Fooled by Randomness (Nassim Nicholas Taleb)
Trader's Library #50 · Risk, chance and decisions. The best book on how much chance masquerades as skill in the market.
Author: Nassim Nicholas Taleb · Original: Fooled by Randomness · Year: 2001 · Usefulness for traders: ★★★★★
What it's about
The first book by Taleb, a former options trader. Taleb shows how often we mistake luck for skill, especially in markets.
What it gives a trader
A book written from a trader's perspective. The dentist who checks his portfolio every minute, the trader who makes money for years selling options and loses everything in one day, the monkeys at typewriters – all lessons that a result doesn't prove skill. Required reading after a winning streak.
Lessons for traders
- a short track record says more about luck than skill (the law of small numbers, Atlas of biases #3)
- we see the winners, not those who lost with the same method (survivorship bias, Atlas of biases #56)
- checking your results often increases stress and noise (myopic loss aversion, Atlas of biases #43)
- a strategy that often makes a little and rarely loses a lot can be a time bomb
What to watch out for
Taleb can be arrogant and digressive. But the content is dense and important.
Discussion
The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →
Navigation
← #049 Jake Bernstein: The Compleat Day Trader and Cycles of Profit · Library index · #051 Thinking, Fast and Slow (Daniel Kahneman) →
Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.