Book Review: Fooled by Randomness — The Hidden Role of Chance in Life and in the Markets


Georges Lteif

Georges Lteif

Software Engineer

Last Updated on August 19, 2022.
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Who Should Read This Book

Fooled by Randomness discusses a ubiquitous phenomenon in our everyday lives: the role of chance and uncertainty and how we deal with it with our ill-equipped reasoning faculties.

If you are interested in such topics (philosophy, epistemology), have a sceptical and curious mind, or looking to boost your informal education and soft skills, this book is a MUST READ.


Synopsis

Fooled by Randomness — The Hidden Role of Chance in Life and in the Markets is the first instalment in a series of five books authored by Nassim Nicholas Taleb titled Incerto. The four other books are The Black Swan (2007), The Bed of Procrustes (2010), Antifragile (2012), and Skin in the Game (2018).

The book examines the role of chance in our lives; the author attempts to draw a line between a chaotic, random, and unforeseeable series of events and the deterministic narratives that our minds spin to explain them.

The author was a professional trader and naturally used this exposure to explain his points of view. Despite this, the theories he puts forward are universal and widely applicable to almost every area of our lives that involves a degree of uncertainty.

Inspecting the reviews for this book will show two opposing camps of readers and critics: those who liked the book and those who hated the author’s style and tone (more on that later).

If you can get past the style, you will undoubtedly find the book a fascinating, thought-provoking, immensely rich, and highly enjoyable.

The book is divided into three parts:

  • Part 1: Solon’s Warning — Skewness, Asymmetry, Induction

The first part of the book discusses three ideas:

  • Fortunes that were acquired by luck can be ruined by luck. Those developed by skills are more resistant to uncertainty. Taleb presents a novel “accounting” method for measuring the quality of decisions made, which he refers to as alternative histories.
  • The problem of induction and rare events, which the author refers to as black swans. The latter is defined as an event so rare that it is constantly discounted but whose effects are overwhelming should it occur. The author brilliantly uses the analogy of an urn full of black balls with a very rare red ball and a mischievous child replacing the balls under the urn.

The author also presents a fascinating perspective on the role of serotonin-induced happiness and momentous success in perceiving our abilities and how this correlates with our leadership skills.

A chapter is dedicated to the problem of induction and the solution proposed by Karl Popper. The essence of Popper’s ideas is that a scientific theory can be proven wrong, but it is far more difficult to prove it true.

  • Part 2: Monkeys on Typewriters — Survivorship and Other Biases

In Part 2 of this book, the author discusses the idea of predicting future success based on past events.

He uses the analogy of an infinite number of monkeys clicking away randomly on typewriters, with one of them eventually coming up with a known work of fine literature.

Taleb argues that calculating the probability of success of such an event is meaningless until you consider the total number of monkeys participating in the experiment. The skill of the winning monkey can only be established if the number of monkeys in the experiment is small.

The author states that:

This part is dedicated to exploring these three ideas.

The beauty of Taleb’s work lies in the richness of its content; there is always a central idea that he would be trying to drive home, but alongside this idea, a vast number of examples, stories, anecdotes, and seemingly tangential arguments abound.

One of those tangential ideas that I found very relevant to discussions we usually have on this website relates to business management and the immense role of luck (rather than skills) in the organisation’s evolution.

  • Part 3: Wax in My Ears — Living with Randomitis

Part 3 of the book is the shortest of the lot; it represents a series of reflections on Randomness and chance and daily dealing with them. It also strangely sounds like a personal biography of the author, making it an exciting read.


Has the Book Achieved Its Aim?

The author’s ideas and arguments were ample and rich enough to leave the reader with a sense of satisfaction and fullness. The discussion rigorously drove the views home with elaborate explanations without overly technical talk. The book, in my opinion, did a marvellous job at closing the gap between our common perception of luck’s role and reality.


Key Metrics

Original Content
95%
Practical Usage
75%
Depth
95%
Authority
95%
Writing Style
95%
Accessibility
80%

Quick Review

Must Read

Format

The paperback cover and the size of this edition make it easy to carry around. The paragraphs are small, and the content is conveniently divided in an easy-to-follow structure.

Style

The author’s style is unique in tone (arrogant and assertive), layout (short, essay-style paragraphs focusing on single but complicated ideas), and structure (anecdotes, autobiography, historical and technical discussions).

Content

If the reader can get past the author’s unique style, they will find the content delightful, inspiring, insightful, and highly original.


Format

Form Factor

Paperback

ISBN-10: 0141031484
ISBN-13: 978-0141031484
12.9 x 2.1 x 19.8 cm
368 pages


Themes


Content

Structure

Rating: 4 out of 5.

The book is a collection of paragraphs and chapters, some small, some average-sized, with each dedicated (usually) to a single idea. The ideas, however, are not easily linkable to the central theme of the section and will require some effort to fit with the rest of the text. Some paragraphs are more autobiography, while others are anecdotes and interesting stories from Greek or Roman mythology. The structure (small sections discussing simple and seemingly isolated ideas) compensated for the (sometimes) tangential content.

Original Content

Rating: 5 out of 5.

The book’s content carries the author’s signature views that I have not seen anywhere else. In effect, the author’s opinions challenge the mainstream ideas on the nature of success (luck vs skills) and evolution of events (deterministic vs random) and provide compelling arguments on why everyone else got it wrong. The multi-disciplinary approach (technical, philosophical, biological, psychological, and philosophical) that the author uses to promote his ideas is unique and gives his content a lot of originality.

General Tone

Rating: 3 out of 5.

The book’s tone is subject to debate in the review panels. Some find it assertive, insightful, thought-provoking, rich, and original, while others believe it’s overly bold, sometimes arrogant, and reads more like a long rant. I happen to be of the former view, and I enjoyed reading it.

Practical Usage

Rating: 5 out of 5.

Randomness and luck are ubiquitous in our daily lives, and an appreciation of their role in our successes and failures can be illuminating. Despite all the heavy arguments on luck’s omnipresence and hidden potency, the author admits in Part 3 that we reason with our hearts and not our minds, and immediate and natural responses are usually emotional and not rational. Despite the clear, logical views, it is pretty challenging to change our behaviours radically. Still, in the author’s opinion, it pays off to be aware of its limitations at a minimum which is why I believe this book is an essential read for almost anyone.

Depth

Rating: 4 out of 5.

Fooled by Randomness presents the author’s opinions in an in-depth, straightforward analysis. By no means a thorough textbook on the subject of chance and luck, the amount of detail and rigour in the discussions is enough to satisfy the curious mind. Taleb mentions all his references in the text, making it exceptionally easy to look for extra material or check external references.

Authority

Rating: 5 out of 5.

The author’s authority on the topic is undeniable, and he is well-known in the financial world. He has published several financial and Risk analysis papers, and he is currently working on a technical Incerto for the tech-savvy reader. The first volume in this series is already available under the title Statistical Consequences of Fat Tails: Real World Preasymptotics, Epistemology, and Applications.


Style

Genre

The book’s genre is a mix of popular Science and philosophical essays.

Writing Style

Rating: 5 out of 5.

The author’s writing style is arguably the trickiest part of this review. The individual stories flow easily and the ideas presented do not seem very challenging to comprehend; it is only when you try to place them in the overall context of the book that it becomes slightly problematic. In this manner, the content seems deceptively straightforward, yet a genuine appreciation of its meaning can only be evident after a careful read.

The sometimes tangential stories can be distracting, but this is more than compensated with the thought-provoking themes it embodies.

Accessibility

Rating: 4 out of 5.

Some of the views explained in the book are complex. They will require a basic understanding of probability theory and statistics to appreciate their beauty, but, in essence, the target audience of this book is the informed reader.


Author

Bio

Nassim Nicholas Taleb is a Lebanese-American essayist, statistician, former trader, and Risk analyst whose work concerns Randomness, chance, and uncertainty problems. The Sunday Times labelled his 2007 book The Black Swan one of the 12 most influential books since World War II.

He has been a professor at several universities, serving as a Distinguished Professor of Risk Engineering at the New York University Tandon School of Engineering since September 2008. and a co-editor-in-chief of the academic journal Risk and Decision Analysis since September 2014.

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