Fooled By Randomness is the first book in Nassim Taleb’s Incerto series, which deals with asymmetries in life.
His books are among the most intriguing I’ve come across and I always feel like I learn something new even if I read 20 pages, never mind the whole book!
Taleb looks at the fallibility of human knowledge in this book. An example Taleb uses is that of looking at the clouds and seeing shapes that aren’t really there.
For example, you may look up to the sky and see clouds that resemble an elephant. Of course, this isn’t the case. What you see is a collection of clouds that appear like an elephant.
Yet, people are either unaware of this fact, or truly believe clouds bear a striking resemblance to an elephant. They don’t, it’s merely an illusion that plays tricks with our minds.
It’s these tricks and illusions that Taleb discusses in his book. What we attribute as a non-random outcome is often the result of randomness.
We tend to underestimate the role randomness plays in our lives, yet overestimate our knowledge and overlook the many cognitive biases we possess.
Talb is one of my favourite thinkers. If you’re looking to start reading his Incerto series this is the best book to start with.
It provides a nice overview of his thinking and serves an introduction to his other books, The Black Swan and Antifragile, which go into more detail about his ideas.
Fooled By Randomness summary
Takeaway 1 – Our emotions can be helpful when it comes to making a decision
Imagine a donkey is thirsty and hungry in equal measure. It’s placed midway between a stack of hay and a pail of water.
A donkey tends to move towards whatever is nearest to him, but in this case, both the food and the water are an equal distance away.
The donkey is unable to make a decision and ends up dying of starvation and thirst as a result. This thought experiment is known as Buridan’s donkey and it highlights how irrational decision making can be.
We’re not donkeys. But, like Buridan’s, we can struggle to make a decision. I’ve faced this problem in cafes and restaurants many times before when it comes to deciding what to get.
I’d agonise over whether to get a hot chocolate or a smoothie. It’s a decision that has little consequence, but one I found hard to make. In the end, I plumped for the hot chocolate for no reason other than to break the deadlock.
Our emotions can be valuable in helping us to make decisions even if they are random. If we try to rationalise every decision we make, we end up like the unfortunate donkey who perished, paralysed by indecision.
It may seem odd, but random choices in situations such as this are optimal because they help us make a decision. This is important because we don’t live in a logical world, so treating every decision as one that must be made in a logical manner is a fallacy.
Our emotions can get us into trouble, which is the inverse of the donkey’s situation, but they are a useful tool in helping to cut through decision fatigue.
Takeaway 2 – By looking at the winners, we forgot all those who lost
One of the principal mistakes we make in society is to focus on those who succeeded. Sure, it’s nice to know how Elon Musk and Steve Jobs came to came to be successful.
Their respective stories are enlightening and motivational for many people. But when we focus too much on the winners, we neglect to focus on another group.
This is known as survivorship bias. It’s where we make the mistake of concentrating on those who made the cut while ignoring the larger majority who didn’t.
The problem with this bias is that it can lead us to become too optimistic. We see stories of success can become convinced we can replicate this, without realising there are many people who’ve failed than succeeded.
Then, there is the issue of luck in an environment. As Malcolm Gladwell outlines in his book, Outliers, the likes of Bill Gates and The Beatles were successful because of luck and the environment they inhabited.
It wasn’t down to some grand strategy, it was because they were in the right place at the right time. Sure, they worked hard too, but that was on top of what were already favourable circumstances.
In some ways, it’s better to learn from the losers than the winners. Failure is a better teacher than success.
Takeaway 3 – Significance and Causality have a big effect on how we determine events
Another mistakes humans tend to make which skews their perception of events is failing to acknowledge the significance and causality of certain events.
Taleb gives the example of a bike race across Siberia. If you engage in a month-long race with your friend across the ice-cold tundra of Siberia, but at the end of the race you only beat your friend by a second, you cannot claim you’re faster than him.
Multiple reasons may exist as to why you beat your friend by a single second. Maybe you had extenuating circumstances such as a tailwind at some point. Maybe your friend’s bike lost grip at an inopportune moment. Or maybe it was due to randomness.
Whatever the reason, you can’t state that you’re faster than your friend when the success could be attributed to randomness.
If the difference were one week, then you could start to analysis the reason for your success.
For causality, Taleb offers the example of a hospital. If hospital A delivered 52% boys and hospital B delivered 48% the same year, would you use the explanation that you ha a boy because it was delivered in hospital A?
It’s just pure chance. Maybe the ratio will switch around the following year. This is a classic example of inferring causality when there is none.
You just happened to have a boy while in Hospital A, it wasn’t because you were in hospital A that you had a boy.
It’s a big difference, but an error we’re all too prone to making.
Fooled By Randomness review
This Fooled By Randomness summary has looked at the first book in Nassim Taleb’s Incerto series. If you’re looking for an introduction to Taleb’s thinking, this is the book to start with.
It’s not as groundbreaking as reading The Black Swan was, nor was it as useful as Antifragile, but it’s still a very good book. One you’ll learn a lot from and enjoy.
The ideas that Taleb presents are fascinating. Chiefly, that we do not understand the role randomness plays in our lives.
We might attribute success to hard work and talent when it could be the result of luck or some other small fortune.
All the while we forget about the people who failed to get to the top. If you’ve read Thinking, Fast and Slow, you’ll know how cognitive biases affect our judgement.
Reading Fooled By Randomness felt like taking a look under the hood of the world of finance and our brains.
It’s interesting how Taleb describes the financial world and how a lot of the people who work in it fail to understand randomness, yet deal with it daily.
If you want to better understand the role chance plays in our lives, Fooled By Randomness is the book to start with!
Who should read Fooled by Randomness?
If you’re looking to learn about randomness, this is the book. It’s a fantastic introduction to our lives are governed by random events.
Anyone looking to start reading Taleb should start with Fooled By Randomness. His Incerto series consists of five books and if you read the last one, Skin In The Game, first the ideas Taleb’s puts across might confuse.
This should be treated as the introductory book and the others the more in depth sequels.