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.

When the author says that finance people is fooled by randomness, makes the same arrogant mistake of his colleagues (he's fooled by his... beliefs). He cannot prove what he is saying. In science only the positive affirmation can be take into account for research, b/s they are the only ones that can be proved; this kind of approach is not scientific at all. When you run a simulation you get something that it looks like the market but it is not! this is the huge mistake. Reality is not that easy!
I heard someone says: people who know how to analyze market make money, people who is unable to do it... teach or write books...

If you want a great book on misconceptions in statistics that lead to flaws in decision making, How to Measure Anything: Finding the Value of "Intangibles" in Business by Doug Hubbard would be a much better read. If you want to read someone rambling on about how much they truly loath what he considers lesser intellects (MBA's as far as Taleb is concerned), then Taleb's book is for you.

Granted, Taleb picks on that certain class of business perons - educated by prestigious schools, well paid, and very likely highly over-confident in their own skills. It is hard to feel much pity for that group. Still, his revulsion with such persons, for me, undermines any effort he makes to seem like a sophisticated intellectual. For example, he has several pages early on in the book dedicated to berating a "an overpaid hick" and he actually makes fun of the guy's accent (a "noo-joyzy" accent, as Taleb put it). He even thought it was important to point out that this sap wasn't "well bred". Well bred? What century is Taleb living in? In another tirade he makes a sweeping characterization of "business oriented" people as being "generally devoid of any introspection, flat as a pancake". Apparently, if your intellect is not up to Taleb's standards, you will make him sick to his stomach. God forbid he ever meets someone who didn't even go to college. He would probably want to kick them to death.

Taleb attempts to present this as merely poking fun at those who take their knowledge too seriously, which is always a worthy pursuit. But that is not the impression the reader is left with. I think its clear that he truly despises these people even if he is not fully aware of it. At one point he states that his argument is often seen offensive by these people he targets (and he targets them right to the end of the book). This might actually be what he tells himself but I think its more likely that they more offended by the direct insults, not the argument.

Taleb's observations about business people might say more about where he got his MBA (Wharton, a fairly "prestigious" business school) or about the types of MBA's that are drawn to trading. Regardless, I would think that someone who is quantitatively oriented, like Taleb is supposed to be, might be a little less convinced by the non-random anecdotes he has chosen to form (and then describe) his impressions of others.

On the other hand, if you can get past Taleb's own demons, then you will see him make some good points. Whatever the real source of all this contempt for a large group of fellow human beings, the idea that luck can be confused with some special skill (or bad luck with the lack of it) is perfectly valid. Many readers, no doubt, will think of specific individuals they know where aptitude is clearly not the reason for any success.

An important element of the book is how Taleb uses the concept of "possible worlds" as a basis for evaluating true performace as opposed to merely looking at outcomes. An outcome could simply be luck. A possible worlds analysis looks at what could have happened otherwise. For example, a person who wins a $10 million prize by "winning" a game of Russian roullete should not be considered a wise, accomplished person.

Taleb is also perfectly right when he discusses common errors in dealing with probabilities. Like Taleb, I realize that journalists and other influential people are capable of some pretty profound misconceptions. On the whole, whenever Taleb sticks to specific errors that people make and stays clear of general personality judgements, then his arguments are dead on.

But, again, I would argue that there are better sources for these arguments. Even though Fortune magazine called it "one of the smartest books of all time", Taleb's repeated low-brow name calling doesn't exactly impress me. This book leaves me feeling that the author is just another one of the "hicks" he despises.

Fooled by Randomness is dreadful. It's badly written and its main message states the obvious. The whole booked could be summed up as follows:

The universe is ruled by chance. We all have chances but most of us: (a)don't recognise them (b)are too afraid to act (c)mistake luck for skill / intelligence.

I read Taleb's The Black Swan and was so fascinated by this author's synthesis of his experiences and knowledge that I purchased Fooled by Randomness. Taleb describes a financial world of shadows which like quantum particles becomes more uncertain the more energy we apply. Fooled by Randomness should be read by most individual investors and anyone contemplating a career on Wall Street. The price of the paperback is $14.95, less than a roundtrip trade at a discount brokerage.

Here are a few of Taleb's observations:

a. The millionaire next door may no longer be a millionaire since the market crash of 2000
b. The more frequently you review your stock portfolio, the greater your potential for unhappiness.
c. Your personal financial happiness may be related more to the wealth of your neighbors than to your own net worth.
d. The winners of the investment game may be more lucky than skilled.
e. Emotions help us make choices when the alternatives are similar.
f. Grey hair is a valuable attribute of a financial advisor.
g. The writings of Karl Popper and George Soros teach us about the unknown unknown.
h. The career of Victor Niederhoffer teaches us about the failure of naïve positivism.
i. Past performance is no indication of future performance.
j. Past performance is no indication of future performance (duplication intended).
k. I am typing this review with Microsoft Word because of network externalities and a Polya Process.
l. Jean Buridan was drowned in a sack in the Seine River in the 14th c. because he was either a post-modern saint or a pre-modern sinner.

Having successfully argued the relevance of randomness and rare events, Taleb may have begun work on his next book which will hopefully describe possible exceptions. Perhaps he will discuss the possibility that governments, investment houses and banks can hide manipulations of liquidity and asset values within these shadows of randomness and noise. Taleb might also include advice on how to wrestle our financial mental health from our justified and unjustified beliefs in causality and randomness, Apollo and Dionysus.

I'm one of the people who read Taleb's "The Black Swan" before I read this book (the reverse order of their publication dates) and the thesis is almost identical.

First, Taleb points out several studies that, in total, show that people (even experts) are irrational. That's no surprise. He points out that these systemic errors in judgement may also account for certain market behaviors. Again, no surprise.

Frankly, if you are thinking about buying this book you are better off buying How to Measure Anything: Finding the Value of "Intangibles" in Business by Douglas Hubbard. Hubbard addresses the same sources - and far more - of expert error. But Hubbard also talks about how to adjust for these errors with proven methods and he makes a much more air-tight case than Taleb. In yet another contrast to Taleb, Hubbard approaches all problems as if he, too, is subject to these irrational forces and the only defense is to realize it and take steps to offset it. Taleb seems to fall prey to Hubbard's observation "The most susceptable people are those who are convinced they are immmune to these errors".

Just a couple of small points...

First, as many have indicated, Fooled By Randomness is a bit of a prelude to The Black Swan, so I, too, highly recommend reading them in order. Reading the former is good preparation for the latter.

Second, I happened to start Fooled By Randomness having just finished with A Mountain Of Silence, an exposition of Eastern Orthodox wisdom, and what a supreme coincidence it was! For me, Taleb's message that we underestimate randomness, that a lot more things are out of our control than we think, that we insist on creative reasoning to assuage ourselves that we can explain and predict events, that we should 'tinker', and that we should live aesthetically with a view to improving ourselves, is perhaps intuitive to an 'Eastern' mind, but a different way of thinking in the West.

I read the Black Swan and I loved it. So, of course, I had to read this book too. It turned out to be a rehash of the same material, but not told with the same conviction. In the Black Swan he pulls no punches. Here he has not quite gotten all his material together and you can feel it. If I had not read the Black Swan I would have liked this book. But, since he wrote a better one, I would recommend the Black Swan and not this one.

A great book that everyone can read and understand. Wonderful insight into the ramdomness of life.

If you ever felt a little queasy about that article in the paper - the one that connected all the dots and claims to have explained yesterdays news - then this is a book you must read. Taleb covers a lot of ground, at times in seemingly sporadic jumps, but each chapter is a mini research library in itself. The reviews for this book span the whole gamut, and I will not try to add to the noise short of saying that if you are interested in probability, in how it affects our lives, and how it skews our perception of the world, then you should judge the book for yourself - I happened to have read it twice.

A good read and many valuable insights that will keep you thinking long after you've moved on.

Attacking this author is besides the point; frankly, why should anyone care if he is or isn't a arrogant, ivy league brat, a walking contradiction that doesn't appreciate the "businessman"? The book is either worth the read or it isn't. My opinion - it has something important to add and does so in a fun, refreshing style to boot.

Hard to rate this book too highly. It is not without flaws and even the author describes is as something along the lines of a self-indulgent and eccentric essay (my words). That is of nonetheless part of its charm. This is an unorthodox look at a very important topic for our world.

It would be a mistake to come to this book as your first introduction to risk management, life, philosophy, probability or derivatives trading. It covers all of those topics and much, much more but this book is not written as an introductory read. You need to have some life experience and at least a working knowledge of risk management (in whatever field of endeavour you pursue). The joy of this book is it's ability to stretch your mind with new ways of thinking.

Taleb's fundamental premise is that we underestimate the role of luck (or Lady Fortuna) in our lives and he argues compellingly to that end with a range of interesting examples. The survivorship bias of 'successful' people is well illustrated using a number of examples to show how (for example) derivatives traders start and fail on a regular basis, eventually leaving only the ones who have been continuously successful. That although skill and experience are important, many wealthy trader have basically thrown 'heads' 20 times in a row (ie. survived 20 years trading). We then back-test their methods to find the 'secret of their success' assuming that it is more than luck which of course it usually (but not always is) but that we for the most part a) underestimate the role of luck and b) assume that what has worked in the past will continue to work in the future. He uses the black swan example (all swans were white until the discovery of black swans in Australia in the 17th century) to illustrate the point that even if the processes that trader has used in the past worked out, we need to keep challenging our thinking and continually learn anew. In a complementary but very different vein, have a look at 'Managing the Unexpected' by Karl Weick and Kathleen Sutcliffe. They give new meaning to the concept of mindfulness and how 'high reliability organisations' such as nuclear aircraft carriers use a 'Pre-occupation with Failure' to sustain mindfulness and avoid Black Swans.

Some reviewers seem to have found Taleb's style challenging (and yes he can be sarcastic) but overall I loved it and found it a compelling read. I have a Masters in Risk Management, trade options, help clients with risk management and international security solutions and am a better practitioner now for having read this shotgun blast of scattered but linked ideas. I thoroughly enjoyed the places that it took and continues to take my thinking and am just grateful that he took the time to share his thought with the rest of us.

Mandatory reading for anyone who manages risk (which is after all just about everyone). When you think you understand something about risk management, then it is time to read this.

I spent most of my career as a partner in a financial service company and lived very similar experiences as described in this book. Buy it and give it to all young and inexperienced people you love - it will bring them down to earth!

This book reads in the voice of a slightly disgruntled Taleb. The rancor that he feels for the traders around him is justified by his lessons in statistics and philosophy, filtered through the criteria of randomness.

If you're thinking this or the The Black Swan: The Impact of the Highly Improbable (author's new book), don't. I read more than half of the latter and this book, "Fooled by Randomness," by far is the better read. It gives you a view of risk and competence, or skill, from a probability (though without numbers) standpoint. Using the stories of Nero Tulip and John, the High-Yield Trader, Nassim (the author) points out how much chance, or randomness, was behind the scenes in both wins and losses. Mostly, he talks financial markets, but this perspective of risk applies to every other thing. If it isn't obvious, I own two copies of this book. A third is likely. There are always secrets, he says. And "It is not natural for us to learn from history." Read the book. If you have ever lost money in the stock market, and don't want it to happen again, you'll love this book.

Note: It doesn't supply a step-by-step prescription of how to control risk and it doesn't need to. What you'll get is an intellectual framework to guide your emotions when navigating risk and returns.

If you're thinking this or the The Black Swan (author's new book), don't. I read more than half of the latter and this book, "Fooled by Randomness," by far is the better read. It gives you a view of risk and competence, or skill, from a probability (though without numbers) standpoint. Using the stories of Nero Tulip and John, the High-Yield Trader, Nassim (the author) points out how much chance, or randomness, was behind the scenes in both wins and losses. Mostly, he talks financial markets, but this perspective of risk applies to every other thing. If it isn't obvious, I own two copies of this book. A third is likely. There are always secrets, he says. And "It is not natural for us to learn from history." Read the book. If you have ever lost money in the financial markets, and don't want it to happen again, you're going to have a good time.

Note: It doesn't supply a step-by-step prescription of how to control risk and it doesn't need to. What you'll get is an intellectual framework to guide your emotions when navigating risk and returns.

The title of this review is from a sentence the author extracted from graffiti during the 1968 student riot in Paris, and in my opinion summarizes what the author wants to convey with this book: 1) that we do not fully understand even our mundane matters, and 2) that we needn't feel ashamed for not being consistent all the time.

Yes, the book is about the markets, but it is no sense confined to it. In fact should the reader be focusing narrowly on that topic s/he will be losing most of what the author has to offer -- a surprisingly broad research on how human beings historically perceived risk; tales of common misconceptions in probability; an amusing telling of the findings of modern behavioral finance (of the Kahneman Tversky "kind" as the author might have put it); and a constructive suggestion on how to deliver ourselves from misfortune (more on this later).

During the earlier parts of the book I have been irritated by the author's tone of delivery. As those who wrote critical reviews to this book might have felt, I felt as if his voice contained conceit (if calling non-scientists -- economists, MBA's, journalists -- straight-out as idiots doesn't sound impolite then I don't know what impolite is). However, at the risk of stereotyping, I later on realized that the author's style might have to do with his Mediterranean disposition. Speaking out loud what s/he truly thinks is true.

Taleb advises us to "dress your best on your execution day ... Be extremely courteous to your assistant when you lose money. Try not to blame others for your fate, even if they deserve blame. Never exhibit any self-pity, even if your significant other bolts with the handsome ski instructor or the younger aspiring model. Do not complain." According to his personal philosophy based on stoicism, "the only article Lady Fortuna has no control over is our behavior."

Taleb makes a very good point, which can be summarised as this: Most events in life are random, but we mere human beings cannot cope with the randomness and instead are compelled to write narratives to justify these events. When we buy a share which goes up it was probably just luck, but rather than accepting this we write a personal story demonstrating our keen intellect in making the selection. This failure to recognise randomness leads us to make various cognitive errors. First, we ride our luck and eventually encounter what he calls a black swan - an event that should have been incredibly unlikely. Second, we worship those who have enjoyed even more luck than us and attribute to them guru-like status.
There are three faults which stop me giving it five stars.
First, Taleb writes that the book has not enjoyed the attention of an editor, but I'm afraid it rather needed one. The insight is spread too thinly and the book could have lost a hundred pages without harm.
Second, he ignores one very vital point. There is an evolutionary reason why we ignore these "black swans". We only live for a few years and if we all followed the risk-averse methods of the author, we'd still be living in caves.
Third, the arrogant tone adopted by Taleb is at odds with his theory. As a Popperian, he knows that his ideas are merely provisional, so why sneer at everyone else?

The title of this review is from a sentence the author extracted from graffiti during the 1968 student riot in Paris, and in my opinion summarizes what the author wants to convey with this book: 1) that we do not fully understand even our mundane matters, and 2) that it is no shame not to always be consistent.

Yes, the book is about the markets, but it is no sense confined to it. In fact should the reader be focusing narrowly on that topic s/he will be losing most of what the author has to offer -- a surprisingly broad research on how human beings historically perceived risk; tales of common misconceptions in probability; an amusing deliverance of the findings of modern behavioral finance (of the Kahneman Tversky "kind" as the author might have put it); and a constructive suggestion on how to deliver ourselves from misfortune (more on this later).

During the earlier parts of the book I have been irritated by the author's tone of delivery. As those who wrote critical reviews to this book might have felt, I felt as if his voice contained conceit (if calling non-scientists -- economists, MBA's, journalists -- straight-out as idiots doesn't sound impolite then I don't know what impolite is). However, at the risk of stereotyping, I later on realized that the author's style might have to do with his Mediterranean disposition. Speaking out loud what s/he truly thinks is true.

Taleb advises us to "dress your best on your execution day ... Be extremely courteous to your assistant when you lose money. Try not to blame others for your fate, even if they deserve blame. Never exhibit any self-pity, even if your significant other bolts with the handsome ski instructor or the younger aspiring model. Do not complain." According to his personal philosophy based on stoicism, "the only article Lady Fortuna has no control over is our behavior."

For the one-star reviewers who complain Taleb's an egomaniac: Duh! He won't deny it. Read the foreward. The whole point of this very self-indulgent book, is that it is one person's exposition on the subject, rooted in his own very picayune views and experiences. If you could get Taleb sitting next to you at a cocktail party and ask him about his thoughts on this topic, this is the book you'd get. There are no footnotes, no research. That's not the kind of book it is. If you're looking for a textbook overview on the topic of randomness: This ain't it. Don't fault an apple for not being an orange.
Also, for those one-star reviewers who were irate that they didn't get advice on milking the markets using Taleb's methods: He is laughing his butt off at you right now. This is definitely not a book about that. Quite the opposite.
Is Taleb haughty and self-indulgent? Yes--and he will tell you that right up front. That's the whole point of his book, it's just his snobbish but interesting musings on the notion of "success in life" and the often-ignored role of dumb luck in it, as concluded by a man who's watched a lot of Wall Street types crash and burn. More broadly he discusses the inherent tendency in human beings to come up with a story or explanation for *everything* that happens around us, and warns that in many cases we may be deluding ourselves. He also talks about our difficulty in really making decisions using cold knowledge, when in fact we almost always ultimately are controlled by our emotions, not our intellect. Sometimes things happen to us for reasons that have *nothing* to do with the obvious explanations we concoct after the fact--whether we are trying to explain the ebb and flow of stock markets (the grist for Taleb's ideas) or historical events.
A fun ride and worth it if you know up front what you're *not* getting.