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Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life

by Nassim Nicholas Taleb, 2001, TEXERE Publishing Ltd, London and NY, hardback, 203 pages, ISBN 1-58799-071-7, US$27.95.

People tend to underestimate randomness.  Nassim Taleb has made a good living in trading options, betting on rare events that are sometimes under-priced in the market.  The book takes the reader on a philosophical and somewhat auto-biographical tour of the author's thinking about risk.  Anecdotes abound where people have mistaken fundamental concepts in probability and statistics.

Some notes:

Despite that he wrote this book, Taleb's wish is for investors in general to remain fools of randomness so he can trade against them (p. 39).

This book is short on quantitative methods and long on philosophy.  Taleb does manage to explain quite a few ideas , woven into the many stories in the book.  I enjoyed the book and recommend it.

From the dustjacket:  "I really like this book.  We need a book like this, that helps us deal with our hard-wired human tendency to underestimate randomness.  It is fun to read, refreshingly independently-minded and at the same time playful." — Robert Shiller, Yale University, author of Irrational Exuberance.


—John Schuyler, October 2002.

Copyright 2002 by John R. Schuyler. All rights reserved. Permission to copy with reproduction of this notice.