summary ofFooled by RandomnessBook by Nassim Nicholas Taleb, PhD

first KEY POINT

There’s more to luck than it seems

This tendency is more pronounced in the stock market where certain investors are considered more competent than others as a result of their lucky streak. Their successful investment portfolios are easily attributed to their competence rather than sheer luck.It is true that some professions require being skillful to achieve success. For example, luck doesn’t help you to have a long career in medicine or law. You need to have training and skill to succeed.Where it concerns the stock market, there are no real rules. Luck is the operative term here. There is an inherent randomness in the stock markets that make it possible for an investor with little or no skill to be just as successful as a skilled investor.

This probability reveals that you’re likely to achieve more success in the stock market by investing based on a coin toss.From these unskilled investors, we can expect almost 200 of them to record profits every year for 5 years. Consequently, we confer competence on these investors when in reality they simply made wild guesses and were lucky.The long run eventually reveals the poor choices they have made. That’s why some investors record devastating losses where they lose everything in a quarter after a streak of successes in the preceding years.The rest of this summary explains our misconceptions of randomness as determinism, why we constantly fail to appreciate the impact of randomness, and how we can deal with randomness.