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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto) Hardcover – October 14, 2008

3.9 out of 5 stars 734 customer reviews

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Editorial Reviews

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 --This text refers to an out of print or unavailable edition of this title.

From Publishers Weekly

In this look at financial luck, hedge fund manager Taleb (Dynamic Hedging) addresses the apparently irrational movement of money markets around the world. Using his own investing experience and examples of others' successes and disappointments, he discusses theories like Monte Carlo math (easy; considered cheating by purists) and the concept of Russian roulette. Taleb tells interesting, well-wrought stories about individual behavior: "While Nero has succeeded beyond his wildest dreams, both personally and intellectually, he is starting to consider himself as having missed a chance somewhere." While serious investors and mathematics enthusiasts will be intrigued, readers looking for practical investment strategies will be disappointed by this rambling intellectual discourse. Tables. 40,000-copy first printing; $150,000 marketing budget.

Copyright 2001 Cahners Business Information, Inc.

--This text refers to an out of print or unavailable edition of this title.
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Product Details

  • Series: Incerto (Book 1)
  • Hardcover: 368 pages
  • Publisher: Random House; 2 Updated edition (October 14, 2008)
  • Language: English
  • ISBN-10: 1400067936
  • ISBN-13: 978-1400067930
  • Product Dimensions: 6.4 x 1.1 x 9.6 inches
  • Shipping Weight: 1.4 pounds (View shipping rates and policies)
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (734 customer reviews)
  • Amazon Best Sellers Rank: #62,486 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Bradley A. Swope on September 13, 2005
Format: Hardcover
REVIEW: This book tends to elicit very strong opinions about its quality (both very good and very bad) so it is important to know which camp you are in before you purchase it or you may be very disappointed. I found that both the very bullish and the very bearish reviews have significant merit. On the plus side Taleb aggressively addresses a topic that many readers will be interested in - randomness in our daily lives. He discusses many important concepts that are not known or at least not very well understood by the general public and experts alike. These include: 1) that uncertainty and luck play a large role in the outcomes of human activities (much more than most people think); 2) that a correlation between two types of events does not necessarily mean that one causes the other; 3) that statistics and the rare random event are poorly understood by almost everyone; 4) that small differences in performance and ability can cause very large differences in the rewards or difficulties that people obtain in life; and 5) that humans are very irrational beings and are not very good at thinking probabilistically and understanding the probabilities of even everyday events rationally. All of these are important points that I commend Taleb for bringing to our attention.

However, there are significant drawbacks to this book, which to some readers will make the book significantly unenjoyable or even impossible to read. While it did not significantly bother me, Taleb does have an attitude or style which at times tends to the snobbish. The author repeatedly reminds readers that he is well traveled, is a "voracious" reader, pursues his exercise routines "assiduously", and is from upper class Mediterranean roots.
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By A Customer on September 18, 2002
Format: Hardcover
This is an tough book to review. I give it 3 stars because the points he makes are valid and should be more widely understood. Unfortunately you must wade through much rambling to find them. He seems more interested in proving that he's as arrogant as people expect him to be than in discussing the key points at any length. With a fairly strong background in probablility assessment and risk evaluation I was able to follow his arguments reasonably well but I suspect anyone who does not already understand probabilities and Monte Carlo modeling will not understand the points he is trying to make. This is because the explanatory points are almost always one sentence buried in a rambling paragraph. Our society would be better off if every citizen understood his points but I don't think this book will enlighten many people. On a side note - I don't know what book several of the other reviewers read but it wasn't this one. Nowhere does this book discuss specific trading strategies or approaches or taxes. Several reviewers also clearly didn't follow the discussion. The point of survivorship bias is not that it proves LUCK is responsible for a given individuals success in any of the many areas where it holds. The point is that you don't KNOW the source (luck or skill) and you can't PREDICT future results.
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Format: Hardcover
Anyone who holds any doubts in regards to the validity of this book must read Edward Chancellor's 'Devil Take the Hindmost,' which provides a history of financial markets from the dawn of the Roman Empire up to now. After reading such a sweeping historical account, one sees the financial markets for exactly what they have always been: one vast bubble machine where people have even invested in, according to Chancellor, a company that refused to explain anything about what it did but simply assured the investors that it had a great idea for making money. Sounds rather similar to some of the dot coms in recent years. Through a compliation of both antecdotes and thoughts, Taleb provides an explanation as to why the markets work in this way, why so many fail to realize this, and how these issues are mirrored in our everyday lives. He addresses many issues that everyone should understand in order to view the world in a realistic manner. Evolution is not a one way road to nirvana but rather the process through which those adapted to the current situation fare better, and they may not be best adopted when things change. When judging the validity of any strategy in business or in life one must consider that the winners write the history books; you can only talk to survivors of war but that certainly doesn't mean that everyone survives it. When deducing anything from viewing a sample you must consider the forces that created that sample: should you consider yourself unintelligent because you're behind your classmates at a top law school? Are a good outcome and a good decision the same thing, and likewise for a bad outcome and a bad decision? And the list goes on.Read more ›
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Format: Hardcover Verified Purchase
I bought FOOLED BY RANDOMNESS after reading the Malcolm Gladwell profile on Nassim Nicholas Taleb in the April issue of the New Yorker. Like others who have reviewed this book, I found that Gladwell captured the most important details of Taleb's thoughts in a shorter, more entertaining way. However, I thought that this book can be a worthwhile read for those with a passion for this type of book.
FOOLED BY RANDOMNESS is an introduction to the difficulties human beings have at reasoning around probability. Taleb argues that human beings are genetically hardwired to misattribute the results of human endeavors to skill and knowledge that are, in fact, just coincidental, random events. Taleb discusses the results of this embedded flaw in human reasoning in three areas.
In part 1, Taleb discusses impacts of `rare events' on both financial markets and on human history. Taleb argues we should beware seemingly successful strategies if they are not proven by the test of history. In particular, we should examine human history in the long term for general trends and treat skeptically claims that humanity has reached `the end of history' or `a new economic model' where the old, proven rules do not apply.
In part 2, Taleb discusses the `survivor effect', or mistaking success based on luck for success based on skill. In particular, Taleb warns against judging a strategy by its actual results. Instead, we should judge strategies based upon a sum of all possible outcomes.
In part 3, Taleb briefly discusses `tricks' he has developed to try and derail his flawed, ingrained, statistical reasoning and live a rational and, to a great degree, classical life based upon a good understanding of the effect of randomness on our lives.
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