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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Paperback) (平装)
by Nassim Nicholas Taleb
| Category:
Nature of randomness, Human behavior, Nobfiction |
| Market price: ¥ 158.00
MSL price:
¥ 148.00
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| Stock:
Pre-order item, lead time 3-7 weeks upon payment [ COD term does not apply to pre-order items ] |
MSL rating:
 Good for Gifts |
| MSL Pointer Review:
Finally in paperback, the word-of-mouth sensation, a book with a reputation that matches that of Malcolm Gladwell's books, will change the way you think about the markets and the world. |
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AllReviews |
1 Total 1 pages 9 items |
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Malcolm Gladwell (The New Yorker) (MSL quote), USA
<2007-07-29 00:00>
[Taleb is] Wall Street’s principal dissident... [Fooled By Randomness] is to conventional Wall Street wisdom approximately what Martin Luther’s ninety-nine theses were to the Catholic Church.
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Michael Schrage (MIT Media Lab, author of Serious Play) (MSL quote), USA
<2007-07-29 00:00>
In many ways, his writing recalls the best of scientist/essayists like Richard Dawkins, George Gamow, and Stephen J. Gould. |
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Gaurav Pareek (MSL quote) , USA
<2007-07-29 00:00>
Fooled by randomness is a very intelligent take on how human beings percieve risk and uncertainty in life. The author provides relevant comparisons from history, philosophy, mathematics to make his point. Read the book cover to cover (the introduction, foreword clarify author's intentions and some misconceptions you might develop while reading). Language and style of writing is smart and fun-filled. The book has the potential to change your attitude and approach to uncertainty; it has changed mine! Looking forward to more from Taleb. |
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Ernesto Vazquez (MSL quote), USA
<2007-07-29 00:00>
We are emotional beings, capable of understanding our emotions but not very good at controlling them; hence we are blind to probability.
We also like nice neat explanations for events (I succeed because I am brilliant, I fail because of bad luck) and are susceptible to superstition. No where are these human traits more visible than in the financial community.
Taleb writes from experience and weaves an entertaining, insightful piece. His intelligence is evident in his writing, which may be why my `middlebrow' (a favorite adjective of his) mind had trouble adjusting to his style.
He has a quick wit and is not afraid to use it (Wait, he was kidding there, right?) More importantly, his observations are spot on. A healthy dose of selfdeprecation let's the reader know that this guy has first hand experience being fooled by randomness.
This is a really useful read for anyone starting a career (not just in Finance), or enjoying great success in one.
An awareness of survivorship bias, denigration of history and our innate blindness to probability (fueled by emotion and a need to draw causality in what we observe) will serve recent college grads well in the industry of their choice.
For the recently successful, Taleb warns that the five common characteristics shared by fools of randomness are
1.Overestimating the accuracy of some metric they believe in
2.Being married to a position
3.Failure to plan on what to do when the unthinkable happens
4.Lack of Critical Thinking
5.Denial in the face of the unthinkable
You will nod and understand the concepts as he presents them. However, the author cynically points out, you will proceed to forget it all and go back to being governed by your emotions. |
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Spike (MSL quote), USA
<2007-07-29 00:00>
Some readers of this type of book don't want to be distracted by important ideas when seeking nuggets about how to make wads of money. So when deciding to purchase this book, I dismissed the many criticisms as reflecting a lack of appreciation for narrative style and individuality. This was a mistake.
Other reviews amply (and accurately) document the author's narcissism, so I won't belabor that. I'll limit myself to two points.
1) Taleb extensively details the weaknesses of others' investment strategies, and explains how some pretty dopey people can do quite well, at least in the short term (basically, due to luck). He also frequently touts the superiority of his approach. Unfortunately, he never clearly specifies what that approach is. I kept turning the pages in a vain search for an affirmative, lucid explication of his advice. Near as I can tell, and to save the need for anyone to read the book, here it is: make frequent, small bets on long shots because the market consistently underestimates their frequency and therefore underprices them. You may bleed a little along the way, but the home runs will more than compensate for your discomfort. Details on how to implement this strategy are left, implicitly, as an exercise to the reader.
(As an aside, I note that occasional success of investors due to chance is entirely compatible with standard financial theory, but unusual returns at the tails are not. Taleb fails where Mandelbrot succeeds - see below - in making the distinction clearly and explaining why it exists.)
2) Taleb takes the reader on a meandering, though occasionally entertaining, tour of some of the trendiest ideas in academia - evolutionary psychology, behavioral economics, social network theory, chaos theory (now getting a bit stale) - as well as some chestnuts from statistics, finance, and philosophy. Don't get me wrong. I think these things are all important, interesting, exciting, and worth reading about. And Taleb makes no gross misrepresentations of their content, at least none worth quibbling about. But neither does he demonstrate anything but a superficial understanding, failing to go beyond their obvious implications. It reads like "here's another interesting thing I've learned a little about" rather than a deep synthesis relating them to each other and/or to investing.
I recently finished Mandelbrot and Hudson's "(Mis)Behavior of Markets" and the contrast could not be more stark. Though I have significant problems with it (perhaps to be detailed in a separate review), theirs is an excellent book, well worth reading. Mandelbrot also suffers, though less frequently, from the bouts of pomposity and self-promotion as Taleb; the difference is that Mandelbrot has some justification, having been a leader in more than one area of applied mathematics. Where Taleb scratches the surface, Mandelbrot goes to the core. Neither provides any "get rich quick" answers, but you will learn something from Mandelbrot.
Normally, I would cut some slack for a book where the sentences are generally well constructed and lots of interesting ideas are integrated, but in this case, so little value is added (especially relative to its exaggerated sense of erudition and self-importance) that I cannot recommend it at all.
(MSL remarks: A negative review) |
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Ross Mendel (MSL quote), USA
<2007-07-29 00:00>
This book was right up my alley, as a personal investor and also someone interested in the way randomness/probability/noise affects our lives. If you have an interest those areas, and like to be introspective, I'd guess you'd like this book. It was interesting to learn more about asymmetric payoffs, and how humans are not wired to see them accurately (or to weigh abstract vs. concrete accurately). Although I'm an active and somewhat successful investor, I'm far from sophisticated, and I felt this book exposed me to some concepts that I want to learn more about. But most of all, I think it helps one to see the big picture better, and see that there is often more complexity than is painted in a "bullish vs. bearish" outlook. |
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Joe Wikert (MSL quote), USA
<2007-07-29 00:00>
I was fascinated when I stumbled across Fooled by Randomness recently and decided to give it a shot. After all, the cover says it was named by Fortune as "one of the smartest books of all time", so how can you go wrong?
I found this to be a somewhat interesting but challenging read. The author is a former Wall Street quant who has forgotten more about statistics and probabilities than I'll ever know. As a result, even though the book is written for anyone with a decent knowledge of math it gets rather heavy at times.
The author is a big fan of Karl Popper and much of what he offers in this book is based on there being only two types of theories:
1. Those that are known to be wrong, and
2. Those that simply haven't been proven to be wrong yet.
In other words, much of the wisdom and supposed business intelligence that is credited for great investment results can often be attributed to nothing more than dumb luck. In fact, there's no reason to limit this logic to investing. The author suggests that the same is true for many other business and personal life results.
One of his other equally interesting points is in this excerpt:
"The higher up the corporate ladder, the higher the compensation to the individual. This might be justified, as it makes plenty of sense to pay individuals according to their contributions. However, and in general (provided we exclude risk-bearing entrepreneurs), the higher up the corporate ladder, the lower the evidence of such contribution."
Given my title (Vice President and Executive Publisher), reading that paragraph was like getting a punch in the gut. As I read the rest of that section though, I found myself agreeing with Taleb's argument. If you're not sure whether the book is a worthwhile investment, take a few minutes and read this part (pages 254-257) and see if you're not convinced as well; it might also cause you to want to buy the book to read more of the author's interesting perspective.
If anything, this book makes me feel both a bit more confident and unsure of myself as an investor. The confidence comes from knowing that many "professional" investors are really just benefiting from nothing more than lucky choices, the same luck I might enjoy just by playing the game. The reasons for uncertainty are the same as they always have been... |
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J. Watkins (MSL quote) , USA
<2007-07-29 00:00>
As a society we are drowning in information that we are increasingly unable and unwilling to properly filter. Mr. Taleb's book is on my shortest list of recommendations for precisely that reason - it speaks of a studied humility in the face of randomness that is sadly lacking not only ourselves but in so many of those to whom we look for guidance. In focusing on our very powers of observation, this book strikes at truths that profoundly impact any human endeavor.
When did we as a society lose the distinction between Noise and Signal? Forget the discussion of sophisticated financial instruments - derivatives, options and the like. I prefer to linger upon Mr. Taleb's expressed disdain for the media. He poses a fascinating question: Should we wait to receive our information in the form of studied books rather than the breathless commentary that accompanies the typical newspaper article or television broadcast? It is his idiosyncratic filtering of information that was most thought-provoking because he gives solid and justifiable reasons for his opinions rather than take the typical "expert" approach and give his statements as gospel truth. The discussion at pg. 233 (softcover) is wonderfully illustrative: "For the best way to understand how we could be rational in our perception of the risks and probabilities and, at the same time, be foolish while acting on them would be to have a conversation with a cigarette smoker. For few cigarette smokers remain unaware of the lung cancer rates in their population. If you remain unconvinced, take a look at the... nurses (and, perhaps, doctors) standing outside the entrance [to the Sloan-Kettering Cancer Center] with a cigarette in hand as hopeless patients are wheeled in for their treatments."
Mr. Taleb has focused upon a crucial blindness in human nature - his question is whether we can train ourselves to be rational and the book speaks to his doubts that it is possible. Like the optical illusions with which we are all familiar, we can only teach ourselves that we are fundamentally incapable of rationally evaluating random events.
Save scripture, which comes with a decidedly higher authority than Mr. Taleb as well as a strikingly similar opinion of the wisdom of men, Fooled by Randomness is the only non-fiction book I have read in the last twenty years that I have immediately begun to re-read. Highest Recommendation. |
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Khurram Naik (MSL quote), USA
<2007-07-29 00:00>
With one essential concept in hand, Nassim Nicholas Taleb takes us on a tour of our vanities. The idea is asymmetry, as in the notion that less of a greater mass can be greater than more of a smaller mass. Take a cancer screening. If the rate of incidence is 1% in a population of 10,000, and a test designed to determine presence of cancer will affirm this for 90% of those who indeed have the cancer and 1% of those who do not. If one has an affirmative result, what is the probability you have cancer? Experiments have shown the bulk of laypeople and a disconcerting number of statisticians and doctors answer "90%" incorrectly. The number of people with positive results includes both the incorrectly and correctly labeled groups. The number correctly labeled are 10,000 x (percentage of population with the disease) x (% tests will correctly identify these) = 10,000 x 1% x 90% = 90. The number incorrectly labeled is 10,000 x (percentage of population without disease) x (% tests will incorrectly identify these) = 10,000 x 99% x 1% = around 1000. Thus 10 / (10 + 1000) = about 1%. The recurring cognitive bias that causes this error is the attending to probability (90% vs 1%) instead of expectation, the probability times payoff (10 vs 1000).
As Taleb shows us in biological and economic climates, this mode of thinking leads us astray. Just as the well-dressed talking heads breathing numbers in succession repeat the words bullish or bearish, we do not bother to say "but how much?". Content is important to Taleb, perhaps the most refreshing part of this walkabout is his reminder now and then that we really ought not to be be impressed with those made wealthy fromt he markets, since extreme success has a greater likelihood of coming about due to noise than skill. This especially hits home when Taleb's musings reminds us wealth itself is not as interesting as, say, essay-writing and contemplating Homer. In a world driven by power laws (the 80/20 rule that describes distributions of the bulk of wealth among percentage of population, as well as size/use of words, population/number of cities and more), network externalities (each additional node to a network makes the network more valuable, Microsoft is used because other people use it), asymmetries matter, particularly if they are mostly attributable to chance and confabulated by those Taleb describes as charlatans: the media pundits and economists, the opiates of the middle class ("normative economics is like religion with the aesthetics").
The problem is induction. These asymmetries show up again in the role of the black swan problem, which has profound implications for epistemology, what we can know. Hume's perception that even if we observed a man for a thousand days and observed he did not die, it would be improper to take finite data to create a law that "this man will never die". We can never truly estabish the causal mechanism that would allow for us to induce laws like these, because any observations we make could still be wrong down the road, and all the while at best we perceived correllation. The assymmetry arises when one could take a thousand white swans to have whiteness as a rule and all this data would be upset by a single black swan. Thus countervailing evidence can be disproportionally devastating, and indeed, be highly illuminating in unpredictable ways. One could concoct a dozen coincidental explanations to why swans must be white, but the presence of a different colored swan would have one scrambling to narrow down the possible mechanisms for producing color in swans.
What Taleb holds is that what's true for markets is true for minds. He sees the persistent misconceptions about the capacity of economists to explain data and traders to turn consistent profits as stemming from our cognitive biases. Thus leads him to go so far as to claim Kahneman and Tversky, who illustrated basic cognitive biases that completely contradict standing assumptions of neoclassical economics, as the two greatest influence on economics in modern history. Taleb's reading of the behavioral economic literature is incomplete, for instance, it leads him to assume persistent losses are psychologically less painful than an equivalent single loss. Dan Gilbert has shown that we possess a psychological immune system of sorts that prevents large gains or losses from having long term effects on our happiness, but small frequent gains and losses figure prominently. But he shows that a handful of these cognitive biases have profound effect when combined with a mystical reverence for the dogma of statistics (more information is better) and our faith in those that have training in repeating these assumptions to us as fact. The style of these essays is exploratory, and determined to explain by dint of logic rather than "proved" quantitatively. Taleb is honest in his appraisal of the capacity of mathematics to explain, and since narrative is still a powerful way to seduce coupled via induction, it is appropriate to weave a story for us.
It's a delightful story, particularly because we are marinated with Taleb's idiosyncrasies, sometimes off-topic, often trivial but always memorably written. His respect for skeptics like Montaigne, who declared "I am myself the matter of my book" is apt. Taleb, who actually refers to his origin as Levant, is romantic in his passions, he would prefer to call himself as a professional skeptic. He is a wonderful chimera, and this charming book serves as an invaluable primer on enjoying the spectres our mind produces as spectator. |
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1 Total 1 pages 9 items |
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