Fooled By Randomness By Nassim Taleb

Fooled By Randomness

Silver is the founder and editor in chief of the website FiveThirtyEight. Drawing on his own groundbreaking work, Silver examines the world of prediction, investigating how we can distinguish a true signal from a universe of noisy data. Every day, we make decisions on topics ranging from personal investments to schools for our children to the meals we eat to the causes we champion. The reason, the authors explain, is that, being human, we are all susceptible to various biases that can lead us to blunder. Our mistakes make us poorer and less healthy; we often make bad decisions involving education, personal finance, health care, mortgages and credit cards, the family, and even the planet itself.

However, as he repeatedly points out, we all tend to believe our successes are proof of our own genius, and that it is only our failings that are the result of bad luck and chance. I was reminded constantly of Heraclitus while reading this book. The author was also from a well off family that lost everything in the Lebanese War. This also made him focus on change and the nature of unpredictable events. Hardly surprising then that Popper is his favourite philosopher – there is no ultimate truth, rationality is more or less prejudice, everything is awaiting falsification. The other books in the series are The Black Swan, Antifragile,and The Bed of Procrustes. Sections of the book describe how perceptions of success vs. actuality can strongly influence peoples’ perceptions and happiness.

Heraclitus’s vision of the world was that what is important is change, everything else is transitory and impermanent. To ask other readers questions aboutFooled by Randomness,please sign up.

Without spoiling the book, the stories talk about common stories people experience and how they have gone astray because of misconceived risks or probabilities. Apply these stories to an architect’s life for more success. As architects, we are very good at designing and implementing a building design. There are all sorts of risks we mitigate in our process every day. Some include water infiltration, legal issues, zoning, code issues, accessibility, user requirements, building science issues, and cost risk. A major portion of our everyday work life revolves around mitigating these types of risks.

This is a list of authors, books, and concepts mentioned in Fooled by Randomness, which might be useful for future reading. The best strategy for a given time period is often not the best strategy overall. In any given cycle, certain places will be dangerous, certain trading strategies will be fruitful, etc. The concept of alternative histories is particularly interesting. If you were to relive a set of events 1000 times, what would the range of outcomes be? Meanwhile, if there is a very wide range of normal results when considering 1,000 variations (entrepreneurs, traders, etc.), then it is a very random situation.

Their strings of successes will inject them with so much serotonin that they will even fool themselves about their ability to outperform markets. If we were to optimize at every step in life, then it would cost us an infinite amount of time and energy. Accordingly, there has to be in us an approximation process that stops somewhere. Maximizing the probability of winning does not lead to maximizing the expectation from the game when one’s strategy may include skewness, i.e., a small chance of large loss and a large chance of a small win.

Incredibly insightful and powerful commentary – a must for business and ordinary people. This will challenge your thinking and push you to re-evaluate your biases. Some real gems in here and the performance is good, but in typical NTT fashion there is a bunch of rubbish annecdotes and petty swipes at people. Beautifully written book with Taleb’s eccentric writing style. love the fact he didn’t change his style even after receiving different opinion from editors. Some good thoughts here and there, but his style is too rambling and he puts others down too much.

Fooled By Randomness Summary

I am aware of my need to ruminate on park benches and in cafes away from information, but I can only do so if I am somewhat deprived of it. Any reading of the history of science would show that almost all the smart things that have been proven by science appeared like lunacies at the time they were first discovered. Such a tendency to make and unmake prophets based on the fate of the roulette wheel is symptomatic of our ingrained inability to cope with the complex structure of randomness prevailing in the modern world. Lucky fools do not bear the slightest suspicion that they may be lucky fools–by definition, they do not know that they belong to such a category.

Fooled by Randomness

The same can said for setting huge goals, following a fad diet, chasing an extreme training protocol, and so on. In this way, evolutionary traits that are undesirable can survive for a period of time in any given population. That is, suboptimal strategies and traits can seem desirable in the short run even though they will be resoundingly defeated in the long run.

This audiobook 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.

True Randomness May Not Exist

Since this is the third book I’ve read of his and since I’ve read them in reverse order, I probably don’t need a thorough second reading. I would recommend all readers, however, to highlight key passages with a pencil and come back to them periodically to reflect on them. Taleb is best when he is covering his area of expertise — probability — and the chapters dealing with probability are great. There are also several enjoyable and illustrative personal anecdotes which are a fun and memorable read.

Fooled by Randomness

Some self-aggrandizement is fine given his job but the book is also full of cheap digs at his colleagues and since I don’t really know the author or his friends it’s all lost on me. The book starts out with a disclaimer that it will not attempt science or reason (research is hard!) because it’s more about anecdotes and gut feelings and then continues to point and laugh at all those pseudo-science done by other traders. His other books have mostly been a collection of interesting thoughts. It’s kind of like listening to someone continuously digress without actually making a point. I like to think of myself as pretty intelligent — and I usually get bored quickly — but even by my standards, Nassim changes topics too quickly. He will cover some theory, like the Law of Large Numbers, as a one sentence commentary in a small anecdote. • The more enduring trading strategy is betting on rare or unlikely events with a big payoff in case they occur.

Chart Reading

The author lacks clearly the skills of providing an captivating narrative. The author having spent big part of his life in finance market, gives 100s of examples to prove his theory, but alas all in stock market and finance. Before I can truly judge this book, however, I do think I need to read it a second time. Taleb always has sharp provocative ideas, but they do need to be reflected on and digested.

  • Taleb is best when he is covering his area of expertise — probability — and the chapters dealing with probability are great.
  • as I read through, I was humbled by the limit of what I knew, grateful for the privilege and luck I had due to the simple random fact I was born in the family that I come from.
  • By applying the principles to our own lives, we may be able to understand our behavior and behavior of others better while giving us an advantage over others who do not understand these things.
  • The most smug book I’ve ever read.Wastes so many pages mocking financial authors and TV personalities.
  • Citations contain only title, author, edition, publisher, and year published.
  • Here, the standouts and winners in the markets are glorified and assumed to have demonstrated model decision-making and behavior.
  • Though this was highly recommended by some bloggers I read, I found it to be pointless and meandering.

A book written by a person who likes to be smarter than everybody else. The Audible recoding start around chapter 4, goes through to the end of the book and then starts the beginning of the book. I really enjoyed this book, but unfortunately the chapters are not in the correct order on Audible. Feels disjointed and random until something suddenly clicks.

Carneades Comes To Rome: On Probability And Skepticism

In other words, we can only gain knowledge through proving that things are false. For instance, when I accidentally find myself in a theistic debate, people often challenge me to tell them how the universe came into existence. How dare I have the gall to dismiss some of their religion’s claims as not true without projecting my own claim to reality? I gain knowledge through knowing what’s wrong, not through making claims about what I think is right. Anyway, if you believe the preceding ideas, the book doesn’t offer much else. Another idea I really liked is how he describes opportunity sets.

Besides, forecasters never anticipate the big world-changing event — he calls them “fat tail deviations” or “black swans” — that cause traders to make huge sums of money in an instant. “When a 9/11 happens,” he said, “it counts. When a forecaster says that nobody could predict it, well, that’s the whole point, isn’t it?” In describing Wall Street forecasting, the word he kept using was “fraud.” For the most part, it is a collection of stories, both real and fictional. My guess is that it is intentional, because stories seem to impress us deeper than the facts. “Notice how our brain sometimes gets the arrow of causality backward. Click here to watch a video on the notes from this book.

Talebs Principal Thes ..

In short, life is more random than you think and your ability to navigate it rationally is more limited than you think. In all, a decent read, though I thought way too lengthy and cluttered for what he had to say.

There is nothing wrong with benefitting from randomness so long as you protect yourself from negative random events. Randomness, chance, and luck influence our lives and our work more than we realize. Because of hindsight bias and survivorship bias, in particular, we tend to forget the many who fail, remember the few who succeed, and then create reasons and patterns for their success even though it was largely random.

Fooled By Randomness : The Hidden Role Of Chance In Life And In The Markets

The book seems to have been a revelation to many, judging by the enthusiastic reviews. In a five-star Amazon review, reviewer Alex Bush writes that the book “revolutionized how I view the world. In multiple ways. It’s hard to overstate how rarely a book changes your ideas about how the world works once, let alone multiple times”. Indeed, these are things you may learn from the book in a non-technical way. These things come together when people attribute a financial trader’s performance to his ability in selecting the right stocks, their value increases over a long time, but he disregards that a crash of the stockmarket may ruin him. To be fair, the book is from 2001, and maybe many concepts described in the book were very innovative back then.

This is not a dry mathematical book but a very enjoyable read/listen. I kept coming back to it again and again just like any good book that keeps you going until it is finished.

Computer programs are ideally suited to running Monte Carlo simulations. Using a computer, a person can run millions of random sample paths . The results of the simulation can be studied for insights. Monte Carlo generator is a method for modeling the probability of different outcomes in hard-to-predict situations . People confuse and conflate forecasting with prophecy all the time. Some degree of unpredictability can be beneficial to our defective species.

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