I’m stunned. People are still making the same mistake–intelligent people, at that. The mistake? They contradict themselves in boldface statements and are proud of it. Nassim Nicholas Taleb makes the mistake throughout “Fooled By Randomness” and what’s worse, he loves himself for it. Taleb’s general theory is that everything is simply random (to some degree)–especially equities trading–and “nothing can be accepted with certainty.” Sure, there is some aspect of randomness at the subatomic level and there is seemingly randomness throughout our worldview, but to say that “nothing can be accepted with certainty” means that even that statement can’t be accepted with certainty, which presents an instant contradiction and causes the argument to self-destruct like a Mission Impossible tape.
The self-professed skeptic Taleb doesn’t think his idea self destructs however, he is simply content to have realized that there aren’t gifted traders, just lucky ones. Traders are fooled by the randomness in the markets, according to Taleb, and think they’re good at what they do, until they blow up (lose everything beyond expectation). Taleb admits he’s one of these fools, but if that’s so, and the market is unpredictable, then the only reason he hasn’t blown up (if he hasn’t) is because he’s lucky and doesn’t have any wisdom to impart. So why are we reading his book? What information does he have that would be helpful to us beyond, “it’s a coin toss?”

It turns out that Taleb does actually have wisdom to impart. Once the reader gets past the hypocritical class warfare diatribe in the first half of the book, “Fooled” gets good. The author delves into the Kahneman & Tverski studies about how arbitrary anchors influence our estimates and the two systems of reasoning among other interesting studies.

I admit that Taleb’s book was great mental fodder for my forthcoming book, but if you’re not interested in analyzing self-destructive mentalities, there are much better books to consider including Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics and my book, How to Take Advantage of the People Who Are Trying to Take Advantage of You: 50 Ways to Capitalize on the System.