Navigating Life’s Chaos: A Personal Reflection on Nassim Taleb’s “Fooled by Randomness”
Book Overview
Are we all fooled by randomness? Or, a more realistic question is how much we are fooled by randomness? Randomness, as mentioned in the book, is risk or uncertainty. The randomness the author refers to is mostly the downside part of risk or uncertainty.
“Fooled by Randomness” is a book penned by author Nassim Taleb, who is deeply concerned about the nature of complexity, randomness, and a world where rare events dominate various aspects of life. Despite Taleb’s background as an options trader and risk analyst, the book is not solely about finance or intended exclusively for finance professionals. In it, Taleb zooms out to reveal how randomness affects both simple and sophisticated life events and the choices we make. It’s one of the very few books (at least from those I’ve read) that leaves you with a feeling that you know less about randomness than ever before. I find this clever and intuitive, given the unstructured nature of the topic. We are only trying to take a closer look at randomness and understand it as much as possible.
Some Thoughts on the Book
This isn’t a review of the book itself, its writing style, or the author’s skills, as I’m by no means qualified to be a literature reviewer. Consider this article as thinking out loud (actually on paper) about some ideas and concepts discussed in this book.
After reading the book, I found that the author made me start pondering many questions. How are we supposed to deal with problems? How can we quantify whether the good things that happen to us are a matter of pure luck, hard work, and more importantly, experience? I believe it’s a combination of all. I’m a believer in the complexity of life, where there are no simple answers to the big questions we develop throughout our lives. Taleb himself mentions that there is no linearity in life, and you’re not always rewarded exactly in proportion to the effort you put in; luck always plays a part in the results of our work.
The author also emphasizes that randomness is chaotic, and we are helpless against the potential downside of randomness. However, he doesn’t mention that we can benefit from other people’s experiences. What makes us, as humans, different from other creatures is our ability to develop, gain knowledge, and learn not only from our own experiences but also from others, through stories, books, or simple observation.
For example, if we develop a new sophisticated trap to catch a wild animal in Asia (for experimental purposes only, with plans to set them free after proving our point) and then try to use the same method in Africa with another animal from the same breed but in a different geographical setting, it won’t necessarily avoid our trap before experiencing it. This contrasts with creatures like planarian worms, which, interestingly, have no defense mechanism except being able to regenerate like starfish. In an experiment exposing the worm to a very bright light and putting food at the end of a maze, the worm started to adapt to both the light and the maze. When researchers cut the worm into two, both worms developed an experience on how to deal with both the light and the maze. This led to the conclusion that planarian worms pass their experiences to new generations to avoid hazards.
What sets humans apart is our history and highly sophisticated means of communication. We can communicate our thoughts, stories, and experiences with each other, enabling us to avoid randomness (or black swans, as defined in a later book by Taleb). By collecting and sharing our experiences, we try to recognize patterns to avoid, as much as possible, any kind of hazards or bad experiences with randomness or black swans.
Everyone who knows me is aware of how much I believe in and frequently use Karl Marx’s quote: “All the important events in history are repeated twice in history; the first time it’s a tragedy, the second time it’s a farce.” I see that the second time mostly becomes a farce due to our collective ability as a group of people to recognize patterns on a macro level. We’ve witnessed events like businesses, societies, people, and humanity repeating history, and this, to an extent, can reduce the impact of randomness in our lives, making life less chaotic than Taleb suggests. Admittedly, it’s not always easy to have that view about life on a personal level, as we are subjective creatures who tend to act based on emotions, feelings, and perceptions.
But this is one of the books I always revisit, especially after my most recent reading post-COVID, which was similar to the Spanish flu in the last century. I found many events with similarities to WWI, WWII, and the attempts of both Napoleon Bonaparte and Adolf Hitler to invade Russia. Interestingly, these events had similar outcomes. We, as subjective, biased, and probability-blind creatures, sometimes fail to recognize these patterns. It’s not only due to biases and subjectivity but also to our lack of knowledge about certain events or matters. In the case of the black swan, before discovering Australia, humanity believed that all swans were white, and black swans were just a result of some genetic mutation (pure randomness). On discovering Australia, we found that black swans are far more common than we thought. Our lack of knowledge about a certain matter, like the color of a swan, can make us think it’s just a random event (randomness).
Taleb disagrees with the idea that we can learn from history, and I also disagree with that notion. It’s just a matter of scope. As individuals, we are emotional and tend to overlook historical events, even if they are recent personal experiences under the influence of emotions. On a group level, for example, within a community, we can learn from history to infer a new understanding of problems and challenges. It’s easier to isolate emotions in a group of people than on an individual level.
In the end, while this is one of my favorite books, I wrote this article not just to examine randomness in finance but also to extend my view on this randomness to a macro level. I wanted to explore the relationship between randomness, historical events, and how it can impact our judgment or anticipation of future ‘black swans.’
