Customer Reviews
A Different and Worthwhile Look at the Market (and More) - By: Steve S., 25 Mar 2007 
Fooled by Randomness is based on a basic truth about humans: we are not very good at statistics, especially if we simply rely on our instincts. For example, we fear airplanes, sharks & terrorists, yet we rarely think about mundane risks like cancer & car accidents. Similarly, we are not good at judging investments. We think that the broker who picked three winnersin a row must know something; not necessarily so, says Taleb.
This book is well worth reading, especially if you ever investin individual stocks or managed stock funds (it will probably talk you out of doing so). It certainly is not an investment guide, however, so do not buy it if you are looking for a hot stock tip.
Taleb has a quirky writing style. This certaintly is not a "pretty" book. Nevertheless, it is easy enough to read.
Taleb, a stock trader himself, does to seem to hold most other tradersin high regard.
Taleb has a unusual way of looking at things; one gets the idea that he is somewhat arrogant & a bit of a crank. But that does not really matter much. His book is still very much worth reading.
Managing Unpredictable Variations in Order to Prosper! - By: Donald Mitchell, 07 May 2004 Every person who is interestedin investing should read this book!
In investing, few can tell the difference between being lucky & smart. Being successfulin the short term can come from either source. If it is coming from unrecognized sources of luck, however, the behavior that the investor associates with success can sink the ship. The cautionary tale of Long Term Capital Management is citedin the book as an example of this point. 'If you're so rich, why aren't you smart?' is the wonderful reversal here on the old saw.
I see this effect all the timein my consulting practice with helping companies understand how their decisions affect their stock price. A large percentage of people feel that they know all the answers when their stock price is rising. They keep doing the same things when the stocks are falling. Few survive to still have top jobs when the cycle shifts again. Then a new group of self-confident people take over who often don't know any more than those who preceded them. It's just that their track records look better.
Fooled by Randomness will help make you more knowledgeably humble about what you can expect to accomplish with investments. Not only do fewer than one percent outperform the market averages over long time periods, the ones who do are probably often being aided by luck as well. 'Get thee to the index funds as soon as possible' is the message that most should take away from this book. Better yet, buy them when multiples are low!
The book's fundamental point is that there is tremendous volatilityin any investment. Ignore that volatility to your peril.
At the same time, you should be cautious about how well you understand the volatility. Stocks at their lows can still go to zero. There are all kinds of events that can happen, that have not done so yet. When they do, throw out all the old rules of investing. The terrorist attacks on the United States last week are probably an example of this. So each investment must be made as though you could be totally wrong. This means that you have to manage your risk exposure to events you don't even know how to expect.
I loved his example of the joint probabilities of having a rare disease if you get a positive result on a test for that disease. Even most doctors apparently don't know how to evaluate that one. If even well educated people cannot quantify two known risks occurring simultaneouslyin their own field, how can investors be expected to make good decisions?
Dr. Taleb has some very good advice for how to handle the psychology of being able to do this. He upholds the Stoic ideal -- 'the attempt by man to get even with probability' which encourages 'wisdom, upright dealing, & courage.' This means not chasing the latest investment fad or fashion, not looking at your investments very often, & being open to both sides of any idea (it could go wrong as well as right --what are the consequences of both?). I especially liked his idea of watching CNBC with the sound off so that the 'experts' seem humorous & you are less likely to hear & follow their advice. Even more poignant was his advice not to live on Park Avenue where living with all of the arrogant, temporarily lucky can make you feel small. Instead, live somewhere that the results of your cautious approach will cause you to be the envy of all.
Dr. Taleb impressed me with his willingness to tell stories on himself about how quickly he can become superstitious when things are going well, take on excess risks, & start looking too short term. After all, we are only human!
The importance of this book can only be appreciated if you go back & think about your biggest investing successes. How much was luck versus skill? A good way to test is to see if the same approach has continued to work for you whenever you use it. Another good test is to see how often it would have backfiredin the past.
In my research on good decision making, I find that those who guard the downside first make the most moneyin the long run. They are able to find ways to get the best of both worlds!
Remember that the two-edged sword can cutin either direction!
All I need is the beef - By: Aron Palmer, 02 Oct 2002 
As someone who agrees with the Amazon reviews of Nassim's "Dynamic Hedging" that if there's a better book on options trading I haven't read it, I was immensely looking forward to reading "Fooled by randomness". It is however a very different book. Rather than the technical detail of the earlier book, this is more the personal musings of a trader. A collection of anecdotes, quotes & personal thoughts tied together with a few ideas from statistics. It did remind me of his quotein the previous book "I hear you are giving a 4-day seminar on hedging exotic options. Can you give it to me during lunch time tomorrow? All I need is the beef. You see I don't have patience for the details". The book also has agendas, it seems Nassim wants to show that rich traders / successful companies etc. may be just lucky without the converse that poor traders etc may be just unlucky. It also forgets one of the themes of his earlier book about the optionality of being a trader. As a trader other peoples money five years of big profits followed by blowing it all & some morein the sixth year is not a disastrous strategy (the disaster is losing your own money, or being a bank with a trader like this). The "Black Swan" or exceptional event that runs through his book (and which he bases his trading on apparently) could be that there are no "Black Swans" (though I doubt it, particularly at the minute!) The anecdotes & quotes are enjoyable, though I felt there weren't really enough of them to feel quite sated.
Allin all an enjoyable read (I read itin a day) but a bit lackingin beef. Notin the same league as "Dynamic Hedging".
All I need is the beef - By: Aron Palmer, 02 Oct 2002 As someone who agrees with the Amazon reviews of Nassim's "Dynamic Hedging" that if there's a better book on options trading I haven't read it, I was immensely looking forward to reading "Fooled by randomness". It is however a very different book. Rather than the technical detail of the earlier book, this is more the personal musings of a trader. A collection of anecdotes, quotes & personal thoughts tied together with a few ideas from statistics. It did remind me of his quotein the previous book "I hear you are giving a 4-day seminar on hedging exotic options. Can you give it to me during lunch time tomorrow? All I need is the beef. You see I don't have patience for the details". The book also has agendas, it seems Nassim wants to show that rich traders / successful companies etc. may be just lucky without the converse that poor traders etc may be just unlucky. It also forgets one of the themes of his earlier book about the optionality of being a trader. As a trader other peoples money five years of big profits followed by blowing it all & some morein the sixth year is not a disastrous strategy (the disaster is losing your own money, or being a bank with a trader like this). The "Black Swan" or exceptional event that runs through his book (and which he bases his trading on apparently) could be that there are no "Black Swans" (though I doubt it, particularly at the minute!) The anecdotes & quotes are enjoyable, though I felt there weren't really enough of them to feel quite sated.
Allin all an enjoyable read (I read itin a day) but a bit lackingin beef. Notin the same league as "Dynamic Hedging".
Thought provoking stuff - By: , 11 Mar 2002 Too much noise & arrogance dominates financial markets & lifein general. This book is truly humbling, whilst the authors style, whilst an acquired taste, is definitely entertaining.
