Fooled by Randomness by Nassim Nicholas Taleb

[RazvanRogoz]

First of all, this is not an easy to read book. The author is an academician turned trader and he tends to love himself a little too much. Signs of his ego are injected everywhere, making it a rather un-pleasant ride from start to finish.

But the idea behind the book is extraordinary. It talks about the role of chance (probability) in our success. It talks how many rich traders are just lucky morons and that in the long terms, it's almost impossible for them not to blow. It talks about how an object will revert to it's initial properties in the long term if a highly unlikely event happens (for example, if a idiot wins the lottery, he'll be a rich idiot for only a few years. The probabilities for him to lose the money are very high.

On the other hand, if someone working out of a system takes a hit, chances are that he won't stay broke, but recover rather quickly).

I'm only on page 70, but I want to finish this book. Why is this such a great book though?

Because it's support MJ's concepts of control and leverage. It shows that yes, you can get rich by not following them, but you'll eventually get back poor. In the long term, unless you are using a system that leverages chances to your side, it's impossible to get rich.

And it's a cautionary tale for all "get rich easy" types out there, all of you who thinks that Forex or MLM will make them rich. You may get rich now, but remember that the odds are in your favor and with every passing day, you are one step closer to losing it all.

I must admit this is a rather hard book, so there are many ideas I haven't comprehended yet, but I'll give a full review and summary of key ideas when I finish it.

But, if you want to understand why get rich easy does not work, go and buy it now.

Razvan

PS: Sorry for the typos, just woke up and wrote this first.

 

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[Milenko]

Great book.

The last two companies I worked for didn't appreciate the role that randomness played in their success and, instead, thought their success was due to their own sheer brilliance. When things got tough they continued to exhibit the "brilliance" that supposedly made them successful and drove their companies right into the ground.

If you have enough people engaged in a probabilistic activity whether that's trading, gambling, or life a certain percentage of them are going to be successful and they can often be successful despite themselves.

It reminds me of an old gambling scam I read about. The guy would email a group of gamblers giving his prediction for a certain sporting event. For half he'd pick team A and for the other half team B. After the game he would email the gamblers who he predicted the correct winner to with a prediction for another game - again predicting one team would win to half and the other team would win to the other half. After a few mailings he would have built up an amazing string of 100% correct picks with the set of gamblers who, through blind chance, had received every one of his correct picks. He would then charge for access to his "system", collect the money, and disappear.

 

[fellipe]

I've read black swan from the same author. It's a nice reading... but that's all.

 

[RazvanRogoz]

Indeed.

Can't wait to finish the book (and read it again, to fully understand it).

However, luck is not a fixed variable. You get luckier the more you tilt the chances to your side.

Nothing guarantees success. Nothing guarantees a happy life. But you can increase the probability for that to happen.

For example, let's say you want to have a productive day.

Case one - Wake up, get on the computer, start answering to emails.
Case two - take a shower, read a few pages, run, eat something healthy and then get to your most important task for today (the frog), not your emails.

Each action (taking a shower, reading a few pages) tilts your chances towards achieving your goal.

I'm not saying that you can't have a great day in case one, but that's random. You may be happy because it's a sunny day. You may have received a great email and set the mood for the day. You've heard a song you like. These are facts. But these are rather random and out of your control.

And in life, it's better to understand that everything is connected. Everything is a system. There are a few unknown factors, but if you get most things right, it's almost impossible to fail.

But if you rely on luck, you're just a time bomb waiting to explode. And in the long term, luck is not on your side. On the long term, every good thing that happens to you (outside of your control) will be equalized with a bad, negative thing.

So if you are a FOREX trader and you have a good week but you don't follow a system, good for you. You know what? Chances are that unless you get a system and you start doing it right, you'll have a bad week that will wipe out everything you've gained.

If you've found a wallet on the street with $100, chances are that in the long term, you'll lose at least $100.

That's the difference between relying on luck (kicking a$$ without knowing what you're doing. It's a strange fact, but you can actually make money by persistence and passion alone.) vs using a system (slower but stable returns, low risks, small possibility of a black swan).

Now, don't get me wrong. A fast lane is not based on luck. Using a system is not based on the slow-lane.

A fast lane is when you follow all principles and you do everything you can do to tilt the chances to your favor. This means using every advantage in the book and eliminating that variable called "luck". It's when you don't rely on the fact that your competition is doing worse than you. It's when your business is not momentum based (and can go extinct in a week) but rather a set of systems that work towards obtain a worthwhile goal.

The slow-lane instead focuses a lot on luck. You wish that you are lucky and:
-> Not get fired.
-> Not get killed in a car accident.
-> Your spouse won't divorce and take 50% of what you have.
-> Live until 75 to enjoy your wealth.
-> Have the same job forever.
-> Get a pay raise.
-> Survive until next month.

But, this is not a book about luck. This is a book about statistics and how they connect to other systems. This is a book where you realize that every bad email adds a chance to having a bad day. This is a book where you understand that the "random" things you do every day have an impact on your biology and psychology.

Nothing is random. The fact that you are reading this post and you are inspired by it may improve your performance today. This improvement may lead in making some extra money or it may be that last impulse you need to start your great business idea.

Understand the facts, understand the statistics, move everything you can towards you and what you want, use a predictable system that limits risks and gives you the highest chance of winning and then get to work. You can still be killed by a car accident (black swan) by you'll have the odds to your favor.

Razvan

 

[deSeingalt]

I was about to make the same thread about this book yesterday, glad somebody else mentioned it.
I really enjoyed this book and the Black Swan as well. It was pretty easy read for me and it reminded me of the Tipping Points (which I stopped reading halfway, didnt like it)
Taleb does have a strong argument but it is flawed in some parts but overall it is VERY eye opening book. One thing I like about it is that he states that he takes aggressive risks not to be confused with reckless. I think by agressive he implies putting yourself in the position where you can profit by "luck".
In his second book 'the Black Swan' he draws the difference between "mediocristan" vs "extremistan" societies and thankfully we live in the extremistan world where success or outcome can be non-linear but rather exponential (just like MJ said in his book).
In all honesty, for those who are interested in entrepreneurship and who is a student of MJ work, those two books (Fooled by randomness and the Black Swan) are a must read.