Fooled by Randomness is Taleb’s first non-technical book published in 2001. This book discusses the underestimation of the role or randomness and chance in day-to-day life experiences. One of the core concepts of this book is the idea of hopefulness for the best average consequence across all possible outcomes and the unpredictable ranges of possibilities as opposed to a fixed foreseeable outcome. This book looks at randomness at a broader context and even though it focuses more on market and trading, it stills spans to other spheres of life and general philosophy. Precisely stated, this book is about luck and how we perceive and deal with luck in life and business.
The overreliance on causality, where events are believed to be as a result of other events, is yet another idea dealt with in Fooled by Randomness. Taleb observes that human beings are fond of finding simple explanations to causal relationships where they link totally unrelated events, though appearing somewhat related, to the occurrence of another. For example, if an accident occurred on a road which had experienced a heavy downpour, one would easily attribute the accident to a slippery or misty road. This underscores the probability that the driver may have been drunk, slept on wheel, or even, the vehicle may have had some mechanical problems. It is such misguided attribution that randomness plays an integral part in one’s life. In the business world for example, this form of causal relationships, according to Taleb, would be misleading. Just as in the case of Survivorship Bias, luck plays an integral part in any given situation. Moreover, modern financial markets are ridden with all sorts of scientists. In this regard, Taleb recommends that traders should moderately be denied information to enable them filter useful signals from the junk of financial information that they are always exposed to.
Lastly, Taleb recommends that we should pay greater attention to the problem of induction. He argues that an individual may hold true a wrong idea or belief when subjected to the same routine or experiences. He gives an example of the swans, which people, especially in America, believed that were only black until the discovery of the black swans in Australia. He further states that simply because we have not discovered anything new does not mean that new things do not exist. Therefore, people should be versatile, able to change opinions and beliefs. By so doing, we shall be breaking out of the problems presented by Survivorship Bias and causality and will be in a better position to make forecast for the future.
In conclusion, Fooled by Randomness remains significant to anyone who seeks to understand the complexity of the world we live in and the infinite forces that drive our lives in an attempt to get an objective view of how thing come to be. Particularly, Survivorship Bias, Causality and the problem of induction are key points noted in Fooled by Randomness which serve a greater good of breaking our simplistic thinking and unnecessary co-relations.
Work Cited
Taleb, Nassim Nicholas. Fooled by Randomness: The Hidden Role of Chance in Life and in the
Markets New York: Random House and Penguin, 2001/2005
