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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto) Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb
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Fooled by Randomness Quotes Showing 31-60 of 478
“Heroes are heroes because they are heroic in behavior, not because they won or lost. Patrocles does not strike us as a hero because of his accomplishments (he was rapidly killed) but because he preferred to die than see Achilles sulking into inaction. Clearly, the epic poets understood invisible histories. Also later thinkers and poets had more elaborate methods for dealing with randomness, as we will see with stoicism.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“I AM NOT SO INTELLIGENT The epiphany I had in my career in randomness came when I understood that I was not intelligent enough, nor strong enough, to even try to fight my emotions. Besides, I believe that I need my emotions to formulate my ideas and get the energy to execute them. I am just intelligent enough to understand that I have a predisposition to be fooled by randomness—and to accept the fact that I am rather emotional. I am dominated by my emotions—but as an aesthete, I am happy about that fact. I am just like every single character whom I ridiculed in this book. Not only that, but I may be even worse than them because there may be a negative correlation between beliefs and behavior (recall Popper the man). The difference between me and those I ridicule is that I try to be aware of it. No matter how long I study and try to understand probability, my emotions will respond to a different set of calculations, those that my unintelligent genes want me to handle. If my brain can tell the difference between noise and signal, my heart cannot. Such unintelligent behavior does not just cover probability and randomness. I do not think I am reasonable enough to avoid getting angry when a discourteous driver blows his horn at me for being one nanosecond late after a traffic light turns green. I am fully aware that such anger is self-destructive and offers no benefit, and that if I were to develop anger for every idiot around me doing something of the sort, I would be long dead. These small daily emotions are not rational. But we need them to function properly. We are designed to respond to hostility with hostility. I have enough enemies to add some spice to my life, but I sometimes wish I had a few more (I rarely go to the movies and need the entertainment). Life would be unbearably bland if we had no enemies on whom to waste efforts and energy.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“It takes a huge investment in introspection to learn that the thirty or more hours spent “studying” the news last month neither had any predictive ability during your activities of that month nor did it impact your current knowledge of the world.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“In his Treatise on Human Nature, the Scots philosopher David Hume posed the issue in the following way (as rephrased in the now famous black swan problem by John Stuart Mill): No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“wealth does not count so much into one’s well-being as the route one uses to get to it.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“In other words, history teaches us to avoid the brand of naive empiricism that consists of learning from casual historical facts.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Realism is punishing. Probabilistic skepticism is worse.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Imagine taking a test knowing the answer. While we know that history flows forward, it is difficult to realize that we envision it backward. Why is it so? We will discuss the point in Chapter 11 but here is a possible explanation: Our minds are not quite designed to understand how the world works, but, rather, to get out of trouble rapidly and have progeny. If they were made for us to understand things, then we would have a machine in it that would run the past history as in a VCR, with a correct chronology, and it would slow us down so much that we would have trouble operating. Psychologists call this overestimation of what one knew at the time of the event due to subsequent information the hindsight bias, the “I knew it all along” effect.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“This high-yield market resembles a nap on a railway track.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Our emotional apparatus is designed for linear causality. For instance, you study every day and learn something in proportion to your studies. If you do not feel that you are going anywhere, your emotions will cause you to become demoralized.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“we are not made to view things as independent from each other. When viewing two events A and B, it is hard not to assume that A causes B, B causes A, or both cause each other. Our bias is immediately to establish a causal link.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“My principle activity is to tease those who take themselves and the quality of their knowledge too seriously.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Aut tace aut loquere meliora silencio (only when the words outperform silence). These”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“One of the most irritating conversations I’ve had is with people who lecture me on how I should behave. Most of us know pretty much how we should behave. It is the execution that is the problem, not the absence of knowledge. I am tired of the moralizing slow-thinkers who pound me with platitudes like I should floss daily, eat my regular apple, and visit the gym outside of the New Year’s resolution. In the markets the recommendation would be to ignore the noise component in the performance. We need tricks to get us there but before that we need to accept the fact that we are mere animals in need of lower forms of tricks, not lectures.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“It is also related to a problem called denigration of history, as gamblers, investors, and decision-makers feel that the sorts of things that happen to others would not necessarily happen to them.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“one cannot judge a performance in any given field (war, politics, medicine, investments) by the results, but by the costs of the alternative (i.e., if history played out in a different way).”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“There is a Yiddish saying: “If I am going to be forced to eat pork, it better be of the best kind.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“This is one of the many reasons that journalism may be the greatest plague we face today—as the world becomes more and more complicated and our minds are trained for more and more simplification.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“The virtue of capitalism is that society can take advantage of people’s greed rather than their benevolence, but there is no need to, in addition, extol such greed as a moral (or intellectual) accomplishment (the reader can easily see that, aside from very few exceptions like George Soros, I am not impressed by people with money).”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“people often confuse complex ideas that cannot be simplified into a media-friendly statement as symptomatic of a confused mind.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Of course chance favors the prepared! Hard work, showing up on time, wearing a clean (preferably white) shirt, using deodorant, and some such conventional things contribute to success—they are certainly necessary but may be insufficient as they do not cause success.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“The formation of our beliefs is fraught with superstitions—even today (I might say, especially today). Just as one day some primitive tribesman scratched his nose, saw rain falling, and developed an elaborate method of scratching his nose to bring on the much-needed rain, we link economic prosperity to some rate cut by the Federal Reserve Board, or the success of a company with the appointment of the new president “at the helm.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Veteran trader Marty O’Connell calls this the firehouse effect. He had observed that firemen with much downtime who talk to each other for too long come to agree on many things that an outside, impartial observer would find ludicrous (they develop political ideas that are very similar). Psychologists give it a fancier name, but my friend Marty has no training in behavioral sciences.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Try the following experiment. Go to the airport and ask travelers en route to some remote destination how much they would pay for an insurance policy paying, say, a million tugrits (the currency of Mongolia) if they died during the trip (for any reason).Then ask another collection of travelers how much they would pay for insurance that pays the same in the event of death from a terrorist act (and only a terrorist act). Guess which one would command a higher price? Odds are that people would rather pay for the second policy (although the former includes death from terrorism). The psychologists Daniel Kahneman and Amos Tversky figured this out several decades ago.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“at any point in time, the richest traders are often the worst traders. This, I will call the 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. This does not happen too often with dentists or pianists—because these professions are more immune to randomness.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“One conceivable way to discriminate between a scientific intellectual and a literary intellectual is by considering that a scientific intellectual can usually recognize the writing of another but that the literary intellectual would not be able to tell the difference between lines jotted down by a scientist and those by a glib nonscientist. This is even more apparent when the literary intellectual starts using scientific buzzwords, like “uncertainty principle,” “Godel’s theorem,” “parallel universe,” or “relativity,” either out of context or, as often, in exact opposition to the scientific meaning. I suggest reading the hilarious Fashionable Nonsense by Alan Sokal for an illustration of such practice (I was laughing so loudly and so frequently while reading it on a plane that other passengers kept whispering things about me).”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“If one puts an infinite number of monkeys in front of (strongly built) typewriters, and lets them clap away, there is a certainty that one of them will come out with an exact version of the 'Iliad'. Upon examination, this may be less interesting a concept than it appears at first: Such probability is ridiculously low. But let us carry the reasoning one step beyond. Now that we have found that hero among monkeys, would any reader invest his life's savings on a bet that the monkey would write the 'Odyssey' next?”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Wittgenstein's ruler: 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. The less you trust a ruler's reliability (in probability called the prior), the more information you are getting about the ruler and the less about the table.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“Popper’s falsificationism is intimately connected to the notion of an open society. An open society is one in which no permanent truth is held to exist; this would allow counter-ideas to emerge. Karl Popper shared ideas with his friend, the low-key economist von Hayek, who endorsed capitalism as a state in which prices can disseminate information that bureaucratic socialism would choke. Both notions of falsificationism and open society are, counterintuitively, connected to those of a rigorous method for handling randomness in my day job as a trader. Clearly, an open mind is a necessity when dealing with randomness. Popper believed that any idea of Utopia is necessarily closed owing to the fact that it chokes its own refutations.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
“There is a saying that bad traders divorce their spouse sooner than abandon their positions. Loyalty to ideas is not a good thing for traders, scientists - or anyone.”
Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets