Get the key ideas from

Fooled by Randomness

The Hidden Role of Chance in Life and the Markets

By Nassim Nicholas Taleb
15-minute read
Audio available
Fooled by Randomness: The Hidden Role of Chance in Life and the Markets by Nassim Nicholas Taleb

Fooled by Randomness (2001) is a collection of essays on the impact of randomness on financial markets and life itself. Through a mixture of statistics, psychology and philosophical reflection, the author outlines how randomness dominates the world.

  • Investors and financial professionals who think they understand the nature of risk and performance
  • Anyone interested in human decision-making
  • Anyone who reads the newspaper every day to gain valuable information

Nassim Nicholas Taleb is an academic, author and investor who has spent his life trying to understand the true nature of luck, uncertainty and knowledge. His later book The Black Swan also became a bestseller, and he is considered one of the top intellectuals on the planet.

The author has written Fooled by Randomness partially based on his own experiences and interactions as a Wall Street trader.

Go Premium and get the best of Blinkist

Upgrade to Premium now and get unlimited access to the Blinkist library. Read or listen to key insights from the world’s best nonfiction.

Upgrade to Premium

What is Blinkist?

The Blinkist app gives you the key ideas from a bestselling nonfiction book in just 15 minutes. Available in bitesize text and audio, the app makes it easier than ever to find time to read.

Discover
3,000+ top
nonfiction titles

Get unlimited access to the most important ideas in business, investing, marketing, psychology, politics, and more. Stay ahead of the curve with recommended reading lists curated by experts.

Join Blinkist to get the key ideas from
Get the key ideas from
Get the key ideas from

Fooled by Randomness

The Hidden Role of Chance in Life and the Markets

By Nassim Nicholas Taleb
  • Read in 15 minutes
  • Audio & text available
  • Contains 10 key ideas
Upgrade to Premium Read or listen now
Fooled by Randomness: The Hidden Role of Chance in Life and the Markets by Nassim Nicholas Taleb
Synopsis

Fooled by Randomness (2001) is a collection of essays on the impact of randomness on financial markets and life itself. Through a mixture of statistics, psychology and philosophical reflection, the author outlines how randomness dominates the world.

Key idea 1 of 10

We often mistake luck and randomness for skill and determinism.

We are all frequently fooled by randomness, meaning that we underestimate the impact of luck and random events on our lives. We use terms like “skills”, and “determinism” when “luck” and “randomness” are called for. Nowhere is this discrepancy more evident than in the stock market, where “capable investor” should usually be substituted with “lucky idiot”.

In some professions, one simply cannot succeed without skills: A plumber or a dentist is extremely unlikely to have a long career without knowing what he’s doing.

Unfortunately, the inherent randomness of stock markets means that, just like millions of monkeys hammering on typewriters for long enough can eventually produce Shakespeare, so can unskilled investors produce great track records. In fact, it is very likely that some will.

Consider for example a cohort of 10,000 investors who, for the sake of argument, are relatively incompetent: each year they only have a 45% chance of being profitable. In other words, you would basically be better off investing based on the flip of a coin.

Nevertheless, despite their lack of skills, after 5 years based on probabilities alone we can expect almost 200 of them to have been profitable every year. They would boast flawless track records and enjoy praise for their exceptional skills.

Of course, in the long run, the randomness that sustains these “acute successful randomness fools” will turn against them. Wall Street has seen many traders, who after years of success have one devastating quarter where they lose everything in one huge blow-up.

Often their short-lived success was due to the fact that they simply happened to be at the right place at the right time, i.e. pure luck.

We often mistake luck and randomness for skill and determinism.

Upgrade to continue Read or listen now

Key ideas in this title

Upgrade to continue Read or listen now

No time to
read?

Pssst. Sign up to your secret to success: key ideas from top nonfiction in just 15 minutes.
Created with Sketch.