The Hidden Role of Chance in Life and in the Markets

Taleb eplores of one of the least understood forces in all of our lives; mistaking luck for skill.

Here is a person with a single, but large topic, who spent his life exploring randomness vertically and horizontally, maturing it, getting into its most interesting wrinkles. The book is a feast to read and re-read. I laughed a lot while reading the book and had to think even more about Taleb's deep understanding of the philosophy of probability. He's amazingly articulated so you can see his damn brain working ... while Taleb can certainly not be accused of being humble :-)

Despite the hype for the book on Wall Street, FBR might very well be one of the smartest book of all time.

It's an interesting subject -- the role of chance in the markets -- it's just too bad Taleb was too busy puffing himself up to get to it. He apparently wants to be a cross between Daniel Dennett and Richard Feyman, but he comes off instead like an insecure blowhard -- like some bore of a party guest who won't stop droning.
Is there anything useful in the book? Sure, but honestly, it's not worth the effort finding those few nuggets about fat-tailed distributions and volatility inflation. Read John Allen Paulos's innumeracy series; read Peter Bernstein's "Against the Gods". Hey, even read some books by Dennett and Feynman, if you want. But don't waste your time on this pompous twaddle. Taleb has an insecurity streak you could spot from high-earth orbit -- and it obscures his entire book.

A very good reflection how randomness affects our life. Several try to find out the reasons one succeeds and other fails. But in the end of the day is just luck. Taleb give us a rational explanation how randomness or luck influences our life. Much more than one would like or want.

Interesting read about the unpredictability of events, and hence of markets. Market events that are supposed to be "Multiple Sigma" -- ie, less than once in several lifetimes -- have in fact occured several times within the lifetime of current market participants. The assumption that they happen less often than, in fact, they do, explains much of the instability of markets -- and much of our recent economic pain. This book isn't, as other reviewers have noted, an academic exploration, and it is (as others have also noted) highly personal in tone. Still, the topic is so critical -- and Taleb so important bringing the topic to the financial community's mind set -- that this is very definitely required reading for those with money at risk.

I can tolerate the ego-maniacal writing style, but I cannot abide the enormous errors the author commits when he delves into science.
To wit: Taleb posits that Einstein proved Newton wrong. Not true. Einstein showed that Newtonian mechanics failed at the extremes - extremely large (cosmologic) and extremely small (atomic distances). Further, he posits that the poor schlep scientist's odds of success continue to increase as he does more mouse experiments. Untrue if the hypothesis under which the scientist is proceeding is ultimately incorrect. And finally, the author accepts global warming as a given and castigates science for not having recognized the truth of it from random weather events. Taleb, stick your knitting. It's one thing to be ignorant, but another to open one's mouth and remove all doubt.

I love ideas that force you to examine old things in new ways. And this book promises to offer a powerful such perspective: to endow you with a greater consciousness of the sea of randomness that surrounding the supposed determinism of life when viewed "in hindsight". It even delivers on this promise to a slight extent.

What caused me to stop reading is that by and large the book read like a rambling mess. A precious few insights bobbing in a sea of words and references I couldn't care less about.

Case in point: In the first two chapters, he makes reference to the concept of a "Monte Carlo engine" with which he models randomness-rich events. He promises to explain what this engine is in Chapter 3. However, while chapter 3 repeatedly claims it's just about to reveal what the Monte Carlo engine is, it only implies, it never explains. In fact, most of the chapter just walks all over the place, sounding more like an endless, repetitive diatribe than anything else.

By the end of chapter 3 I was skipping pages, looking for the promised explanation of the Monte Carlo engine, which sounded fascinating in and of itself. Supposedly he uses it to model organisms, cancer cells, and all kinds of things. But I never found any substantive description of what it was, or how he uses it to achieve those results. And so I skipped faster and faster until I realized it wasn't worth trying anymore. I just didn't care to spend the work to separate the wheat from the abundant chaff.

I think he could have boiled his book down to something 1/4th the size, and with tremendous impact. But I just didn't find it enjoyable in its current form.

Extremely insightful book, and delightful to read as well. I debated on whether to choose this item or The Black Swan as my first Taleb book - after reading many opinions and reviews, I went with Fooled by Randomness. Excellent choice, and excellent purchase.

Loved the book. Easy to read, easy to understand. Anyone with an interest in finance should, investing or basic bath in general should pick this up. Explains very well how large investment groups can loose billions upon seemingly "correct" information trends.

I heard all about Black Swan over the past couple of years but resisted reading it due to my dismissing as a piece of pop lit. After reading that all the great poker players had picked up Fooled by Randomness, I bought a copy myself quite cheaply through the the store z shop. I am pleased that I did so. Nassim Taleb is not a journalist as much as he is a man of science. I enjoyed his review of the literature here, and I also appreciated the stories he conveyed as a trader in these pages. This book was written in 2004 so it does not address the concept of a "black swan robust society," but after reading about it I've placed Black Swan on my wish list and will be reading that one as well. This is a book that challenges and educates.

Exelent book to better understand the difference between causes and randomness related yo anything that happen in our lifes. Very clever approach ti understad this difference. Writing style might not be the best, but at the end of the day you get the important points or arguments.

Author spends too many words on the market, especially the options market. No doubt an option trader is highly subject to the effects of random events, but that's the way it goes. Very interesting, but not very applicable to us normal folks.

This book, combined with the authors BLACK SWAN, present a different prospective of the roll of chance in life. The black swans are things that happen that no one would expect given past data and probability based on commonly used statistics. They tend to creat terrible damage, as for example the current financial market meltdown. It is interesting to consider what a black swan of climate change might be. The book is well written and explains somewhat complicated ideas well. Strongly recommended!

This book talks about many situations where human beings ignore randomness and its impact. Usually, that ignorance is bliss until randomness hits them hard. A good lesson in probability, statistics, and how randomness governs are data saturated, modern lives.

Fooled by Randomness & The Black Swan both shaped my thinking early in my career (for the better). I recently re-read Fooled By Randomness and found it even more enjoyable than initially. One of the best books of all time.

Full of really good information. I do not hope to do better than the other reviewers except to voice my opinion in that regard.

I posted an audio snippet of the book here if you need more information before you choose to buy or not! Please check the link in the description of my video too, more information is there.

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Thank you for checking out the audio snippet!

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.

This book is very convincing, and if you buy into it, it may overshadow your worldview in a way that is not entirely pleasant. If you are prosperous, the message will be golden: realize that your good fortune was never guaranteed and is not ensured to continue, so you'd better smarten up and protect yourself. Great.
If you are still struggling to attain prosperity, you may do everything right, and never get there. Not so great...and by the way, lots of people who are mistaken in nearly every action they take will surpass you.
The author seems to have found one of the few, possibly the only, profession where he can take advantage of these principles: a hedge fund trader. He does not explicitly share his investing strategies here. He does have another book specifically about options trading which is comically advanced for a layperson. I can't possibly tell you whether it's of value or not, because with the sample I read, I don't pretend to come close to understanding it.
This all sounds pretty scathing for a four star review, but overall, it was very smart and interesting. I'm just having a hard time figuring out how to employ the author's principles cheerfully to become more successful. I haven't yet found the advantage offered here.

It happened that I read 'Fooled by Randomness' after I read 'The Black Swan'. While I found the first book enlightening and worth re-reading, I also got tired of the author attacking Frenchmen.

This one is simpler, friendlier and easier to grasp. I liked its sharpness big time.

This is one of those books that completely changed the way I view the world around me. I first read it back in 2008, when I was still very new to the world of finance. Its wisdom goes well beyond finance though. It contains a lot of practical advice on how one should live one's life, and by putting this advice into practice, my life in general has on various levels become substantially calmer and more noise-free.

While reading this book for the second time, I also realized that it is actually the best book on trading that I have ever read. You will meet four fictional traders in the book: two wise ones (Nero and Louie) and two amateurs (John and Carlos). A lot can be learned from all of them. In addition, aside from the general theme of the book on how people can be deceived by their own minds, especially when subjected to randomness, the following (sub)sections are particularly worth heeding for traders: "Pascal's Wager" in chapter 7 (on how good traders conduct their business), "The Backtester" in chapter 9 (warning against over-optimization), "Our Brain" in chapter 10 (on the importance of tolerating drawdowns), and "Monsieur de Norpois' Opinions" in chapter 13 (on the dangers of doggedly sticking to past opinions--there is a nice story about one George Soros here).

After reading this book, you will begin spotting things half-baked all around you in life in general. Without giving any personal examples, I will leave you with the pleasure of making such discoveries on your own. Suffice it to say, more than a decade has passed since the first edition of this book, and it seems to me that most people are still completely unaware of its insights. (I confess to having strayed from them far too often over the years, making the second reading all the more vital.)

Amazing philosophicoscience by Taleb but makes the world much clearer. I do not doubt the message and incorporate it into my consciousness daily. Good job and a refinement of his "Black Swan". A very interesting mind at work! WBL

Just like his other (and rather more famous book, The Black Swan), Nassim Talib does not disappoint you: Turning everything you had been taught on statistics upside down. Some sections were a bit difficult to follow, due to heavy handiness in statistical calculations. However, it does make you aware of probability's shortcomings, and to be sceptical of media, especially financial.

A sincere and humorous account of what it means to navigate a world that we don't necessarily understand even while being adamant we do. I laughed, smiled and learned more in a few hundred pages than I could ever articulate.

On rare occasions, I sometimes read a book that I simply cannot understand. I believe this happens for one of two reasons, the author is incapable of effective communication or I am incapable of understanding. Typically, I can figure which one is most likely but after reading Fooled by Randomness, I am at a loss. I found myself confused often. I felt like the author jumped around a lot and I had a difficult time recognizing the key points or main arguments. However, I found some interesting pieces here and there.

From the title, you can easily gather the spirit of the book. We put too much emphasis on strategy and experience when our lives are generally ruled by randomness. The author spends most of the book discussing how traders approach the market yet time and time again, traders are proved wrong by a volatile and haphazard market.

I know this is a popular book with great reviews, but this just was not the book I expected and I did not enjoy it. Again, I may not be the right audience for the book. I may have been too foolish understand it. There is a short piece of philosophers that I found hilarious, which almost made the entire book worthy enough of a recommendation. I like books on data, statistics, and how we understand our world but this book does not hit the list of great social science books for me.

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.

Wow! 305 reviews! I heard the author on a podcast with Russ Roberts and was intrigued enough to purchase both this book and The Black Swan. First, like my title says, I have to acknowledge that this review is more about me than Dr. Taleb or his book. I haven't read all 305 reviews, but if I'm the first to say that, then 305 people sure didn't get the point! Let's hope randomness found him at least a few outliers who paid attention...

I especially liked (see, this review is about *me*) the style of his argument: concrete examples mixed with surveys and summaries of literature, from classic thinkers to contemporary researchers in a variety of fields that tend to support his thesis. I feel as if I wanted to dive into some serious academic study of randomness that I could pick one of a hundred places to jump off, from portfolio theory to biology.

In an interesting juxtaposition, Dr. Taleb's appearance in Russ Robert's Econtalk podcast followed that of John Bogle, founder of the Vanguard funds and a pioneer in low cost index funds. I'm sure Taleb would argue that there is a black swan lurking even in the stock market indices, that the old wisdom of playing for the long term (20+ year horizon) does not guarantee profitability much less favorable performance against decent grade bonds. I'm not too sure I buy Taleb's insight quite yet. Technology and productivity gains, regardless of whether we have good measurements for them, look like a trump card against catastrophic index fund performance. Unless of course global warming or nuclear war or termites wipe out our country, and I don't see anyone betting on those things happening yet.

As for economic math, which Taleb addresses at length... Since my days in grad school (theoretical computer science) at the beginning of the popularization of the Internet and the WWW, I have thought that calculus was the wrong model to dominate economic thinking. That instead, graph theory (vertices and edges, aka network theory) would yield better insights about the collective interactions of individuals. And with Hayekians making a comeback in the field, perhaps we'll see that. They'd be wise to explore the operations research literature and dig up Markov chains too fill out their tool belts.

Fooled By Randomness delivers an introductory course on how to live in a random world. Taleb believes the human mind isn't made to understand randomness and that really complex systems operate more or less as if they were random.

Taleb wants us to change how we think about risk. He wants us to abandon the attitude that because something's happened before, it'll happen again (e.g. my portfolio will continue going up) or that because something hasn't happened before, it'll never happen (e.g. others traders have gone bust, but I never have and I never will). Taleb chides traders who prefer frequent small gains and tries to explain their behaviour. A trader who makes small profits 4 days out of 5 and a small loss the other day will have a solid record, he will feel good about himself but he will not be prepared for Black Mondays or other financial shocks and he will blow up, to use Taleb's phrase, and disappear.

Taleb also wants to debunk the assumption that the bell curve (the Normal distribution) is a good model. He points out that financial disasters like the 1929 crash or Black Monday in 1987 have happened more frequently than the bell curve predicts. Why then, he asks, do risk managers still stick with Normal models? These models have failed to predict large movements and are dangerous.

Taleb does not take credit for the views he presents and he gratefully acknowledges debts to a range of thinkers from Montaigne to Popper to Mandelbrot. But a good teacher is hard to find and we should be grateful for someone like Taleb. The ideas here are not original, but Fooled by Randomness presents them forcefully and dramatically.

As a mathematics teacher who was formerly in the world of business, I enjoyed Taleb's examination as to the hidden role of luck in success. Though other reviewers discuss some of the errors in reasoning, his overall message is a valuable one.

However, throughout my reading it, his style continually grated on me.

First of all, it is often of a rambling nature, with long-winded philosophical expositions that did not speak to me. Some may enjoy it, but for someone who is not philosophically inclined, it can put you to sleep.

Second, as others have said, he definitely comes across as an arrogant s.o.b., but it seems more born out of insecurity than intelligence. It almost seems like this is someone who was not popular in high school trying to vindicate himself through his intellectual pontificating, dropping names of authors he has read right and left. I can't point to a particular passage to highlight this, but it remains my overall impression after reading the book.

To sum up, it wasn't a bad book, but I would have enjoyed the book more had it been more in the style of "Innumeracy" - more geared to the intelligent layperson than the intellectual elite.