Fooled by Randomness

Fooled by Randomness is a standalone book in Nassim Nicholas Taleb’s landmark Incerto series, an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we don’t understand. The other books in the series are The Black Swan, Antifragile, Skin in the Game, and The Bed of Procrustes.

Fooled by Randomness is the word-of-mouth sensation that will change the way you think about business and the world. Nassim Nicholas Taleb–veteran trader, renowned risk expert, polymathic scholar, erudite raconteur, and New York Times bestselling author of The Black Swan–has written a modern classic that turns on its head what we believe about luck and skill.

This book is about luck–or more precisely, about how we perceive and deal with luck in life and business. Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill–the world of trading–Fooled by Randomness provides captivating insight into one of the least understood factors in all our lives. Writing in an entertaining narrative style, the author tackles major intellectual issues related to the underestimation of the influence of happenstance on our lives.

The book is populated with an array of characters, some of whom have grasped, in their own way, the significance of chance: the baseball legend Yogi Berra; the philosopher of knowledge Karl Popper; the ancient world’s wisest man, Solon; the modern financier George Soros; and the Greek voyager Odysseus. We also meet the fictional Nero, who seems to understand the role of randomness in his professional life but falls victim to his own superstitious foolishness.

However, the most recognizable character of all remains unnamed–the lucky fool who happens to be in the right place at the right time–he embodies the “survival of the least fit.” Such individuals attract devoted followers who believe in their guru’s insights and methods. But no one can replicate what is obtained by chance.

Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover nonexistent messages in random events? It may be impossible to guard ourselves against the vagaries of the goddess Fortuna, but after reading Fooled by Randomness we can be a little better prepared.

Named by Fortune One of the Smartest Books of All Time

A Financial Times Best Business Book of the Year

Table of Contents

PART I: SOLON’S WARNING

1 IF YOU’RE SO RICH, WHY AREN’T YOU SO SMART?

2 A BIZARRE ACCOUNTING METHOD

3 A MATHEMATICAL MEDITATION ON HISTORY

4 RANDOMNESS, NONSENSE, AND THE SCIENTIFIC INTELLECTUAL

5 SURVIVAL OF THE LEAST FIT—CAN EVOLUTION BE FOOLED BY RANDOMNESS?

6 SKEWNESS AND ASYMMETRY

7 THE PROBLEM OF INDUCTION

PART II MONKEYS ON TYPEWRITERS

8 TOO MANY MILLIONAIRES NEXT DOOR

9IT IS EASIER TO BUY AND SELL THAN FRY AN EGG

10 LOSER TAKES ALL—ON THE NONLINEARITIES OF LIFE

Eleven RANDOMNESS AND OUR MIND: WE ARE PROBABILITY BLIND

PART III WAX IN MY EARS

12 GAMBLERS’ TICKS AND PIGEONS IN A BOX

13 CARNEADES COMES TO ROME: ON PROBABILITY AND SKEPTICISM

14BACCHUS ABANDONS ANTONY

Epilogue SOLON TOLD YOU SO

Postscript THREE AFTERTHOUGHTS IN THE SHOWER

Review

“[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.”

–Malcolm Gladwell, The New Yorker

“Fascinating . . . Taleb will grab you.”

–Peter L. Bernstein, author of Against the Gods: The Remarkable Story of Risk

“Recalls the best of scientist/essayists like Richard Dawkins . . . and Stephen Jay Gould.”

–Michael Schrage, author of Serious Play

“We need a book like this . . . fun to read, refreshingly independent-minded.”

–Robert J. Shiller, author of Irrational Exuberance

About the Author

Nassim Nicholas Taleb has devoted his life to problems of uncertainty, probability, and knowledge. He spent nearly two decades as a businessman and quantitative trader before becoming a full-time philosophical essayist and academic researcher in 2006. Although he spends most of his time in the intense seclusion of his study, or as a flâneur meditating in cafés, he is currently Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute. His main subject matter is “decision making under opacity”—that is, a map and a protocol on how we should live in a world we don’t understand.