Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

by Nassim Nicholas Taleb

Somehow all respect we may have for history does not translate well into our treatment of the present.

A mistake is not something to be determined after the fact, but in the light of the information until that point.

“If I am going to be forced to eat pork, it better be of the best kind.” If I am going to be fooled by randomness, it better be of the beautiful (and harmless) kind.

cross-sectional problem: At a given time in the market, the most successful traders are likely to be those that are best fit to the latest cycle.

Judging an investment that comes to you requires more stringent standards than judging an investment you seek, owing to such selection bias.

am fitting the rule on the data.

A journalist is trained in methods to express himself rather than to plumb the depth of things—the selection process favors the most communicative, not necessarily the most knowledgeable.

mixed up between absence of evidence and evidence of absence,

the maximum of an average is necessarily less volatile than the average maximum.

Unless you have confidence in the ruler’s reliability, if you use a ruler to measure a table you may also be using the table to measure the ruler.

There is no rational reason to keep a painting you would not buy at its current market rate—only an emotional investment.