Fooled by Randomness
The Black Swan |
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets is a book by
The Black Swan (2007–2010), The Bed of Procrustes (2010–2016), Antifragile (2012), and Skin in the Game
(2018).
Thesis
Taleb sets forth the idea that modern humans are often unaware of the existence of
non-random
.
Human beings:
- overestimate causality, e.g., they see elephants in the clouds instead of understanding that they are in fact randomly shaped clouds that appear to our eyes as elephants (or something else);
- tend to view the world as more explainable than it really is. So they look for explanations even when there are none.
Other misperceptions of randomness that are discussed include:
- Survivorship bias. We see the winners and try to learn from them, while forgetting the huge number of losers.
- Skewed distributions. Many real life phenomena are not 50:50 bets like tossing a coin, but have various unusual and counter-intuitive distributions. An example of this is a 99:1 bet in which you almost always win, but when you lose, you lose all your savings. People can easily be fooled by statements like "I won this bet 50 times". According to Taleb: "Option sellers, it is said, eat like chickens and go to the bathroom like elephants", which is to say, option sellers may earn a steady small income from selling the options, but when a disaster happens they lose a fortune.
Reaction
The book was selected by ninety-nine [sic] theses were to the Catholic Church.[4]
Editions
- In 2001, TEXERE published the first edition of the book. (ISBN 1-58799-071-7, London : Texere, 2001)
- In 2004, TEXERE published a revamped second edition.
- In 2005, ISBN 1-58799-190-X, New York : Random house, 2005)
- In 2005, a French version appeared, with many unique changes.[citation needed]
- The book has been translated into 20 languages,[5] and is reported to have sold over half a million copies.
- Further editions have been published by Penguin (softback, May 2007) and Random House (hardback, October 2008.)
See also
- List of cognitive biases
- Ludic fallacy
- Pareidolia – the psychological phenomenon of perceiving patterns in randomness
References
- ^ Useem, Jerry (21 March 2005). "The Smartest Books We Know". Fortune.
- ^ Mouton, Andre (19 August 2013). "Does big data have us 'fooled by randomness'?". U.S.A Today. Retrieved 28 August 2013.
- ^ Sizemore, Charles (23 January 2013). "Nassim Taleb's 'Antifragile' Celebrates Randomness In People, Markets". Forbes.com. Retrieved 28 August 2013.
- ^ "Book review : Fooled by randomness". The New Yorker. Retrieved 24 August 2020.
- ^ fooled by randomness