Fooled by Randomness - Nassim Nicholas Taleb

Cover Art - Fooled By Randomness


Fooled By Randomness is the second book in the Incerto series by Nassim Nicholas Taleb. Like The Black Swan, it is a treatise on the philosophy of uncertainty, a field dominated by Taleb. Whereas The Black Swan talks about epistemological missing links or the gaps in our knowledge, Fooled By Randomness is more focussed on the effects of these highly unlikely, yet potent risks, lurking in the shadows of uncertainty.

What would happen if the Markets collapse tomorrow? Or your currency gets devalued due to Hyperinflation? What if you are on the way to an important meeting and your car has a flat tire? What if something truly out of the ordinary happens in our lifetime? (Aliens?) As a proponent of Stoicism, Taleb asks us to imagine every scenario under the sun which maybe highly unlikely, but is still possible. As a software person, I find this is rather similar to a systems architect or an engineer following Murphy's Law and assuming the worst scenarios are virtually a certainty. However, the truly novel idea put forward in this book is to assign a value to each of these uncertainties, so we can sum up all the scenarios and arrive at an Expected Value (sum of all probabilities multiplied by their values) and act accordingly.

I think many people are familiar with Gambler's Fallacy, where people expect that a string of losses must be offset by a string of subsequent wins. If we assume life to be random sequence (as Taleb suggests) it only makes sense that we should avoid such a fallacy in our daily lives (i.e just because you are unlucky today doesn't mean you will be lucky tomorrow; don't wait for a miracle). Gambler or not, we need to account for the uncertainties and be prepared for everything life throws at us.

5/5 - Must Read