It’s true that Taleb’s ego sticks out from this book like a porcupine’s quills, but whether that bothers you may depend on whether they prick you. It’s hard to take his self-satisfaction seriously; in some ways, he seems just a little sad (but funny). Overall I found his style pretty amusing and had quite a few laugh-out-loud moments while reading the book.

I noted a few favorite examples [from the 2004 revised paperback edition]:

Chapter 7, p 124: “Whenever I hear work ethics I interpret inefficient mediocrity.”

Postscript, p 254: On the inverse rule: “The higher up the corporate ladder, the higher the compensation to the individual”, but the lower the evidence of that individual’s contribution to the company.

Who could be annoyed at a guy who holds such opinions?

I have a few quibbles. I do wish he’d had some graphs in some cases (in the preface, he explains why he refused to add these). If he’s going to claim that outstanding performers got where they are by chance, he could show it by attempting a fit of some variable to a normal distribution. But that’s probably easier said than done. Also, he tends to make generalizations – if something applies to him, then it applies to everyone (for example, he claims he never learns from reading, he has to experience something for it to make an impression – and seems to think this is the case for everyone). I think he should keep in mind that not everyone’s brain functions in the same way, and furthermore the human brain is not identical to a pigeon’s brain. Still, it’s easy to ignore these irritations, which are minor in comparison to the entertainment and educational value of the book.

I just started reading Fooled By Randomness, by Nassim Nicholas Taleb, yesterday. I have a vague memory that I read the first edition of this book for a personal finance course that I took in 2002, but I don’t remember much about it. In any case, the second edition has been expanded, so now I’m getting some extras. I’ve only finished the preface, and so far it’s going well, as he attacks certain clichés about success and failure, as found in The Millionaire Next Door:

That all millionaires were persistent, hardworking people does not make persistent hard workers become millionaires: Plenty of unsuccessful entrepreneurs were hardworking people….

It is completely obvious, but it’s still a joy to read.

He also takes a potshot at Buffet: I am not saying that Warren Buffet is not skilled; only that a large population of random investors will almost necessarily produce someone with his track records just by luck. I think it’s not fair to confuse Buffet’s success with that of any ordinary stockpicker, since Buffet has interfered with the management of the companies in his portfolio on more than one occasion. Still, the beneficiaries of random luck are so frequently and unjustly deified, it can make you ill. It’s nice to actually read an alternative view, for a change.

I’m not sure if Nassim Nicholas Taleb is a pompous asshole or not. If he’s not, his too-frequent, post-modernish, narrator-rising-through-the-surface-of-the-narrative interjections in Fooled By Randomness certainly don’t help his case much. I don’t mind John Barth popping through the pages of his novels and I welcome Tom Robbins offering me a champagne toast, but every time Taleb offers one of his parenthetically whispered asides about what a smart, sensitive guy he is you want to scream at him to get over himself already.

As much as I’d like to argue the merits of the book on the contents, Taleb makes it impossible to separate the book from the author. He would have done better to present his arguments and keep his own enormous ego out of the pages. You certainly get the sense that Taleb is the guy at the party who looks for every possible opportunity to drop some sort of hint about how bright he thinks he is. His enthusiasm for conveying this message blinds him to the fact that he’s not nearly as subtle as he believes himself to be.

So, the book. Despite a well structured outline-based TOC that Taleb shares with the reader early in the book, the message still manages to wander. Taleb’s premise that most people tend to mistake skill for luck, certainty for probability and signal for noise isn’t entirely off-base. Nor is it entirely original. Perhaps what makes Fortune Magazine call this One of the Smartest Books of All Time is that Taleb illustrates that investors and traders are just like everyone else in that they mistake skill for luck, etc.

Taleb concedes that our minds are not wired in such a way as to really discern skill from luck. Unfortunately, he refuses to acknowledge the vast amount of research that shows that people who attribute success to skill and failure to (bad) luck are in fact much happier than their peers. Whenever HH the Dalai Lama has an opportunity to drop some truth on a crowd, he makes a point of saying that “we’re here to be happy.” I’ll take the DL over Taleb as a source of wisdom any day. Taleb is charting a course for his own personal misery by choosing to be right instead of happy. Maybe that’s why he feels so obligated to parenthetically interject his success into the book. Knowledge isn’t wisdom, etc.

The one originally presented idea that makes me say this book is worth reading has to do with distilled thinking and the difference between noise and information. Taleb applies this idea to monitoring a stock portfolio, e.g. “Over a short time increment, one observes the variability of the portfolio, not the returns…one sees the variance and little else.” Meaning, even if your portfolio is doing well, if you look at it too frequently, you’ll see it go down almost as frequently as it goes up. I think about this same notion in the context of information in general (not as it pertains to my portfolio) but using the terms resolution and attention to describe it. What is the correct resolution vs. attention that a given object warrants? Do I need to hear about the war in Iraq for 10 minutes a day or read about it for 45 minutes a month? Do I need to check my aggregator every 5 minutes for new feed items or can I just let some feed items roll through without landing on my radar and instead just check my feeds once a week, still gleaning what is going on with the web?

Taleb’s book got me thinking a lot about attention (how long/frequently to look at something) and resolution (how deeply to look at something) and that’s a good thing. Hence, reading it wasn’t really a complete waste of time.