Interesting. Annoying. Self-referential. Insulting. Exasperating. Ultimately, intriguing. Taleb is smart, but an autodidact and quite full of himself. (After he lobs his tenth purely gratuitous insult, he is no longer cute -- he is merely sociopathic.) He gets a lot right, but he also plays fast and loose with schools of thought in which his understanding is strictly superficial. (And as with many autodidacts, he has trouble identifying which areas these might be -- making humility the mark of the really smart ones.) Like Descartes, whom he loathes, he is a rich guy who has the time and the means to ruminate with a wide swath of other intellectuals. This breadth offers bridges from ideas with which the reader is familiar into new and intriguing places. And on the pragmatic side, the reader can ask himself just what this guy does that might have saved us from loosing our collective shirts in the market.

Insulting, interesting, self-referential, annoying, ultimately intriguing. Taleb is smart, but an autodidact and quite full of himself. (After he lobs his tenth purely gratuitous insult, he is no longer cute -- he is merely sociopathic.) He gets a lot right, but he also plays fast and loose with schools of thought in which his understanding is strictly superficial. (And as with many autodidacts, he has trouble identifying which areas these might be -- making humility the mark of the really smart ones.) Like Descartes, whom he loathes, he is a rich guy who has the time and the means to ruminate with a wide swath of other intellectuals. This breadth offers bridges from ideas with which the reader is familiar into new and intriguing places. And on the pragmatic side, the reader can ask himself just what this guy does that might have saved us from loosing our collective shirts in the market.

This book is great and should be a compulsory reading for everyone at college. Lots of people do not realize how much chances and coincidences play roles in our lives. This book is about learning to appreciate the vast number of variables in common life which are not controlled by anyone.

The ideas in this book have created more controversy than they deserve, and it might have something to do with the title of the book. Given the number of people who equate "random" with "equiprobable", "Fooled by Probabilities" would have been a more appropriate title for the book, though not as provocative as "Fooled by Randomness". There is a finite chance that there is a black cat in every dark room, but when you switch the light on, there is no black cat in the room. Both are correct statements - mathematically and practically. This book must be read in the same light.

It seems to me that the transition from an average to good investor (probabilistically speaking) happens as soon as you internalize the concept of expected values and invest by it. My favorite story from the book is where Taleb is asked which way the market is expected to go next week, and he says slightly up with a high probability (70%). Then someone intervened that Taleb had just made a big bet on the S&P going down next week, and he said that indeed he did. The one lesson this book teaches is that the two statements are not inconsistent with each other. 70% chance of a +1% change and 30% chance of a -10% change sums upto -2.3, a strongly negative expected value. Good investors always shadow the expected value (trend and magnitude), although market sentiments are always driven by either the expected trend of upward or downward movement, or expected magnitude of upward and downward movement.


Four key insights that I received from the book about how we all get fooled by probabilities in our everyday lives are the firehouse effect, survivorship bias, endowment effect and Wittgenstein's ruler. Firehouse effect is characterized by a clique of people with much downtime (firemen) who end up strongly agreeing with each other about things that would seem incorrect to any rational observer - something that many investors suffer from. The survivorship bias talks about exclusion of failures from "objective" after-the-fact performance studies - something that many business books suffer from. Endowment effect suggests that people value something more after they own it or get familiar with it - something that many businesses suffer from. Wittgenstein's ruler says that when an unreliable ruler is used to measure a table, the table is measuring the ruler and not the other way around. Reliability of the ruler determines what is being measured - something that consumer reviews and stock recommendations suffer from. For these and many such, read Fooled by Randomness.

This book is great and should be a compulsory reading for everyone at college. Lots of people do not realize how much chances and coincidences play roles in our lives. This book is about learning to appreciate the vast number of variables in common life which are not controlled by anyone.

This is by far the smartest book I have ever read. As a PhD statistician I thought I was pretty sophisticated about randomness. Wrong, this book made me think about it in ways that I had not before. Every student of life or mathematics must read this book before they can consider themselves educated.

"Fooled by Randomness" may not make you a better person or even a better Wall Street trader, but it is fun to read. I took a couple of the typical Statistics courses in college and understood enough to realize that statistics was being misapplied by lots of academics (and others).

It is really pretty subtle and easy to make mistakes.

Taleb is now a personal hero of mine. My hats off to someone that can make a living from the market with seemingly so little effort.

I've always thought it was funny for some executives whose company lost major amounts of money to say something like: "so and so, unexpected event occurred, and we lost money. (It's not my fault), just look at all my competitors (who also lost money)". How is this a justification? Did your mother tell you don't jump off the bridge just because everyone else is going to? Don't drink that poison Kool-aid!

Whether it's the dot-com meltdown, the mortage meltdown, the Enron collapse, the Arthur-Anderson accounting scandals, Katrina, Andrew, or 9-11 leading to terrorist wars, when one looks into history, there was always someone who did calculate for such risks factors. They were always overruled by some then-high-flying executives who denied such possibilities. These events are the black swan of reality.

The book is fun and informative book. The author throws his sarcastic personality into this book tells amusing stories of how a finance occupation with a great deal of randomness in success rate produces all kinds of successful incompotent characters. Frequently, as Taleb points out, even after a black swan, these once-successful characters still walk away with millions of dollars or other successes. As for example, the not-indicted Enron executive with $98 million, the Arthur Anderson execs who still had tens of millions, Mayor Nagin of New Orleans, the dot-com and mortage-related companies that kept their money, etc. It's not just the financial market--it is life in general, as Taleb notes.

Most reviewers here find his views narcissitic because he knocks so many occupations and people; I actually think he's just sarcastic; and it is evident he is also highly self-critical. The way he knocks these others is very entertaining. Everything from Russian scientists to MBAs to zero-risk traders to aggressive traders and to himself.

Anyhow, what can one learn from this valuable book (other than be cautious assumming that those who are successful are compotent):

1. If one is in an occupation where there is luck (randomness) involved, the occupation will produce a large number of lucky and unlucky people.
2. People aren't very good at remembering or assessing the percentage of luck in their decision process, and the lucky will be fooled into thinking their luck was skill. Therefore one will meet a large number of successful lucky incompotent people.
3. We as human beings cannot be rational; and thus, one's feelings, and incompotentence about one's luckiness still has to be expressed, understood as luck, and limited in one's decision-making impact.
4. People thinking processes frequently exclude the occurrence of the black swan events.

Taleb is saying more than how this applies to the market. He's saying that human beings are not good mathematical decision calculators, and as such, in recognizing this, one will see differently others and self.

As for financial markets, Taleb is saying something similar to Malkel's (sp?) Random Walk Down Wall Street (first edition). It's actually a great follow-up--the psychology, characters, and black swans of Random Walk.

I have been trading markets for long time and have been exposed to volatility and its devastating impact on portfolio. I have been trading professionally too (in a bank, different markets). I read numerous books before on trading (technical analysis, strategies, etc..). But trading is more than just fundamental and quantitative analysis. Good trading skills have deep roots into psychology and philosophy. I decided to buy the book and read it after noticing so many negative reviews and I became curious. I can say , that the book was above my expectations. The author confirmed and reinforced many interesting aspects I knew with very nice and interesting examples. This work also broadened my horizons into history, philosophical thinking and gave me new ideas how to improve my own trading. Now, it is time to say to all who say negative things about the author: you are all wrong...Look at the financial crisis and blowouts by hedge funds and banks. Thats because those idiots didnt even understand things covered in this book. After long way of schooling (MBA at NYU) and long years of work, I met a lot of people Taleb talking about (traders, strategists, analysts,and professors), and many of them have wrong way of thinking. Taleb exposes all of this in his book. It is an excellent book for experienced traders (not so experienced ones are unlikely to appreciate the book to its full extent or even understand the concepts covered). Great book to complement someone's quantitative training. To make the long story short, the book is going to benefit everyone and make everyone smarter.

The first cautionary point I would make the prospective reader of Nassim Taleb (in any form) is that he can definitely come off as extremely arrogant. He pulls very view punches in sharing his opinions, particularly about people, be it groups or individuals. His fellow Wall Street professional are vilified, as are those who can be considered the luminaries of financial theory and plenty of others. Taleb is free with his criticism, though he does also offer complimentary words for some others, like George Soros, whom he clearly respects.

My second cautionary point is that Fooled by Randomness is not a handbook or scientific treatise of any sort. The author is actually pretty upfront about that. Taleb classifies it as an essay. I'll call it an expression of personal observation, opinion, and philosophy.

The main thrust of Fooled by Randomness is quite simple. It's that people are fooled into believing that what are likely random things have instead some meaningful causality. Taleb talks about all the different ways this can happen, and they are fairly numerous. This is probably the aspect of the book which upsets the most readers (or prospective ones), because he essentially says that we cannot necessarily assume the success someone has in trading or business or whatever necessarily has anything to do with that individual's intelligence or skill or whatever. It might just be luck, good or bad.

This is not, as I understand it, to say that Taleb believes everything is a matter of luck. Rather, he suggests that certain ventures (trading, for example) are much more influenced by randomness and uncertainty than others (dentistry, to cite his favored example). Naturally, the idea that randomness may be more important than our decision-making abilities is something that's not going to sit well with many people.

Something I would have liked to see as a compliment to the uncertainly discussion was a bit of practical talk about the implications of uncertainty in how one operates, for example in how one develops a trading strategy. Aside from highlighting the requirement to account for that uncertainty, though, Taleb is mostly silent on the application side of things. Nor does he bring in much specific science or math into the discussion. I would have liked more of that, but the author states from the beginning that such will not be the focus, and he's supplied a number of notes and references in the back of the book toward that end.

It's worth noting that the randomness angle isn't the only one in the book. There are plenty of other philosophical ideas discussed in the text as well.

In terms of writing style, I found Taleb generally engaging and easy to read. There are some complex concepts he discusses which necessarily slow you down, but as I noted about, he doesn't get into stats and math and stuff like that, so the text is generally fluid. Grammar sticklers might be a bit put off by the relatively frequent use of sentence fragments at the start of paragraphs, but the ideas are communicated effectively nevertheless.

As for the overall presentation, I personally found the latter part of the book to get a bit scattered, causing me to wonder where the author was going. Generally speaking, however, it was an enjoyable read. Taleb certainly triggered in me a number of different thoughts and ideas. Given that Fooled by Randomness is above all else a philosophical exposition, that is exactly what should have happened, so I would say the book definitely achieved it's objective. I definitely recommend it

The points this author attempts to make in this book at completely lost on the reader due to the poor quality of writing and the authors total love affair with himself. It is shame. Unless you can overcome his short falls as an author, you'll be challenged to get any value out of this book.

Taleb has some good thoughts, and is occasionally witty and amusing. However he drones on and one about the same thing. Could be truncated, and then offer (more) thoughts on execution.

This book is definitely one of the best books ever...I claim to be a mathematician somewhat having gained straight A's in pure and applied mathematics and advanced mathematics with (a boring) engineering degree at a number of UK univerisities, and after years of dabbling in options trading and having experienced first hand; Black Monday (black swan?), the Asian Economic Crisis, living in the epicentre of SARS (lucky to avoid it), and being in this market whilst we have one of the greatest financial crisis ever since the great depression..this book in my opinion is a real diamond and i reckon Taleb is a genius. I agree with his logic and found his book so good I just could not put it down.. I would recommend this book to anyone trying to find "direction in life"(there is none cos it may be random) or those who are going thru major change in life, or simply those who are bored with life and need another " angle"...I agree totally with his analysis of noise vs market movements, and his view of how so many people misunderstand probablility and statistics...and yes I do have an MBA and did find the degree useless...this book "probably" would have been more useful in my career for sure! brilliant book!! Well done!

Some years ago, I had a colleague who organized a Mark 6 pool among friends. They had a database of previous Mark 6 results and from it derived that some numbers were more easily drawn than others. They then collectively bet on such numbers which they believed would have a higher probability of winning. I asked him the basis of his action. He explained that the fact some numbers appeared more frequently was real as proven by the statistics. The reason could be the material of the paint of different colour, the difference in the shape of the numbers painted, or their different position before drawing. Although the factors would be too complex to compute, the results shown in the statistics were sufficient to show the bias. By the time I left the department, the pool was still losing money.

It is not a coincident that the essence of the book is exactly on the same thinking. Taleb points out that human beings always overestimate causality, and we tend to view the world as more explainable than it really is. An example used in the book is the performance of stock and option investors. These investors use sophisticated statistical methods to analyze the performance of the market in the past and predict the future. The information they derived from analyzing the past may adequately explained what happened. However, the performance of the market on the following day has no relevance to the past. It is a Brownian movement which only depends on the factors at present. It is actually more random than expected.

For that matter, people always confuse between randomness and causality. The book gives an illustration on the two corresponding sides of such thoughts:
Randomness v Determinism
Probability v Certainty
Belief v Knowledge
Coincident v Law
Forecast v Prophecy
Lucky idiot v Skilled investor
Survivorship bias v Market out-performance
Stochastic variable v Deterministic variable
Noise v Signal

It is not surprising that such thinking would attract objection from the skilled investors. There are a lot of comments on this book defending the reliability and almost certainty of statistical analysis and prediction of market movements. However, from the market performance in recent months, I tend to believe that the market is much more random than we thought.

Since human being developed self-consciousness, or the soul if one likes to call it, we always wonder why things happened. This quest for reasons has also developed into the religion delusion. This innate property of the human mind makes it easy for us to attach reasons, whatever they are, to nearly everything. Thus we are easily fooled by the randomness of nature, which is now beginning to be recognized in modern science such as evolution biology and quantum physics. For the ordinary people, it is useful to reflect on the randomness misconceptions discussed in the book.

There is a survivorship bias in many statistical data we gather. We see the winners and try to learn from them, while forgetting the huge number of losers. The case study used in the book is the survey of the earning ability of the stock and option traders. While a lot of data on the traders in business can be gathered, the survey is actually gathering only the data from the survivors. Data on many traders who lost money and dropped out in the previous years are all ignored. Thus the statistics is unreliable. Let's say we want to survey among government executive officers on how the university graduates adapt to government work. We are only surveying the survivors of the government recruitment. University graduates who do not make it are all missed. If we conduct a survey in an online forum on the habit of people using computer, we are only surveying those surviving in the forum. Such statistics need to be qualified on their target participants. However, there is a misconception that survey with survivorship bias can be applied universally.

Many probabilities have skewed distributions. Many real life situations do not have a 50% probability like the two sides of a coin, but have unusual and counter-intuitive distributions. People can often be fooled by the fact that they won a bet 50 times and think that they will win next time with absolute certainty. Taleb opines that some aggressive stock and option traders eat like chickens and go to the bathroom like elephants. They earn a steady small income from selling the stocks and options, but when a disaster happens they lose a fortune. They are fooled by the randomness of the market which is hidden from them.

There is the story of black swan on probability, on which Taleb eventually wrote another book. Swans in Europe are white. People may take numerous observations to prove that swans are white. So a fact is established that all swans must be white, and the probability is 100%. However, it only takes one twist in the DNA to turn one swan black and the probability is re-written. In fact, black swans are found in Australasia. The impact of the highly improbable is severe. The more improbable it is, the harder the impact when it happens. Another joke on the false improbability is when Taleb observes an old man everyday to see if he is still alive. For eighty years, there have been about 30,000 observations and the old man is still alive. With such a large number of observations, he could conclude that this old man must be a superman who is highly improbable to die. By the track record, he may even live forever. But it only takes one death to turn the probability to zero. The truly scary thing is that the black swan could be a random event. That means it is capable of happening any time to turn a high probability totally upside down.

Every once in a while, someone really intelligent focuses his thoughts on the most valuable skill a human can have--how to think. Nassim Taleb has done an admirable job at just that: not telling us what to think--but showing us how to think in ways we can apply to innumerable life situations. I'm talking about what Charlie Munger refers to as "multiple mental models."

The most important ideas explored are those of Popper--the idea of the open society--one in which no theory is known with certainty--only with probability, and theories continually replace one another as more information comes in. Interestingly Taleb continually cites Soros as a famous investor who utilized Popper's ideas, but Warren Buffett, the ultimate realist, if queried, would no doubt acknowledge Popper in influencing his thinking. In contrast to Soros and Buffett would be Bill Miller, an intensely philosophic investor, who recently has classified himself as an optimist--but not a realist. In any case, the methods of thinking propounded by Taleb fit nicely into what Charlie Munger classifies as "mental models"--doubtlessly useful stuff for the introspective, philosophical investor.

This book reads a lot like a self-absorbed blogger's rant, but it is a rant that is highly satisfying to read. Almost all of us have a distant relative or friend who is allegedly a "stock market genius". Taleb argues that it is usually hard to know whether that person is truly skilled or just lucky. Those of us who tend toward schadenfreude (enjoyment taken from the misfortune of someone else) can take solace in the fact that this person might just be a dolt who is likely to blow up one day. He argues that most often trading success is either the result of ones arbitrary trading style happening to jibe with market conditions or a product of exposure to volatility in a way that allows for small regular gains followed eventually by a spectacular blowup.

One of the most self-congratulatory, didactic books I've ever read. Taleb is a convinced ideologue whose expertise in stock trading has created the conviction that he sees the invisible hand at work.

He constantly reminds the reader that he is writing, restating and recasting sections with a reference to his earlier statements (never trust a writer that quotes himself) while dismissing whole schools of thought by selectively quoting from philosophers to make them look silly and misguided--if you read any philosopher, they will eventually prove themselves silly and misguided. It happens when they take themselves too seriously, which Taleb certainly does.

Overall, his ode to skepticism is well conceived, but very thin. Unfortunately, it seems to be the only idea he ever tested. He makes the frequent mistake of confusing the success of a rigorous analysis for the justification of a philosophy as a guiding system to thought for others.

Ultimately, philosophy is what Taleb suggests science is, taking the ideas of Karl Popper over the top and placing them on an alter, "science is mere speculation, mere formulation of conjecture." Popper was a solid skeptic, while Taleb is a convinced acolyte.

My husband has been struggling in the market for a good 5 or 6 years. Its really opened his eyes though. Of course its all common senses but when you've lived in denial for so long its a real eye opener. He was able to put himself into many of the positions and has stopped living on the if's and could've or should've been position. There's no more hoping for him he's looking for the signs now.

Many concepts in "Fooled by Randomness" can be mentally applied to many areas and circumstances of our lives. This book has a lot of variety both past and present that can help us in the future in how we *think* about things, our environment, and more importantly, ourselves. This review will take a different path because there have been so many written about this book already.

Author Nassim Taleb believes that Randomness and luck is more of a factor regarding people's positions and successes than most folks realize. In politics, business, economics, and a other fields and areas.

We often too quickly make the assumption that because of someone's superb and/or superior circumstances that these superior results are exclusively because of his/her smart mind, brilliant decisions, actions, and skills. Surely they must know something we don't? This isn't always the case. Sometimes it is, but not always. More often than we might think, it isn't. I see the author's repeated points that we as humans, underestimate the odds and occurrences of Randomness. But I do think diligence, planning, and acumen are also highly prevalent in many successful things we do, in life. It you're good, you'll do better than someone who isn't, in anything. Common sense is a critical factor, too. Our choices also obviously affect what happens to us, in what we passively receive.

All of us can recall times when we were given credit for something that was in all honestly, more the result of fortuity than our own doing. Do we often openly admit it? :) I do believe, that most of one's achievements is because of hard work, skill, planning, and yes luck. But for some of us, in certain situations, luck is the key reason, and there's nothing wrong with this. Those of us that have been the beneficiaries of luck should enjoy it, use it to our advantage, and perhaps most importantly, realize that we've received it.

Within the first couple of pages a detailed description lures the reader: the quick-topping Ferrari, screeching to a halt. Underlings immediately jump, scramble, and run to park the car as its owner vacates and bolts to the Trading Floor. Being a former trader, there attention paid to the trading world in FBR (Fooled by Randomness).

One of the many real-life examples and anecdotes Nassim Taleb noted was the topsy-turvy rise and crash of individuals in the world of Bond Trading: A Bond Trader named "Nemo" was envious of his 'more successful' Chicago neighbor "John the high-Yield trader," who lived right across the street. Nemo had a 14 year track record of solid returns based on careful assessments of risk. Nemo was a long-term survivor of the Bond World and had a solid personal financial base he'd built up for him and his family. Across the street, John was boorish, loud, show-offy. He loved to flaunt his toys. His wife was arrogant, and pseudo-high society. John's luck - his stint with randomness eventually ended, and he crashed. Karma....

Over the years as we get older we observe our circumstances, our environment, our peers, and our peers' circumstances in relation to *ourselves.* In the chapter, "If you're so rich why aren't you so smart?" we see the randomness of the social pecking order.

The world has many one hit wonders in politics, business, music, film, etc. And when the Random opportunity or luck of the one-hit wonder appears, people should take advantage of it. (If, they can recognize it.) Because if it's luck or randomness, it won't last forever.


Only a few times (not often) throughout this book, I had to re-read or re-scan a sentence or group of sentences to get the point Taleb was making. But the writing is good enough, to the point, and succinct. Readers should note the author is not a native English speaker and being a Mathematician, the author is likely left-brained. So readers, go easy. I do believe however, this book is decently written.

Taleb lists some of the common traits listed of people who are the beneficiaries of Randomness but don't realize it. Instead, they think their situation is the result of mostly themselves, their decision-making, and actions.

The Confusion Index:

The Confusion Index has several terms for people who assume results are because of "vision," "excellent strategy," and "brilliance." This is often the interpretation of past results. It's pretty easy to interpret past results, isn't it? It's easy to be a Monday Morning Quarterback. This is called "Hindsight Bias." Have you ever heard "It was so obvious" after the fact? Things appear more predictable after the fact. Some concepts below in the index:

Luck vs. Skills
Randomness vs. Determinism
Probability vs. Certainly
Belief, Conjecture vs. Knowledge, Certitude
Theory vs. Reality
Anecdote, Coincidence vs. Causality, Law
Forecast vs. Prophecy

My Favorite Chapter: If you're so smart why aren't you rich?

Some of the many great chapters and sub-chapters:

Gamblers' ticks & pigeons in a Box
You should be dead by now
Placebo Investors
The rare-eve fallacy: the mother of all deceptions
Survivorship Bias (one of my favorite sub-chapters)

Don't be fooled. This is....a great book.

PROS:
* The book argues an important message (that we underestimate the role of luck in our results/outcome).
* A few interesting anecdotes.

CONS:
* Although the author is self-deprecating at times, it smells more of false modesty rather than geniune humility (which he argues everyone should have). Most of the time (as other reviewers have noted) his arrogance comes out loud and clear, and that's annoying.
* Disjointed style of writing. He rambles, jumps around, and writes in awkward sentences. The writing doesn't flow easily.
* Disorganized. He proclaims that he doesn't like to use headers that tell the reader much about what is coming up. For non-fiction books, I prefer clarity, rather than cuteness.

CONCLUSION: There are brief moments of brilliance and lucidness, brief moments when you think the book is really going to be worth reading, and then it quickly vanishes. Unfortunately, it's also a hard book to skim. I don't recommend it.

Well, what can I say? The concept of "black swamp" function is very original and as a professional investor, I appreciate the author's insight into this critical concept to long term return. However, the whole book is about this concept and I don't learn anything new after finishing the first few chapters. Moreover, the author is a trader rather than a writer which probably explain his less-than-perfect reading style. Readers have to be prepared for his "non-linear" logic and could be very confusing at times.

i find it fascinating the diverse reviews this book has received, it seems to have a polarizing effect on readers! for me the book was engrossing, but admittedly i am a fan of taleb's writing and philosophy of life. while he is clearly not concerned with journalistic rules he is able to communicate his point. so what if his sentence structure is not perfect. what i appreciate most about his works, fooled by randomness included is that they caused me to think, and rethink my own beliefs and perceptions about life. i felt challenged by the content and relished the opportunity to ponder paragraphs. this is the strength of his writing (in my humble estimation) to cause the reader to think. a worthy read even if you are prone to focus on the impossibly difficult particulars of writing in the english language...

This everyman's introduction to randomness should prove interesting to everyone who invests for profit, fun or retirement. The narrative style conveys the author's point that random spikes or troughs can occur in any investment without warning and that the oft used normal curve does not necessarily model the behavior of investments. It's sort of like saying that the normal wind speed is an accurate model for what could happen in tornado alley on a specific day in the summer.

That being said, there's little guidance for the investor about ameliorating the effects of "black swan" events; the best one can do is expect them and try to avoid being over-extended in yesterday's hot investment when the bottom falls out.

Nassim Nicholas Taleb is an extremely insightful individual with an equally impresive gift for storytelling.

His basic thesis is that although we like to think of our lives as ordered and predictable, they are extremely prey to random chance, and are in fact far far more so than most of us can even understand. We create delusions of predictabilty, mentally rewriting our own history in order to avoid excessive anxiety. He brings a unique perspective as both a genuine thinker and a man of practical experience in one of the most volatile occupational arenas of modern life - the stock market.

I found the autobiographical aspects of this book (both in the first person narrative, and the use of the fictional Nero Tulip) as interesting as its more philosphical and analytical content.

The book is poorly written by a financial trader and money manager. He does a poor job actually answering any of the questions that he poses. He alludes to literary, philosophy and obscure historical figures in an arrogant manner. He comments probably ten times how he despises the wealthy, and yet begins a dozen paragraphs with phrases like, "While i was in London..., or "As i am writing this on a beach in Rio...". He talks about how well read he is, how much he loves to work out, and really does very little in assembling and proving his thesis. I would avoid this book.

I thought this book was great although I didn't read the whole thing. It appears to confuse people because it attacks statistics while spending so much time examining them, but the title makes it clear that this is the intention of the book. This is an important point in our statistics obsessed socieity. Books like Freakenomics (which has a column in the NY Times) treat statisitcs as facts and reality as an illusion. (So if statistics show something obviously wrong then our "perceptions" must be wrong.) Educated people use statistics to show trounce those with less eduction and of course there's the stock market and various new financial istruments that rely on statistics. All of this is fatally flawed.

The other issue is his writing style, which is really old fashioned. I haven't read lots of old science books but it reminds me of Frankenstein, the mad scientist of alchemy. Of course, every writer is a politician now and with all the political correctness often you can't figure the sex of the writer let alone what they actually believe. But then they try to connect with you through way too much biography, like with Greenspan's book. Taleb obviously wasn't trying to run for office and he doesn't really tell us much about himself. If you've worked in tech or been to grad school lately you'd recognize this new personality, which can be insulting although Taleb is actually moderate in this regard. If you don't like him then don't go to grad school and don't work in any area with lots of elite foreigners.

I liked this book. (Ignore most of the philosophy junk...)

One thing you have to say for this guy. The book is published in 2004. He predicts that some hedgefunds trading short treasuries and long sub-prime with 20 times leverage will blow up because they're not factoring in the risk right. In 2006 four such funds blew up...

The key pieces to walk away with here are....

Don't think YOU KNOW for CERTAIN that something is going to happen or not happen because of history or what you know...

You can't statistically prove that something won't happen because it has never happened before.

That most of what's on the news is rubbish or hype... (Which I buy because most of it is either dumbed down or cut short that the meat is missing... )

Most market movement is noise...

People need to evaluate not only the probability of an event or a move up or down... but you have to factor in the amounts/size of that movement. Example: So if you make a dollar a day for 99/100 days only to loose 1000 dollars in one bad day, is that a bet worth taking...

Limit your use of leverage or know the downside.

Wow, what a tough book to read and try to follow the author's line of thought!

I guess the author's main point of the book is to take a different viewpoint of risk. For example, Black Swan events (10 sigma +) do occur and try to always understand the probabilities involved with any issue.

One chapter is dedicated to criticizing the book The Millionaire Next Door by Stanley. The author claims having a lot of millionaires to study is a product of extraordinary times, e.g. the 1982-2000 Bull Market. The author claims there would have been fewer millionaires to study if the time period was the Bear Market of 1968-1982.

Although the author might be right in there were fewer millionaires by number in the early 1980's versus the 1990's, he is dead wrong about the percent of millionaires depending on the stock markets. Pareto, the Italian economist, found that only 10% to 20% of the population owned 80% to 90% of the wealth in Italy and England in the late 1800's and early 1900's. In fact, in the U.S. today, about 10% of the population owns 90% of the wealth. I'm surprised the author is not aware of the Power Law and Pareto's 80:20 Rule as a subset of the Power Law. Based upon Pareto's work in the late 1800's which still holds true in the 21st Century, Stanley's Wealth Accumulators have always existed.

Stanley's finding that millionaires lived below their means and invested the difference is no big secret per Charles Dickens (1812-1870) in his 1849 David Copperfield, "Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."

The author also argues that Stanley's studies suffered from survivorship bias. He argues that if Stanley had included all the people who saved and invested in losing investments, the net worth of his average millionaire would have been cut in half. I hate to let the author in on another secret that has been around for 2,000 years: don't put all your eggs into one basket as elegantly said in the Talmud, "Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve." I disagree with the author saying that all investors ignored this age-old advice to diversify their investments.......and therefore drive Stanley's average millionaire's net worth down by 50%.

I do agree that survivorship bias is an important item. When comparing actively managed mutual funds to passively managed index funds, one should always remember that only the "survivor" actively managed funds still exist. If the actively managed mutual funds that died or were taken over were included in the numbers, passively managed index funds would be the actively managed by a higher margin.

I found Mauboussin's book, More Than You Know, to be much easier to read and much more thought provoking than this book. If you are interested in actionable behavior you can take as an investor to overcome behavioral finance tendencies, I recommend Pompian's book, Behavioral Finance and Wealth Management.

See other great books about investing below:

Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pro's
The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing

I managed to read the entire book (which means its an easy read and decent enough. I will not go so far as to say its worthless, as I say its a 'decent' book). So, here's my bottom line. Each chapter has the same unfounded examples-- Taleb casually mentions someone did something and concludes 'see, its random'. He does this over and over again. Fortunately, he concludes the book by acknowledging he's as dumb as the rest of us. His thesis does seem to have 1 definitive source of proof: by random chance many, many people (including me) have been fooled into buying this random book. Maybe his 2nd book, Black Swan, is an improved version-- I would suggest (randomly, since I haven't read it) to just start with Black Swan.

This book is one of a kind. It is a thought-provoking essay that presents the author's philosophical views on randomness, which originates from his long-time experience as a trader and from his vast knowledge of the western philosophical tradition.

I think the book is wonderfully written, although I understand some reviewers' comments about the arrogant style. There is actually some self-sufficiency in Taleb's writing, but I think it actually gives the book a very special ironic and personal touch: you can feel there is an author there, he is not trying to be neutral. I ended up loving it and asking for more. I have also read The Black Swan, but I must say that Fooled by Randomness is the first I read and the one that caused me the greatest impact.

Certain parts of the book are enjoyable and a good reminder of how emotions skew rational thinking. Furthermore, the authors explanation of probability versus expectation is also written in a pretty entertaining manner.

Basically, he is saying that majority of traders trade strategies where probability of making small amounts everyday is high and the probability of a catastrophic loss is much smaller ... and that, they eventually blow up. What is insane about this author is that, he implies this in multiple places, he is trading where others blow up (loose money most of the time and make it big on a few occasions). How is this any scientific and rational? given just as those traders cannot foresee that they will blow up, this literally over developed author/trader type cannot tell he will make money because a big event will happen tomorrow and his bet is on the right side. This author probably has option positions out there betting on aliens will invade 20,000 years from now. Too bad, he won't be around to see the outcome.

Another point, he is quite popular right now, in various magazines, articles, people seeking his advice... However, this is also ex-post. If a credit sequeeze hadn't happened in the last year or so, he would not get the same attention he is getting now. I wonder if he is thinking about that sometimes. This reflects his trading style, this is a brief moment in his life, where he hit the jackpot. He will probably ride this as long as he can. I don't think his book will leave serious mark, because he does not even come close to answering any of the fundamental questions he is debating. Also, at places in his book he is discussing technical terms like ergodicity. I don't think he fully understands the meaning but he tries to find some verbal explanation for it based on everyday experiences. Sometimes, mathematical concepts may not have a direct translation in life. They are abstract. He does not discuss "stationarity" at the same level for example, and even if he did readers would have little to gain from his explanation.

I'm stunned. People are still making the same mistake--intelligent people, at that. The mistake? They contradict themselves in boldface statements and are proud of it. Nassim Nicholas Taleb makes the mistake throughout "Fooled By Randomness" and what's worse, he loves himself for it. Taleb's general theory is that everything is simply random (to some degree)--especially equities trading--and "nothing can be accepted with certainty." Sure, there is some aspect of randomness at the subatomic level and there is seemingly randomness throughout our worldview, but to say that "nothing can be accepted with certainty" means that even that statement can't be accepted with certainty, which presents an instant contradiction and causes the argument to self-destruct like a Mission Impossible tape.

The self-professed skeptic Taleb doesn't think his idea self destructs however, he is simply content to have realized that there aren't gifted traders, just lucky ones. Traders are fooled by the randomness in the markets, according to Taleb, and think they're good at what they do, until they blow up (lose everything beyond expectation). Taleb admits he's one of these fools, but if that's so, and the market is unpredictable, then the only reason he hasn't blown up (if he hasn't) is because he's lucky and doesn't have any wisdom to impart. So why are we reading his book? What information does he have that would be helpful to us beyond, "it's a coin toss?"

It turns out that Taleb does actually have wisdom to impart. Once the reader gets past the hypocritical class warfare diatribe in the first half of the book, "Fooled" gets good. The author delves into the Kahneman & Tverski studies about how arbitrary anchors influence our estimates and the two systems of reasoning among other interesting studies.

I admit that Taleb's book was great mental fodder for my forthcoming book, but if you're not interested in analyzing self-defeating mentalities, there are much better books to consider including Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics and my book, How to Take Advantage of the People Who Are Trying to Take Advantage of You: 50 Ways to Capitalize on the System.

After the title and reading a little bit, I was expecting greatness. I never finished it.

I think some of the reviewers didn't read the preface. This author states that he wrote the book as though he were having a conversation with the reader. Hence he refers to himself a lot. The rest can be taken as someone telling you a funny story, which might seem biting to some. I think the reviewers that had a lot of ad hominem arguments against the book are the very same people who would talk the same way in conversation. Opinionated people tend to hate other opinionated people.

That being said, I think there is a lot of good information in this book for someone with no exposure to the concepts. Hence there is a lot of explanatory material to get the novice up to speed. Some reviewers called this "fluff." I found it very helpful. I did think there was a lot of digression, which is okay in conversation, but difficult to keep track of over the course of reading the whole book, so I gave it 4 stars.

This book has made me more interested in this topic. Previously I had some frustrations in some business situations, with no way to quantify what was making me edgy about new processes or practices. Now I am more oriented in those situations and can make more informed critiques or decisions. Very helpful. I will get other books by this author, as well as The Halo Effect, based on this gentle introduction to the subject.

Key requirements of a good book are that it challenge what I think I know and that it introduce me to interesting new ideas. So, despite its many faults, I am giving this book three stars. It challenged much of what I learned in finance and statistics, has spurred me to think more carefully, and has given me a number of great suggestions for further reading. The book's faults can be very distracting, however. Mr. Taleb is an ungracious, needlessly petulant writer whose attacks on others seem grounded in unthinking animus rather than substance. Instead of getting absorbed in his exposition (as in a great book, like "Theory of Justice"), I found that Mr. Taleb's sense of superiority frequently distracted me from his arguments. Had he had a stronger-willed editor and replaced his gratuitous ad hominem attacks with more details supporting his main points, this might have been a great book.

This books illustrates how we humans are wired to underestimate the impact of rare events.

Our (social? genetic?) conditioning towards inductive reasoning may leads us exposed to grave dangers due to decisions based purely on evidence garnered by inductive reasoning.

Highly recommend this one, if you like books on prospect theory, Blink! and Freakonomics.

What this book discusses, I see daily in politics as well as Wall Street

A must own

This book has a lot of very strong opinions and some excellent insights. The discussions of the role of probability and economics are very interesting. The comparisons of trading styles are also very useful. However, his own very strong opinions makes one wonder what black swans he might be missing.

This book is worth reading. It will make you think twice about taking on too much risk in any area of life.
Too bad the management of Soc Gen didn't have this book, it could have saved them $7B.

Fooled by Randomness is both a very interesting book, and a not very well organized one. It is constructed in an almost random (ha!) manner, leaping from one subject to another and never landing on any of its many ideas for very long. The basic concept of the book (and of Taleb's work in general) can be laid out in a single sentence - We underestimate the role of chance in our lives. His explanation for why we underestimate it, and how that under estimation affects our lives is what makes up the majority of the book, and it's a pretty fun (if disjointed) ride.

Taleb made his mark originally as a trader, and that is where many of his examples of the power of randomness come from. He uses finance to explain a survivor bias* and that we post hoc create narratives* to explain our success and failures, when really blind luck probably played a big role in getting us into or out of a given position. If you're involved in a risk prone trade, or just want to read some light, but smart nonfiction, this one is worth picking up.

*Meaning that we think if we want to get rich we should become entrepreneurs, because we only see the successful entrepreneurs, when in reality, if we want the best odds of getting rich, we should become dentists.
** I should have seen the bubble burst in the housing market and limited my position! It is so clear now! Etc, etc. (yes, yes I know everyone knew the housing marker was going to tank, but no one knew, precisely when)

Poor treatment of a good subject. The previous negative reviews were on target for me. The Preface, Prolog, Chapter Summaries, Review quotes and other fluff take up the first 50 pages! Save your time and money for something more organized, less catty and self-preening. The attitude that comes through loudly is, if you don't follow or agree with the rambling thoughts in the disjointed chapters it is because you aren't smart enough. There are many interesting authors out there I would love to have a conversation with. However this guy is one of those insufferable folks who can't stop talking about how brilliant they are and how dumb everyone else is. He tries too hard and it really hurts his credibility. Ironically, in the "About The Author" section it says "In addition to his scientific and literary interests, Taleb's hobby is poking fun at those who take themselves and the quality of their knowledge too seriously." (!) This book is just part of the media "noise" mentioned by the author I wish I had avoided.

The book has some good points and interesting thoughts but it is difficult to get by how much the author clearly thinks he is better then anyone else. This book is a way for him to get on his soap box and proclaim his greatness. Some of the points are thought provoking but all of value can be covered in many fewer pages.

Although I use statistics every day, Taleb's approach makes me think at a deeper level.

i am still trying to understand what was the book about...need i say more?

i am very sorry i have spend the money to buy it but i am handling it with stoicism...just like it is described in the book!!!!

This book was a true disappointment. The one coherent point of the book can be summed up by the title. The contention that traders (and others) tend to ignore rare (and random) events is a good one. But, through the first 114 pages (I got no further, and, as Taleb would tell you, that is absolutely no indication that the rest of the book is not pure Shakespeare), there are no other points besides 1) Taleb is very very smart and 2) everyone else is an idiot. Taleb never considers that he himself might be the product of a rare event: a mindless trader who did well by betting big on an unlikely outcome.

It's especially annoying to me (as a statistician) that he asks questions like (on p. 112): "Why dont Statisticians Detect Rare Events." Actually, we do. As his own logic would tell you, just because some people versed in statistics (or Economics) lost big in bets like Long Term Capital, does not indicate that the whole field of statistics is missing something that Taleb can provide.

I kept reading hoping that through all the arrogance and pettiness, there would be some interesting points or at least anecdotes. I'm sorry to say there weren't, and while I will allow for the possibility that the Philospoher's stone is buried in the last pages of the book, I refuse to read them anyway--it's not worth the pain.

This is a very eclectic book. It is not very well-written. It is filled with self-congratulatory asides and anecdotes. It rambles and seems to never get around to its major point -- that luck is more important than skill in creating opportunities.
I finished the book. It took a long time. I am not sure it was worth it.

This book contains approximately two hundred pages of the author bragging about himself and perhaps 30 pages of insights into the role of chance in life and the markets.
Much of the book reads like an autobiography of the author, about how well travelled and how well read he is, along with some gloating about other traders who lost their shirts due to inferior trading strategies.
He is quick to point out how other people's trading strategies, if successful, can normally be attributed to luck, but fails to point out that the same could be said of his own methods.
Wherever he does provide some insights into randomness, there's really nothing that hasn't been written many times before by other authors.
If you really want to read a fascinating account of this subject, check out Peter Bernstein's "Against the Gods". There you'll find plenty of insights into Gambling, Capital Markets, Probability Theory etc, without the self-obsessed, elitist rambling which you'll find here.
Other recommended books on the subject :
Capital Ideas (again, by Peter Bernstein) similar in content to Against the Gods, but focussing more specifically on financial markets;
Fortune's Formula by William Poundstone

I heard rave reviews about this book so I picked it up from the library. I enjoy intellectual reads as much as the next guy, but I didn't find the material to be too stimulating. As many of the reviews indicated, I found the book to be drawn out and did not think there was a very good flow to it either.

After reading this book I can say that both sets of arguments (the very highly rated and the one stars) are correct. Taleb makes a valid point about randomness in markets and correctly asserts (I think) that what amounts to day trading is just a sexier version of gambling. However, the book is written in a smug tone that saturates the text. The entire book can be summed up by saying,

"I believe everything is random and if you disagree you're a moron and I won't listen anyway because I know I'm right, neener neener neener".

If you're reading this on a plane or just need a book to kill time and flip through a few funny stories while you get some topical insight on randomness, this book is decent enough. Serious students should read a statistics book or something by a vetted professional. Three stars.

I like this book because it's intellectually stimulating. It doesn't matter that I don't agree with some parts, while others I agree with strongly. What matters is that it makes you think of things you haven't thought about before. And that's the most important part.

I agree with the main theme of the book, that people underestimate the role of chance and overestimate their skills. It's cool, and often funny, to see the book discuss many of examples of this.

I disagree that financial markets are a random walk. I think there's a lot of randomness there, but since people are involved I think there's got to be a lot of non random characteristics.

If markets were purely random, in the mathematical sense, I don't think people like Taleb, even mathematicians, could make money trading.