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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets | 
 enlarge | Author: Nassim Nicholas Taleb
Publisher: Texere
Category: Book
Buy New: $64.99
New (8) Used (10) from $14.00
Avg. Customer Rating:  402 reviews
Sales Rank: 472452
Media: Hardcover
Edition: 2
Number Of Items: 1
Pages: 312
Shipping Weight (lbs): 1.3
Dimensions (in): 9 x 5.9 x 1.3
ISBN: 158799190X
Dewey Decimal Number: 123.3
EAN: 9781587991905
ASIN: 158799190X
Publication Date: April 16, 2004
Availability: Usually ships in 1-2 business days
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Amazon.com Review
If the prescriptions for getting rich that are outlined in books such as The Millionaire Next Door and Rich Dad Poor Dad are successful enough to make the books bestsellers, then one must ask, Why aren't there more millionaires? In Fooled by Randomness, Nassim Nicholas Taleb, a professional trader and mathematics professor, examines what randomness means in business and in life and why human beings are so prone to mistake dumb luck for consummate skill. 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. Part of what makes this book so good is Taleb's ability to make seemingly arcane mathematical concepts (at least to this reviewer) entirely relevant in evaluating and understanding everything from the stock market to the success of those millionaires cited in the aforementioned bestsellers. Here's an articulate, wise, and humorous meditation on the nature of success and failure that anyone who wants a little more of the former would do well to consider. Highly recommended. --Harry C. Edwards
Product Description
Selected by Amazon.com and the Financial Times as one of the best business books of the year, Fooled by Randomness is an instant classic. It's uniqueness has drawn to it a wide following - from the New Yorker to the Pentagon. Already published in 14 languages, this new edition, expanded by over 80 pages, includes up-to-date advances from behavioral finance and cognitive science This book is about luck ? or more precisely how we perceive and deal with luck in life and business. It is already a landmark work and its title has entered our vocabulary. In its second edition, Fooled by Randomness is now a cornerstone for anyone interested in random outcomes. 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 of all our lives. Writting in an entertaining and narrative style, the author succeeds in tackling three major intellectual issues: the problem of induction, the survivorship biases, and our genetic unfitness to the modern word. In this second edition, Taleb manages to use stories and anecdotes to illustrate our overestimation of causality and the heuristics that make us view the world as far more explainable than it actually is. But no one can replicate what is obtained by chance. Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover nonexistent messages in random events? It may be impossible to guard ourselves against the vagaries of the Goddess Fortuna, but after reading Fooled by Randomness we can be a little better prepared.
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| Customer Reviews: Read 397 more reviews...
 Superb January 5, 2009
Nutshell review - This is an excellent book - well written, insightful, full of lessons for investing (and life) and eye-opening! Certainly if you are an investor, but also if you just want to understand just how large a role randomness plays in your life, then you need to read this book. Entertaining and informative at the same time.
Two other excellent books in the same genre are The Drunkard's Walk: How Randomness Rules Our Lives by Leonard Mlodinow and, of course, Taleb's later book The Black Swan (awesome).
Fooled by luckiness January 1, 2009
The author is a trader and writes about trading. The book, however, is not at all a mere how-to book on investing but deals with much broader topics on life in general. You may not learn anything new if you are familiar with probability and statistics; however, the author eloquently illuminates those "random" elements in society in various interesting perspectives, including history, science, philosophy, mathematics, psychology, and so on. The author's illustrious reading habit made this a very intellectually stimulating book.
The author properly points out the survivor bias in those successful people in the market where randomness plays an especially huge role, as well as the stupidity of listening to inept journalists who cannot distinguish signals from noises. However, I do not necessarily think that the book has a thorough enough introduction to the concept of randomness for the readers who are not very well versed in the concept of Monte Carlo techniques. If you are such a reader, it would still be better to recall the author's statement that the luck rewards the prepared. As far as trading is concerned, it seems that the author did make a profit even during the subprime crisis, but he does not really reveal anything in terms of useful investment strategy, though his approach can be guessed somewhat.
If you are science-type, there are not many enlightening moments; after all, nothing in the book really are new concepts. However, it elucidates the importance of not being fooled by noise as well as the benefit of resigning, so to speak, as nobody can tame randomness in life.
So many lessons taken from this December 29, 2008
0 out of 1 found this review helpful
I loved the rant and I loved the stories. While sometimes a little bit hard to stay in the flow of it, I think I learned as much of value from this book than anything I read in school. Really drove home some key value lessons about finance and way beyond.
Better lucky than good though best to be both!
Outstanding - An Unputdownable Read December 25, 2008
0 out of 1 found this review helpful
This (and its sister book 'The Black Swan) completely blew me away. I am a 24 year old finance major, now working as a management consultant, with a real interest in markets and psychology.
The central thesis of the books are tantalisingly simple: the world is so functionally complex (and growing ever more so) that most social phenomena are effectively `random'. Randomness, however, is poorly understood and even more poorly explained by orthodox mathematical modelling which systematically underestimates the `wild randomness' inherent in the world. Taleb suggests (and attempts to demonstrate) that merely understanding the deficiencies of orthodox thinking with regard to randomness (and probability) is a big advantage in life.
The book(s) are a must read for people looking to understand more deeply the world we live in and the limitations with mainstream thought generally and modern portfolio theory more specifically.
I cannot recommend these books highly enough. I read them both in a couple of days and have found them totally absorbing (in a way few books truly are). They challenge and confront and pull the reader out of his or her `comfort zone' with regard to many perspectives on the world. The core readership of the book will obviously be those interested in behavioural finance but I would happily (and will probably) give the books as presents to friends who hate finance. I will probably also give the books to my mother, which for me is the test of whether I consider a book a `must'.
Having said that the author (this is perhaps at times a symptom of his unique writing style) does at times become rather grandiose. He suggests not advising others about how to behave and then only a few pages later commits the very sin he has just warned against. In `Fooled by Randomness' he invents fictional characters "Nero Tulip" (hmm could the initials N.T also stand for someone else?) - the brilliant but modestly profitable trader (that due to massive risk aversion only invests in treasuries) who overcomes cancer but is overshadowed by a flashy superstar trader neighbour who later `blows up'. In `The Black Swan' Taleb later details how he has overcome cancer and is very risk averse, investing a large percentage of his worth in treasuries. This grandiosity is however in the end totally forgivable due to the ability of the anecdotes to entertain and inform the reader.
One other thing that I found slightly difficult to follow (admittedly I am convinced that I am not as smart as the author so it may be my fault) is the fact that in `Fooled' he correctly discusses peoples' inability to think in terms of conventional probabilities and then sharply criticises those `experts' who rely on such probabilities in managing financial risk (a theme built on very powerfully and convincingly in `Black Swan'). There is the risk that (without meditating somewhat and trying to assimilate everything) the reader will be left nodding at everything Taleb says, but later wondering how it all fits together.
Finally, coming from a legal background I found the discussion in `Fooled' about the warped use of probabilities in the OJ Simpson trial very interesting. The author discusses the legal burden as being `beyond a shadow of a doubt'. I am from Australia (with a different legal system to the USA) but this seems a mistake. I would have thought the correct criminal legal burden would be `beyond reasonable doubt'. This is nitpicking I know.
Great book(s). Priceless wisdom and insight.
 Long, repetitive, unorganized, and too philosophical for its own good December 23, 2008
1 out of 1 found this review helpful
[..............]
This is an interesting idea, and deserves some thought. Unfortunately, Taleb immediately sets the tone of his book as a pseudo-intellectual examination of the human approach to life and wealth. He writes about an obscure historical story of King Croesus and Solon. Solon tells Croesus to not be so proud of his riches, because times can change, and his riches can disappear quickly. Voila, Solon turns out to be right - Croesus loses a battle to King Cyrus and loses everything he owns. Taleb celebrates this story's moral as one of his book's finest points: "it ain't over till it's over." My response is: "huh!? no shit."
Taleb then launches into a discussion of how everyone in the world is "fooled by randomness." He writes chapter upon chapter of pseudo-philosophical discourse on how we leave ourselves open to large risks, often without understanding them.
Throughout the entire book, there are really only two points that I remember, or that I considered worth noting:
1. Understanding and braving a certain risk is vastly different from blindly pushing ahead and ignoring the downside of your actions. Taleb makes a point that many people are unfortunately ignorant of various risks and are hence surprised by certain outcomes of their decisions. He describes a "mistake" as something that can be decided before an action's outcome is known. Just because an outcome is positive, that doesn't mean the decision to take the action wasn't a mistake. In other words, Taleb clearly separates decisions and their outcomes.
2. There is a problem with induction. Often we make generalizations based on data that seem complete but aren't. His example is that of a "black swan." Those who observed swans everywhere but in Australia came to a conclusion that all swans are white. However, once a black swan was discovered in Australia, this theory turned out to be false.
These two points are excellent and can serve as good food for discussion. However, Taleb's thesis, combined with these ideas, does not require 300 pages of numerous tangents and irrelevant quotations. At times, Taleb's writing seems simply like a collection of favorite sayings from other big-name authors.
In the last part of the book, Taleb writes about how he himself is also "fooled by randomness" and is not entirely logical about various things. While it's admirable of him to admit his own shortcomings, the reader does not need 80 pages of self-searching.
[.........................]
Pros:
+ an interesting view on investment and risk
+ contains a few thoughtful discussions (see 2 points above)
Cons:
- unorganized; has too many tangents and irrelevant quotations
- very repetitive, could be cut down to 50-100 pages
- written with an annoying "better-than-thou" attitude (note how one of the tags for this book is "humility" - hah!)
- has too much self-searching and too many references to how Taleb was exercising or spending time in the gym when he thought of something exciting
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