Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Na

Description: Fooled by Randomness by Nassim Nicholas Taleb Taleb, a professional trader and mathematics professor, examines what randomness means in business and in life, and discusses why human beings are so prone to mistake dumb luck for consummate skill. FORMAT Hardcover LANGUAGE English CONDITION Brand New Publisher Description Fooled by Randomness is a standalone book in Nassim Nicholas Talebs landmark Incerto series, an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we dont understand. The other books in the series are The Black Swan, Antifragile, Skin in the Game, and The Bed of Procrustes.Now in a striking new hardcover edition, 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 worlds 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 gurus 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. PRAISE FOR FOOLED BY RANDOMNESS: Named by Fortune One of the Smartest Books of All Time A Financial Times Best Business Book of the Year "[Fooled by Randomness] is to conventional Wall Street wisdom approximately what Martin Luthers ninety-five theses were to the Catholic Church." –Malcolm Gladwell, author of Blink "The book that rolled down Wall Street like a hand grenade." –Maggie Mahar, author of Bull! A History of the Boom, 1982—1999 "Fascinating . . . Taleb will grab you." –Peter L. Bernstein, author of Capital Ideas Evolving "Recalls the best of scientist/essayists like Richard Dawkins . . . and Stephen Jay Gould." –Michael Schrage, author of Serious Play: How the Worlds Best Companies Simulate to Innovate "We need a book like this. . . . Fun to read, refreshingly independent-minded." –Robert J. Shiller, author of Irrational Exuberance "Powerful . . . loaded with crackling little insights [and] extreme brilliance." –National Review Author Biography 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 Universitys 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 dont understand. Talebs books have been published in forty-one languages. Review "[Taleb is] Wall Streets principal dissident. . . . [Fooled By Randomness] is to conventional Wall Street wisdom approximately what Martin Luthers 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 Review Quote "[Taleb is] Wall Streets principal dissident. . . . [Fooled By Randomness] is to conventional Wall Street wisdom approximately what Martin Luthers ninety-nine theses were to the Catholic Church." Malcolm Gladwell,The New Yorker "Fascinating . . . Taleb will grab you." Peter L. Bernstein, author ofAgainst the Gods: The Remarkable Story of Risk "Recalls the best of scientist/essayists like Richard Dawkins . . . and Stephen Jay Gould." Michael Schrage, author ofSerious Play "We need a book like this . . . fun to read, refreshingly independent-minded." Robert J. Shiller, author ofIrrational Exuberance From the Trade Paperback edition. Excerpt from Book Chapter 1 Croesus, King of Lydia, was considered the richest man of his time. To this day Romance languages use the expression "rich as Croesus" to describe a person of excessive wealth. He was said to be visited by Solon, the Greek legislator known for his dignity, reserve, upright morals, humility, frugality, wisdom, intelligence, and courage. Solon did not display the smallest surprise at the wealth and splendor surrounding his host, nor the tiniest admiration for their owner. Croesus was so irked by the manifest lack of impression on the part of this illustrious visitor that he attempted to extract from him some acknowledgment. He asked him if he had known a happier man than him. Solon cited the life of a man who led a noble existence and died while in battle. Prodded for more, he gave similar examples of heroic but terminated lives, until Croesus, irate, asked him point-blank if he was not to be considered the happiest man of all. Solon answered: "The observation of the numerous misfortunes that attend all conditions forbids us to grow insolent upon our present enjoyments, or to admire a mans happiness that may yet, in course of time, suffer change. For the uncertain future has yet to come, with all variety of future; and him only to whom the divinity has [guaranteed] continued happiness until the end we may call happy." The modern equivalent has been no less eloquently voiced by the baseball coach Yogi Berra, who seems to have translated Solons outburst from the pure Attic Greek into no less pure Brooklyn English with "it aint over until its over," or, in a less dignified manner, with "it aint over until the fat lady sings." In addition, aside from his use of the vernacular, the Yogi Berra quote presents an advantage of being true, while the meeting between Croesus and Solon was one of those historical facts that benefited from the imagination of the chroniclers, as it was chronologically impossible for the two men to have been in the same location. Part I is concerned with the degree to which a situation may yet, in the course of time, suffer change. For we can be tricked by situations involving mostly the activities of the goddess Fortuna--Jupiters firstborn daughter. Solon was wise enough to get the following point; that which came with the help of luck could be taken away by luck (and often rapidly and unexpectedly at that). The flipside, which deserves to be considered as well (in fact it is even more of our concern), is that things that come with little help from luck are more resistant to randomness. Solon also had the intuition of a problem that has obsessed science for the past three centuries. It is called the problem of induction. I call it in this book the black swan or the rare event. Solon even understood another linked problem, which I call the skewness issue; it does not matter how frequently something succeeds if failure is too costly to bear. Yet the story of Croesus has another twist. Having lost a battle to the redoubtable Persian king Cyrus, he was about to be burned alive when he called Solons name and shouted (something like) "Solon, you were right" (again this is legend). Cyrus asked about the nature of such unusual invocations, and he told him about Solons warning. This impressed Cyrus so much that he decided to spare Croesus life, as he reflected on the possibilities as far as his own fate was concerned. People were thoughtful at that time. If Youre So Rich, Why Arent You So Smart? An illustration of the effect of randomness on social pecking order and jealousy, through two characters of opposite attitudes. On the concealed rare event. How things in modern life may change rather rapidly, except, perhaps, in dentistry. Nero Tulip Hit by Lightning Nero Tulip became obsessed with trading after witnessing a strange scene one spring day as he was visiting the Chicago Mercantile Exchange. A red convertible Porsche, driven at several times the city speed limit, abruptly stopped in front of the entrance, its tires emitting the sound of pigs being slaughtered. A visibly demented athletic man in his thirties, his face flushed red, emerged and ran up the steps as if he were chased by a tiger. He left the car double-parked, its engine running, provoking an angry fanfare of horns. After a long minute, a bored young man clad in a yellow jacket (yellow was the color reserved for clerks) came down the steps, visibly untroubled by the traffic commotion. He drove the car into the underground parking garage--perfunctorily, as if it were his daily chore. That day Nero Tulip was hit with what the French call a coup de foudre, a sudden intense (and obsessive) infatuation that strikes like lightning. "This is for me!" he screamed enthusiastically--he could not help comparing the life of a trader to the alternative lives that could present themselves to him. Academia conjured up the image of a silent university office with rude secretaries; business, the image of a quiet office staffed with slow thinkers and semislow thinkers who express themselves in full sentences. Temporary Sanity Unlike a coup de foudre, the infatuation triggered by the Chicago scene has not left him more than a decade and a half after the incident. For Nero swears that no other lawful profession in our times could be as devoid of boredom as that of the trader. Furthermore, although he has not yet practiced the profession of high-sea piracy, he is now convinced that even that occupation would present more dull moments than that of the trader. Nero could best be described as someone who randomly (and abruptly) swings between the deportment and speech manners of a church historian and the verbally abusive intensity of a Chicago pit trader. He can commit hundreds of millions of dollars in a transaction without a blink or a shadow of a second thought, yet agonize between two appetizers on the menu, changing his mind back and forth and wearing out the most patient of waiters. Nero holds an undergraduate degree in ancient literature and mathematics from Cambridge University. He enrolled in a Ph.D. program in statistics at the University of Chicago but, after completing the prerequisite coursework, as well as the bulk of his doctoral research, he switched to the philosophy department. He called the switch "a moment of temporary sanity," adding to the consternation of his thesis director, who warned him against philosophers and predicted his return back to the fold. He finished writing his thesis in philosophy. But not the Derrida continental style of incomprehensible philosophy (that is, incomprehensible to anyone outside of their ranks, like myself). It was quite the opposite; his thesis was on the methodology of statistical inference in its application to the social sciences. In fact, his thesis was indistinguishable from a thesis in mathematical statistics--it was just a bit more thoughtful (and twice as long). It is often said that philosophy cannot feed its man--but that was not the reason Nero left. He left because philosophy cannot entertain its man. At first, it started looking futile; he recalled his statistics thesis directors warnings. Then, suddenly, it started to look like work. As he became tired of writing papers on some arcane details of his earlier papers, he gave up the academy. The academic debates bored him to tears, particularly when minute points (invisible to the noninitiated) were at stake. Action was what Nero required. The problem, however, was that he selected the academy in the first place in order to kill what he detected was the flatness and tempered submission of employment life. After witnessing the scene of the trader chased by a tiger, Nero found a trainee spot on the Chicago Mercantile Exchange, the large exchange where traders transact by shouting and gesticulating frenetically. There he worked for a prestigious (but eccentric) local, who trained him in the Chicago style, in return for Nero solving his mathematical equations. The energy in the air proved motivating to Nero. He rapidly graduated to the rank of self-employed trader. Then, when he got tired of standing on his feet in the crowd, and straining his vocal cords, he decided to seek employment "upstairs," that is, trading from a desk. He moved to the New York area and took a position with an investment house. Nero specialized in quantitative financial products, in which he had an early moment of glory, became famous and in demand. Many investment houses in New York and London flashed huge guaranteed bonuses at him. Nero spent a couple of years shuttling between the two cities, attending important "meetings" and wearing expensive suits. But soon Nero went into hiding; he rapidly pulled back to anonymity--the Wall Street stardom track did not quite fit his temperament. To stay a "hot trader" requires some organizational ambitions and a power hunger that he feels lucky not to possess. He was only in it for the fun--and his idea of fun does not include administrative and managerial work. He is susceptible to conference room boredom and is incapable of talking to businessmen, particularly the run-of-the-mill variety. Nero is allergic to the vocabulary of business talk, not just on plain aesthetic grounds. Phrases like "game plan," "bottom line," "how to get there from here," "we provide our clients with solutions," "our mission," and other hackneyed expressions that dominate meetings lack both the precision and the coloration that he prefers to hear. Whether people populate silence with hollow sentences, or if such meetings present any true merit, he does not know; at any rate he did not want to be part of it. Indeed Neros extensive social life includes almost no businesspeople. But unlike me (I can be ext Details ISBN1400067936 Author Nassim Nicholas Taleb Short Title FOOLED BY RANDOMNESS Language English ISBN-10 1400067936 ISBN-13 9781400067930 Media Book Format Hardcover DEWEY 123.3 Year 2008 Residence US Series Incerto Edition 2nd Subtitle The Hidden Role of Chance in Life and in the Markets DOI 10.1604/9781400067930 Series Number 1 Place of Publication New York Country of Publication United States AU Release Date 2008-10-14 NZ Release Date 2008-10-14 US Release Date 2008-10-14 Illustrations CHARTS THROUGHOUT UK Release Date 2008-10-14 Pages 368 Publisher Random House USA Inc Publication Date 2008-10-14 Imprint Random House Inc Audience General We've got this At The Nile, if you're looking for it, we've got it. 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