Fooled by Randomness is a thought-provoking investigation of probability, uncertainty and human limitations. As the title suggests, the author argues that most people underestimate the role of randomness and luck in their lives. The book is full of wisdom and thoughtful insights, but you need to get past the author’s ego (like a lot of it!) and contrary (in many parts).
Nassim Taleb is a risk taker (former options market trader), finance professor and author of the best-selling series Incerto. He’s quite a controversial person, and probably not the person that you’d pick for a walk in a sunny weekend!, nonetheless, he’s a great thinker that carries a lot of wisdom.
The Book in Two Minutes or Less
Randomness influence our lives more than we realize. Successful people tend to take credit for their success, and so do people who study success of others because we tend to create reasons and patterns even though it was largely random. “Mild success can be explainable by skills and labor. Wild success is attributable to variance.”
“Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance. It is about the belief in the existence of an alternative outcome, cause, or motive”Nassim Taleb
I found this quote very inspiring. Probability has been always one of my favorite topics, and one of the very few modules that I got good grades at in college (yes, I wasn’t the smartest kid!). But I tended to look at probability as a computational/mathematical measure to quantify reality. Taleb changed how I look at it, arguing that probability is more of a qualitative measure.
Avoid it 〇 Consider it 〇 Shortlist it ✅ Read it
Key Lessons, Important Passages and Quotes
This is a summary of key lessons, important passages and quotes that I found useful in the book:
- “It is more random than we think” rather than “it is all random.”
- Hard Work Doesn’t Guarantee Success. The fact that every intelligent, hardworking, persevering person becomes successful does not imply that every successful person is necessarily an intelligent, hardworking, persevering person.
- “The details are as follows. As a rational trader (all traders boast so) I believe, as I discussed before, that there is a difference between noise and signal, and that noise needs to be ignored while a signal needs to be taken seriously.”
- Much of the connections from the emotional systems to the cognitive systems are stronger than connections from the cognitive systems to the emotional systems. The implication is that we feel emotions (limbic brain) then find an explanation (neocortex). The point is not to fight it. Its to acknowledge the weaknesses and overcome it.
- Researchers found that purely rational behavior on the part of humans can come from a defect in the amygdala that blocks the emotions of attachment, meaning that the subject is, literally, a psychopath!
- Things that never happened before in one area tend eventually to happen. In other words, history teaches us that things that never happened before do happen.
- It is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration. How frequent the profit is irrelevant; it is the magnitude of the outcome that counts.
- A random series will always present some detectable pattern.
- “Our brains are made for fitness not for truth” – Steven Pinker
- My lesson from Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it.
- No matter how sophisticated our choices, how good we are at dominating the odds, randomness will have the last word.
If you reached this far, I hope you enjoyed my summary. I’m trying to find the best structure for book reviews. If you find this structure useful or you have other suggestions let me know.