By Nicholas Nassim Taleb.
Whenever I get a physical book and find anything of value in it I turn over the corner of the page.
When I read Fooled by Randomness the width of the book had grown appreciably as I had turned over so many corners.
Taleb is well known for having predicted, and so profited from massively, a number of critical events such as Black Monday (a day when the stock market crashed in 1987 costing most investors a fortune).
He has a huge following from all students of probability and risk (including me) and could easily move markets with a single comment should he choose to do so.
He mentioned on Twitter prior to the Brexit vote that gold might be a good option and it increased against the pound by 20% overnight.
A hedge fund he advises made a 3,600% in one month when the pandemic hit.
He is most definitely the person to listen to about probability and risk.
This book explains how randomness operates at a deep level in all our lives.
Here are some gems:
It explains how patterns become relied on as a manifestation of some underlying truth, but that they are actually the operation of processes such as path dependence (things happen because of constraints created in the past).
Selection bias is when we try to predict future events from past paths of success while ignoring all the paths of failure and thereby ignoring the risks.
It is impossible to predict when a previously stable system will change to operate under a different set of rules resulting in a regime switch sometimes resulting in chaotic and unpredictable behaviour.
This book is a thorough dissertation by someone that has a legendary capacity to predict outcomes in the financial markets where seemingly everyone involved in the system has become ‘fooled by randomness’.