Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets: Amazon.ca: Nassim Nicholas Taleb: Books

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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 alternate Hardcover edition.

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.

--This text refers to an alternate Hardcover edition.

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Front Cover | Copyright | Table of Contents | Excerpt | Index

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3.9 out of 5 stars (210 customer reviews)

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12 of 14 people found the following review helpful

3.0 out of 5 stars Important topic - flawed explication, July 16 2004

By

Craig Matteson (Saline, MI) - See all my reviews
(TOP 1000 REVIEWER) (REAL NAME)

This review is from: Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Hardcover)

I really wanted to like this book because the it discusses an important topic. The role of randomness in our everyday lives versus our innate (lack of) capacity to deal with it without careful education is one that we need to talk about more in the popular culture. However, the problems with this book are several. Its casual and meandering exposition is supposed to make it more accessible, but it actually makes it harder to come to terms with the topic.

Also, Mr. Taleb is a bit difficult to warm to, although there are occasional flashes of wit and humor that help. For example, he is so proud of his personal achievements that he both disparages them (he is ashamed of his Wharton MBA), and uses them as proof of his superiority of almost everyone (he read a lot at the library). He also has some strange peccadilloes such as his passionate and disproportionate dislike of George Will because he interviewed Robert Shiller (Taleb's friend and author of "Irrational Exuberance") in a rather feckless manner.

In the second half of the book he does explain some interesting phenomena about human psychology and randomness in interesting ways, but he goes completely overboard on certain points. On page 173 he states that Khaneman and Tversky have exerted the most influence on economic thinking in the past 200 years. Come on! Name any major economics department that has become behaviorist in any major way. (Taleb might find such resistance to acceptance a proof of concept - but people weighing evidence seriously would find it a chink in Talebs case.

I think the reality is that what Taleb points to is important and does exist, but that it is something like a second order effect in the big scheme of things. It may matter an extreme amount in the narrow world of options trading where Taleb indicates he lives, but for most of us it is a minor issue. Not one of no consequence, but not a determinative effect in the broad sweep of our lives.

So, I continue to look for a really good book on this topic. If you know of one, please email me with information about the book.

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6 of 7 people found the following review helpful

5.0 out of 5 stars A Different and Worthwhile Look at the Market (and More), Feb 18 2007

By

Oliver (Los Angeles) - See all my reviews
(TOP 100 REVIEWER)

This review is from: Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Hardcover)

Fooled by Randomness is based on a basic truth about humans: we are not very good at statistics, especially if we simply rely on our instincts. For example, we fear airplanes, sharks and terrorists, yet we rarely think about mundane risks like cancer and car accidents. Similarly, we are not good at judging investments. We think that the broker who picked three winners in a row must know something; not necessarily so, says Taleb.

This book is well worth reading, especially if you ever invest in individual stocks or managed stock funds (it will probably talk you out of doing so). It certainly is not an investment guide, however, so do not buy it if you are looking for a hot stock tip.

Taleb has a quirky writing style. This certaintly is not a "pretty" book. Nevertheless, it is easy enough to read.

Taleb, a stock trader himself, does to seem to hold most other traders in high regard.

Taleb has a unusual way of looking at things; one gets the idea that he is somewhat arrogant and a bit of a crank. That being said

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3 of 3 people found the following review helpful

3.0 out of 5 stars Fooled By Nerdiness?, Mar 21 2004

By

PAUL E BLEWITT (Malaysia) - See all my reviews

This review is from: Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life (Hardcover)

This is a good book; although not a great one. It is, though, a "must read" for anyone involved in the business of convincing others (and indeed themselves) of facts based on statistical "evidence".
Taleb is clearly a gifted thinker but I, as some other readers, couldn't help feeling annoyed by him before I reached the middle of the book. The last time I felt this uncomfortable was reading Michael Moore's last diatribe. Not that I disagreed wholeheartedly with either of the writers' polemic; just that I felt the arguments were so heavily soaked in personal anger as to reduce the rational arguments to a one-sided shouting match.
Taleb's clear failure to communicate to his colleagues and bosses says as much about Taleb's communication skills as it does of his acquaintances' foolishness.
Sadly, and perhaps unsurprisingly, Taleb is not without foolishness himself in some of his spurious arguments (used to back up perfectly rational concepts). When he claims that if someone had invested 1 million dollars in the US stock market in the 1920's he would now effectively own the whole of the listed market we know he's not quite serious. Even assuming that the rest of the investors would sit quietly on the sidelines for 80 years, try finding someone in the 1920's with a million bucks to speculate!
In terms of the foolishness of using past performance and past experiences to predict the future what other tool do we have?
My understanding of the "Bigger Fool Theory of Investing" is that fundamentals are irrelevant to the future returns of an investment. While analysts may look at P/E ratios and capitalized values of companies and claim that the stock is fundamentally over-valued, what of a Cezanne?
Many institutional investors hold works of art in their portfolios for the purpose of tax-efficient investment growth and diversification. Fundamentally, a Cezanne may be worth $50 US tops (and that's if you're prepared to pay current prices for the paint and canvas).
There's nothing rational about paying US$49 million for a Cezanne....unless of course you can sell it to a "bigger fool" later for US$55 million.
Mr Taleb's failing is that he leaves out the "human nature" side of making money (and being successful); success which can never be ascribed mathematically.
That being said, this book, though, despite the "chip-on-shoulder" tone of Mr Taleb (who incidentally, I suggest he goes out and, randomly, finds a nice supermodel to have a nice life with!)should be read.
However, it can only be after you have consumed the excellent "Against the Gods" by Peter Bernstein.
Oh, and Mr Taleb, don't overestimate our foolishness. Or if you do, don't tell us!

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