Best Business Books of 2006: #5 – Fooled by Randomness

The #5 entry called out to me from a table in Barnes & Noble, and it was one of the year’s most electrifying reads: Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb

Here are some notes I took on the book when I finished it a few months back:

A cutting, powerful tome on the role of chance
and how to mitigate it, it’s hindered by the author’s ego and attitude.
He does back up his arguments, though the message comes off better than
the messenger.

p.8: On thinking hard vs. working hard: “Trading
forces someone to think hard; those who merely work hard generally lose
their focus and intellectual energy.”

p.23: He uses an example of someone being offered
$10 million to play Russian roulette. The remaining five histories are
not observable. Factor in playing it over and over again, and there are
a handful of rich survivors and a very large cemetery.

p.37: We attribte risk to something vivid. For
instance, a fatal flood in CA due to earthquakes sounds more likely
than a fatal flood in North America.

p.56: On mistakes: “A mistake is not something to
be determined after the fact, but in light of the information until
that point.”

p. 152: On the role of luck in winnowing samples:
313 traders of 10,000 will have five good years in a row based on a
odds of the coin toss.

p. 187: On satisficing: stop when you get a near-satisfactory solution

p. 214: “Journalists being paid to provide explanations will gladly and readily provide them.

p. 234: Reviews tell more about the reviewer than what’s being reviewed.

p.258: On uncertainty: it protects people from themselves.