x Abu Dhabi, UAEMonday 22 January 2018

Nassim Nicholas Taleb: Fooled by randomness

The author has doubtless been one of the most fascinating figures to rise to prominence during these past few years.

Alongside the New York University professor Nouriel Roubini, who accurately predicted most of the trauma that has so far unfolded during the financial crisis, Nassim Nicholas Taleb has doubtless been one of the most fascinating figures to rise to prominence during these past few years. Strange, then, that they're such odd bedfellows - Roubini got plaudits for making good forecasts, while Mr Taleb became famous for criticising people who think they're good at forecasting.

That's the central thesis of Fooled by Randomness, Mr Taleb's first book. It's pretty simple, really. We're human, we're flawed, and we have a lot of hidden biases and cognitive short cuts that send us down illogical paths, preventing us from making sound predictions or reacting intelligently to changes in our environment. In this uncertain age, it's a message that bears repeating, and Mr Taleb does so in a devilishly entertaining way, savaging statisticians, mathematicians, traders, journalists and other pretenders to the throne of truth.

Mr Taleb calls himself a "sceptical empiricist", which means he distrusts most things (including himself). It's a refreshingly candid I-don't-really-know approach, given the purported certainty that springs daily from well-dressed, smart-enough-looking pundits on TV and polished op-ed writers loath to admit that, well, the future is probably full of surprises we can't even guess at. The only real flaw in Mr Taleb's work lies in the fact that there isn't all that much original content in it. For the most part, the author relies on his wide reading in behavioural economics, psychology and philosophy to stand up his arguments. Yes, he has opinions. He has an approach to randomness. He also has a unique perspective on it, as someone who attempts to make money by placing bets on the mispricing of risk, at least when it comes to rare events. Distilled to the basic framework of ideas, however, another person of similar erudition could have written a similar book.

In the end, though, that doesn't subtract too much from Fooled by Randomness. It's a fine read, even if Mr Taleb's later book The Black Swan makes a longer and even better analysis using the same fundamental ideas.

Publisher: Random House, 2004