Book Review: Fooled By Randomness

Fooled By Randomness was unquestionably the best non-fiction book I read in 2005.  The author – Nassim Nicholas Taleb – is a magnificent writer, deeply intellectual, and delightfully blunt.  While one could interpret his style as arrogant, I chose to view it differently, especially given his endless self-deprecating remarks.  I don’t know Taleb, but I’m going to assume that he’s simply an enlightened guy that feels compelled to say exactly what is on his mind in the clearest way possible.

This book is subtitled “The Hidden Role of Chance in Life and in the Markets” and – in my opinion – is a must read for anyone that ever thinks about probability or statistics (or has ever said a phrase like “sunk cost.”)  In college, I struggled with 6.041 – Probabilistic Systems Analysis & Applied Probability (it was the only C I got as an undergrad) and felt like I was a week behind the entire class (e.g. I eventually got it, just a week after the problem set was due, or the test occurred.)  As a grad student I breezed through 15.071 – Decision Methodologies for Managers not necessarily because I was smarter, but because MIT Course 15 classes are much easier than MIT Course 6 classes. 

When I grabbed Taleb’s book, I had some flashbacks to 6.041.  Fortunately, Taleb’s book was extraordinarily easy to understand, even though some of the subject matter was congruent to 6.041.  Fooled By Randomness tackles classic probability theory (or – in Taleb-speak “the philosophy of randomness”) in a way that anyone with a college degree can understand using the financial markets as the backdrop for discussion.  Taleb loves dramatic examples which is a great way to understand this stuff as you end up with an extremely memorable heuristic for understanding something that could easily devolve into complex theory.

Oh – and he’s funny as hell.  I rarely laugh out loud when reading a non-fiction book – Taleb got a few deep belly laughs out of me.  He manages to demonstration his range of interests by weaving some philosophy and history into the book, although each time I tested one of Taleb’s assertions about Hume or Popper on Amy, she went of on a rant that made me remember how difficult it was for me to read and understand this stuff.

Great stuff – I can’t wait for The Black Swan, Taleb’s next book.