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

by Nassim Nicholas Taleb

thus view people distributed across two polar categories: On one extreme, those who never accept the notion of randomness; on the other, those who are tortured by it. When I started on Wall Street in the 1980s, trading rooms were populated with people with a “business orientation,” that is, generally devoid of any introspection, flat as a pancake, and likely to be fooled by randomness. Their failure rate was extremely high, particularly when financial instruments gained in complexity. Somehow, tricky products, like exotic options, were introduced and carried counterintuitive payoffs that were too difficult for someone of such culture to handle. They dropped like flies; I do not think that many of the hundreds of MBAs of my generation I met on Wall Street in the 1980s still engage in such forms of professional and disciplined risk taking.