences of this phenomenon. The main one is Survivorship Bias (that those experiencing good fortune at picking the right investments will be elevated to guru status, until one of those rare but extreme events removes them from their pedestals). There are many other useful insights here; how the shorter the time-scale we use to study performance the more noise we see; how journalists comment on the one random outcome we observe and interpret it as significant news; how pseudo-science has spread to all sorts of unsuitable areas; and how groups of traders form collective opinions which defy rational analysis (the so-called "fire-station" effect); how lucky traders become all puffed-up with their own success, and the link to Seretonin levles and evolutionary benefits of being able to identify winners in competitions. This entertaining section gives compelling reasons for sharing Taleb's scepticism about much of the modern financial world.Read more ›
On the plus side, the book's main argument is very interesting and is fairly compelling. The essential idea is that the role of randomness in events, especially in financial endeavours is largely random and has very little if anything to do with skill. The effect of this idea is far reaching, and affects many areas not the least of which is executive pay; if the fortune of companies is due in large part to luck (rather than the CEO's skills) then how can their pay levels be justified. Likewise with stockbrokers etc.
On the minus side the writing style is very difficult. I don't mean the vocabularly and grammar but rather the strcuture of the book. Often at the end of a chapter the reader is left struggling to remember how (apart from in a very indirect sense) a chapter relates to the central argument and why it has been placed at that point in the book. The whole book is largely unstructured and hard to remember in any detail reading more like a series of unconnected anecdotes.
This is a great pity as the author is clearly onto something here and were it not for the above problem I would add it as a lifechanging book. Maybe Mr Taleb will write us a new, shorter, conciser and consequently much more persuasive book!
I liked the fact that Taleb recommends not reading newspapers or watching TV news, I like his anti-corporate dandyism, too. He makes a sweeping statement about how self-help books don't work, which I didn't agree with, particularly because I think this book is a rather smart and elegant self-help book written by a very funny guy.
I work as a speechwriter and this book is crammed full of colour that can be recycled for that kind of exercise. If you don't use it for that it will liven up your dinner-party conversation.
Most Recent Customer Reviews
A little long winded in places, but if you stay the course, opens a new dimension to everyday life changing events that seem to be against all the odds or probability. Read morePublished 26 days ago by colin bond
This book really failed to grab my attention. There are much better books available on the subjectPublished 1 month ago by Anthony H.
I've read one of NNT books before and have come accustomed to his style, which I like a lot. Stick with it if this your first and you find his conversation tough at first. Read morePublished 1 month ago by A. Sykes
Definitely a very thought provoking book that I found hard to put down but hard to read in roughly equal measures. Read morePublished 4 months ago by Andy
An excellent dissection of the world of investment and speculation. It has made me a lot more careful of the claims of Fund Managers and Investment 'Experts'.Published 5 months ago by Inarticulate
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