Fooled by Randomness

Fooled by Randomness
2001 AD published

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets deals with the fallibility of human knowledge.

Taleb sets forth the idea that modern humans are often unaware of the existence of randomness. They tend to explain random outcomes as non-random.

Misperceptions of randomness that are discussed include:

• Humans overestimate causality - tend to view the world as more explainable than it really is. So they look for explanations even when there are none.
• 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 normal, 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.

New York City, NY

Lattitude: 40.7128° N
Longitude: 74.006° W
Region: North America

Modern Day United States

Events in 2001 MORE