Book Review: Fooled by Randomness

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets is one of the most important non-fiction books I’ve read in years. Buy it, read it.

I’ve said before that hard work is highly overrated and luck is highly underrated.

I believe luck is the single most important attribute of successful people and that raw intelligence has never mattered less.

I believe we tell ourselves stories to construct a preferred narrative of our lives; we connect the dots of our life to make it seem like we did a lot of smart decision making.

And I believe this self-deception is important for self-confidence, an attribute which I believe separates the good from the great.

Nassim Nicholas Taleb touches on many of these points and coheres them into a powerful, entertaining read on how randomness affects our life (and our investing). He touches on various disciplines: cognitive science, statistics and mathematics, genetics, psychology, and social science.

When some people talk about luck and randomness they seem to think of it as totally out of their control. This is true, to an extent, but there are two action-item questions for me:

  1. How can I expose myself to more randomness?
  2. How can I be sure I maximize my good luck when it comes and mitigate my bad luck?

For you investor types, Fooled by Randomness fits well with Winning the Loser’s Game. Active mutual fund managers or index funds? After reading these kinds of books, it’s a no-brainer. (Here’s a New Yorker article on Taleb and investing.)

This is one of those books which I’ll re-read soon, type up notes, and continue to chew on the very provocative thesis for months to come. Thanks Brad Feld for recommending it — although I don’t think it’s just required reading for people who think about probability; I think it’s required reading for everyone!

8 comments on “Book Review: Fooled by Randomness
  • Could the “hard work is important” mantra be just another device to fool ourselves into thinking that we have some control of our fate? That, if we do stumble upon success (or success stumbles upon us), we will feel deserving and not just lucky?

    I think there’s a psychological draw towards control, illusory or otherwise. Thus, we conceive of the American dream and pine after Ragged Dick in hopes of fighting that inevitable sensation that somewhere out there, the Fates are doing things that we can never control.

    Could the “hard work” mantra simply be an effort to reconcile ourselves with destiny?

  • Hmm…I’ve thought that way for a while. I first noticed it when I was a little kid and played lots of computer games. No matter how good you were at the game, in the end it came down to luck. You happened to get a rare powerup. You happened to swerve the wrong way just as the enemy appeared.

    Besides, many honest people work hard their whole lives, but they just don’t get a lucky break and are never succesful. It all comes down to fate.

  • It all comes down to fate? In my opinion, a fatalistic view like this sucks the life out of people more than almost any other type.

    Luck and chance unquestionably exist in every endeavor in life… and a chain effect clearly results from all of the outcomes in one’s life (which are all influenced by luck).

    However, my point is that it seems like the factors that we all have control over are being downplayed far too much. I’ll use a quick example to try to simplify my point. I am 22, and can name at least 4 or 5 close friends who I know will be extremely successful in their lives. It’s not because I know what kind of lucky or unlucky breaks they will experience, but rather I know how they react to the absolute best and worst situations that they are put into. The reason that they will undoubtedly be successful is that they have the mentality and resolve that results in success.

    Luck has a strong influence on the types of situations that we are put into during our lives, but it is our personality and other characteristics that we have control over that determine how we emerge from those situations. Some are able to repeatedly use both good and bad situations to improve themselves and achieve greater levels of success, and others are not.

    Ben- I appreciate the way that you think, and I’m unsure whether we disagree on this a little or a lot. Just my opinion… Guess I need to read the book!

  • Mark,

    Thanks for the note. We agree a lot, disagree little. I didn’t quite “get” the previous comment.

    I agree how you react to things is a BIG determinant in one’s success. But we shouldn’t kid ourselves — the very things we are reacting to is randomness and for some the mountains are so much steeper.

  • Luck vs. Hard work

    There is no question that luck plays a major role in success. My take is as follows, since you can’t control outcome you should focus on process.

    What should you do while you wait for the proverbial lightning to strike?

    Alternative #1- Sit on your couch watching TV waiting to be struck
    Alternative #2 – Put on rain gear, head to your nearest golf course, hold up the longest steel club in your bag, find the tallest tree and start running around in circles.

    Yes, it is true either person might be struck by lightning, but one has increased his odds significantly. Perhaps more importantly, he had a whole lot of fun waiting!

    Take action, luck will find you.

    Ben, congrats on the recent graduation!

  • Thanks Mike. That guy sounds pretty extreme. I agree w/ some points, but DO think hard work is very important, just not as important as everyone makes it out to be.

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