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

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets a book by Nassim Nicholas Taleb first published in 2004. The book explores the various ways predictive modeling fails to capture the effect of randomness. Taleb examines how and why human misunderstanding of randomness affects our evaluation of risk and uncertainty, success and failure, and skill and luck.

The book is the first in a five-part series entitled Incerto. Other books in the series include The Black Swan, The Bed of Procrustes, Antifragile, and Skin in the Game. This guide uses the Kindle version of the second edition, updated by the author and published in 2008.

Summary

Fooled by Randomness is divided into three parts and framed by a prologue and an epilogue. In the Prologue, Taleb states that he aims to provide a different way of understanding binaries such as probability versus uncertainty, luck versus skill, and randomness versus determinism.

Each of the book’s three main sections begins with a prelude which introduces the main ideas of that section in the form of an anecdote or a thought experiment. In Part 1, Taleb begins with a fable about Solon, a famed and respected ancient Greek legislator known for his intelligence, and Croesus, the king of Lydia.