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

by Nassim Nicholas Taleb

software for under $999 and run it yourself during the next rainy weekend. But we are not sure that the world we live in is well charted. We will see that the judgment derived from the analysis of these past attributes may on occasion be relevant. But it may be meaningless; it could on occasion mislead you and take you in the opposite direction. Sometimes market data becomes a simple trap; it shows you the opposite of its nature, simply to get you to invest in the security or mismanage your risks. Currencies that exhibit the largest historical stability, for example, are the most prone to crashes. This was bitterly discovered in the summer of 1997 by investors who chose the safety of the pegged currencies of Malaysia, Indonesia, and Thailand (they were pegged to the U.S. dollar in a manner to exhibit no volatility, until their sharp, sudden, and brutal devaluations).