After reading Nassim Taleb’s The Black Swan a few months back I kind of figured out that I might as well read Taleb’s first book on the subject, Fooled By Randomness as well. Both Fooled By Randomness and The Black Swan make good points about the need of understanding the concepts of fat tale events. The book also makes good points about the things that take place around us being statistically significant, such as how many “good” hedge fund managers are really just making money because of blind luck.

The book is a good read and has some example stories where Taleb gets his points across in a way that anyone can understand. The problem with the book like The Black Swan is the endless rants. Taleb doesn’t just get his point across directly, he goes on and on about the same thing in such a way that you start getting bored and skip ahead. Another problem with Taleb’s ego, he often runs up rants about this and that and his ideas being the best and only valid ones which is rather boring to read. He judges people, methods and models though out the book but offers little in the form of solutions to these problems. It also teaches you not to just take the things around you as given and if you are going to follow something be sure it makes sense*.

The book is a good read but please don’t take this as some kind of gospel like some people do.

*Although not in the book a great example of this is the fact that the price of butter in China is a statistically significant regressor for changes in the US interest rate curve for a given time frame at a 99% confidence interval. That doesn’t mean we should use the price of butter in China to forcast changes in the US interest rate curve? No…. or should we?

Related posts from the blog:

• The Black Swan
• When Markets Collide
• Straight to your iPod – February 2009
• Digital Fortress
• Financial Shock