Fooled by Randomness: Nassim Nicholas Taleb - 2005

Published in 2005, Fooled by Randomness was written by probability theory researcher and philosophical essayist Nassim Nicholas Taleb. The book explores the world which is little-understood by people, through aspects such as human error and risk, uncertainty, luck, probability and decision making.

Taleb thoroughly examines the phenomenon of luck: from how people perceive it, to how people mold it to fit their own intents and purposes, using the extremely interesting world of trading as an example. People’s understanding of many systems is skewed. In fact, simulating randomness in systems can show results of clear ‘winners’, particularly in the short term. The elation experienced by some people who believe they have discovered a pattern to success, even when there is none, is very difficult to change.

"These scientists ... devoid of the smallest bit of practical intelligence"

Taleb presents a very important argument in terms of investment. When presented with the option to invest with a seemingly thriving money manager with steady high returns, is this actually down to the skill of the investor, or pure luck? In fact, hundreds of seemingly successful traders with tried and tested strategies have been eliminated by the volatility of the markets. Taleb teaches the readers to expect the unexpected.

“Heroes are heroes because they are heroic in behavior, not because they won or lost.”

Part of the Incerto series (which includes the books Antifragile, The Black Swan and The Bed of Procrustes), Fooled by Randomness/i> with its convincing and argumentative style presents some of the most thought-provoking ideas on markets, highly recommended to all investors.