Fooled by randomness

I am pretty sure someone searching for Fooled by Randomness on google or bing or any of the other web search engines isnt going to find this blog entry up there. So if you chanced upon this entry, let it at least direct you to two good books. I read the book Outliers by Malcolm Gladwell followed by the book Fooled by Randomness by Nassim Nicholas Taleb.

Both books got me thinking about success from a different perspective. Let me talk about what I got out of Outliers first. Malcolm Gladwell talks about hugely successful people like Bill Gates, Steve Jobbs, etc and point out how they could have become who they did because they were born around a certain year and lucked out on many instances. Similarly the month in which hockey players were born could have a more than expected impact on them being successful at their sport measured by having made the national team. I think it is probably true. The question is then, what can we do with that knowledge. Maybe learn to be humble, or think twice before we label someone as successful or unsuccessful.

Now fooled by randomness is also pretty informative. The book again talks about the role luck can have in success and how we label someones flawed strategy as successful solely based on the fact that he was lucky(survivorship bias). Another strategy, probably works better while working with financial markets than with real life is the following.

This is about how when you make a bet you shouldnt confuse probability with expectation. For example if there is a probability that you will make a small amount of money 99.9% of the time but will loose a tonne of money .1% of the time, then you should never make that bet. Because if you do loose you loose everything.

Anyway, both are good books and pretty easy reads.