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!

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