Fooled by Randomness

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Fooled by Randomness

Book report 1


Fooled by Randomness

Ruozhu Wang


This book talk about when the author Taleb was a rookie-level trader in the stock market, he had succeeded in spying on a stock disaster, and he studied the finance storm for half a year, thought that his escape was not because he is clever than anyone else, it’s full of luck. Luck in the financial market plays an important role. But people are always too low to estimate the random effect. Cannot help to make their own interpretation of things which formed a variety of superstition. So he wrote such a book about luck – randomness.

        Life is random everywhere. Even a professional mathematician, and proficient in the calculation of probability. He may also tend to be arbitrary by tease, Taleb finally suggested: Although we cannot avoid randomness, but we can learn to accept it. This is also a practical book, the stock market is the most typical random phenomenon, ups and downs only occurred in a moment, but learn from Taleb’s operation, you will be able to effectively avoid the risk. And make a fortune when the black swan appears. It said that each stock trader should have one this book.

        In the author’s view, the future of the world is uncertain, random phenomenon can be seen everywhere. Some of the investment experts get the award only in a suitable environment of him, it is likely that they would be eliminated in unsuitable environment. The biological structure of man is destined to be misunderstood and ignorant for certain probabilities, and there is a blind spot for both samples and deviations. The power of the black swan is everywhere, at the beginning of the book, the trader who is careful, different, trying to avoid the rare event of destroy, after he witnessed his neighbors – the random fool was furiously reported, his career were thriving , but because of disgusting the city traffic congestion for a long time, he drove a helicopter to work, finally died because of machine destroyed.

        The book is divided into three parts:

        The first part is about skewing, accidental events. Also talked about a lot of probability related issues. The second part is to live with the deviation, because we only see the success, and thus formed a distorted view of the opportunity. The third part is about the path dependence, and the choices that people make in the past determine their current and future possible choices.

        The division of the three parts is clear, but many of the author’s ideas are repeated and interspersed.

        The author’s investment strategy:

        Prudent investment to prevent “blow up”. Really good traders do not have to make money in the short term, but have to make themselves alive, be aware of occasional events and rare events. Do not let those rare events ruined their own. When the rare event occurs, it is necessary to make a “U-turn”. Do not be obsessed with some wrong beliefs. These beliefs may come from economics or statistics, but it is terrible. Because economics, statistical summary of the law is based on historical events, some are coincidental. It is not eternal truth.