Fooled by Randomness Book Review Wall Street Journal

Before reading the review, consider the post-obit two question:

1) If the boilerplate human life is 72 (allow'due south ignore gender, race, income, location, etc, just to keep the question simple), how many more than years should you await to live?

2) A test for some disease has a five% rate of giving simulated positives (and a 0% gamble at a fake negative).  The disease occurs in 1 in ever 1000 people, and everyone is tested regardless of whether they prove symptoms.  Y'all are tested and the test comes back positive.  What are the odds you have the disease?

(Answers at the end.)  A shockingly high number of people become these questions wrong.  Not only ordinary people, merely doctors, statisticians, and other people who really shouldn't be messing this up.

Fooled by Randomness, The Hidden Role of Gamble in Life and in the Markets is not for the feignt of brain.  Taleb explores the role chance plays in our daily lives and in the daily lives of Wall Street traders.  Written in 2004, Fooled by Randomness isn't just a response to the current financial crisis that looks back on the past with xx-xx vision.  Taleb also isn't going to give yous any advice on what stocks in invest in.

While I plant the book extremely fascinating, I'one thousand sure many people won't.  It's non just a book on randomness or a volume most financial markets.  It's part economic science, part psychology, and part anecdotal story telling.  Information technology'south besides part asshole, as Taleb doesn't come across every bit the nicest guy to be around, especially with how much he talks about how great he is at embarassing and intimidating people.  (People who brag about such skills typically are insecure near it and not really that good at whatever they claim.  A rich person doesn't demand to tell you lot he's rich, a smart person that he'south smart, or a expert looking person that he'southward good looking.)

I found this book to exist not quite as dense equally Taleb'southward The Black Swan, which deals with pretty much the exact same issues.  In that location are a lot of interesting stories and anecdotes to proceed it moving, simply at times it seems like Taleb would rather write drama than write nigh randomness, or that he just needed something to make full upwards the pages.  Taleb probably could have gotten all his points beyond in fifty pages, instead of 260 (non counting cease notes and index).

In Fooled past Randomness you'll learn nearly the errors in reasoning yous brand, but unfortunately probably won't learn what to practice about information technology.  In many examples Taleb shows how people who specialize in fugitive these mistakes professionally end upwardly making them all the fourth dimension in their personal lives, only similar how a glory can fly in a personal jet on the mode to giving a speech most reducing carbon footprints.

While I enjoyed Fooled by Randomness, it was a bit besides scatterbrained and lacking in a conciseness that would make it easily consumed, and I remember ease of consumption is a big factor in a book about how to avoid actually mutual (and seriously plush) mistakes.  Three stars:

Answers:

1) Take 72 and substract your age.  You answer should exist More than that number.  Why?  Yous've survived up to the age y'all are now, while some people accept non.  If y'all are 50 years old, your odds of making information technology to fourscore are more than someone who is 10 years erstwhile.  If yous're lxxx your odds of getting to 72 are fifty-fifty meliorate than the 50 year old'due south.  Think virtually that the adjacent time y'all make a decision regarding your retirement planning.

two) Odds you accept the disease are just under 2%.  If we examination 1000 people, only 1 will take the disease (and volition test positive).  But, with a 5% imitation positive rate, another 50 people volition as well exam positive, for a full of 51 positive tests.  Odds you're not a faux positive are 1/51, or just nether 2%.  Thank God nosotros tend to only see the medico when we accept symptoms (which of course increases the odds that the test is right and not just a false positive, because a disease is far more common in people with symptoms than the full general population).

P.Southward.: Next time you meet a trader, enquire them if they believe in the efficient market place theory.  If and so, enquire them what the hell their job is.

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Source: https://redkingbookmakers.wordpress.com/2009/06/07/fooled-by-randomness-nassim-nicholas-taleb/

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