Non-fiction 10 Aug 2006 17:28
Fooled by Randomness
Fooled by Randomness
Nassim Nicholas Taleb
The main point of this book, which was already made several times by different people in different publications, is that humans don’t deal very well with randomness. We are genetically programmed to look for patterns and, if you look long enough, you will find patterns in any set of data. More often than not, the pattern is not really there; you only find it because your brain is desperately looking for one. That, by the way, is at the root of most superstitious behaviour (such as going to a football match wearing the same shirt you had the last time your team won).
Being a trader, the author uses mostly examples from the financial industry, and tries to show that most of the “star” traders or fund managers are just lucky, not skilled. And he does so very convincingly, with examples and calculations.
The book is not very easy to read; the style of the author is a bit, well, random, and you may have to think a bit about several of the examples presented. It’s well worth, though, and it might make you rethink all your investment decisions. Recommended in conjunction with The Four Pillars of Investing, and especially recommended if you’ve read The Millionaire Next Door.
