Fooled by Randomness

Submitted by Book Library on 28 April, 2010 - 00:41

This book is about luck or more precisely how we perceive and deal with luck in business and life. Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill the world of trading Fooled by Randomness is a captivating insight into one of the least understood factors in all our lives. Writing in an entertaining and narrative style, the author succeeds in tackling and explaining three major intellectual issues: the problem of induction, the survivor ship biases, and our genetic unfitness to the modern world.

The book is populated with an array of characters, some of whom have grasped, in their own way, the significance of chance: Yogi Berra, the baseball legend; Karl Popper, the philosopher of knowledge; Solon, the Ancient World's wisest man; the modern financier George Soros; and the Greek voyager Ulysses. In addition we meet the fictional Nero, who seems to understand the role of randomness in his trading life, but who also falls victim to his own superstitious foolishness. But the most recognizable character of all remains unnamed the lucky fool in the right place at the right time. The embodiment of the "Survival of the Least Fit." Such individuals attract devoted followers who believe in their guru's insights and methods. But no one can replicate what is obtained through chance.

A monkey banging on a keyboard may eventually produce the Iliad, but would you sign him to write the sequel? Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover non-existent messages in random events? It may be impossible to guard ourselves against the vagaries of the Goddess Fortuna, but after reading Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life, First Edition we can be a little better prepared.

Positive Review of Book

The author explains in convincing arguments that we overstate causality; he provides clear examples to prove his point. It does not mean that everything is random, only that we err by underestimating chance. He convincingly shows that 1) chance is much more prevalent that we tend to think, 2) that we are genetically led to underestimate its role, 3) That even scientists tend to be fooled by randomness because of their use of Normal-Gauss curves. This book wills ruffling a lot of feathers, particularly among economics academics and City hotshots. History seems to be proving him right.

Negative Review of Book

Fooled by Randomness actually fools the customer into thinking that the book is about randomness. The prologue contains the meat of the book. The rest is fluff. The author has some good ideas but he never delivers any substance to the reader. If you are looking for a technical book on randomness and the role of chance in the markets and in life, this isn't it.

Author Biography

Nassim Nicholas Taleb is the author of The Black Swan. He has devoted his life to immersing himself in problems of luck, uncertainty, probability, and knowledge. Part literary essayist, part empiricist, part researcher, part no-nonsense businessman, he spent eighteen years as a mathematical trader, and was the Dean’s Professor in the Sciences of Uncertainty at the University of Massachusetts at Amherst. Taleb lives mostly in New York.

Table of Contents

  1. Part. I Solon's warning
      • If you're so rich, why aren't you so smart?
      • A bizarre accounting method
      • A mathematical meditation on history
      • Randomness, nonsense, and the scientific intellectual
      • Survival of the least fit - can evolution be fooled by randomness?
      • Skewness and asymmetry
      • The problem of induction
  2. Part. II Monkeys on typewriters
      • Too many millionaires next door
      • It is easier to buy and sell than fry an egg
      • Loser takes all - on the nonlinearities of life
      • Randomness and our mind : we are probability blind
  3. Part. III Wax in my ears
      • Gamblers' ticks and pigeons in a box
      • Carneades comes to Rome : on probability and skepticism
      • Bacchus abandons antony
      • Epilogue : Solon told you so

        Postscript : three afterthoughts in the shower

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