Thursday, July 28, 2011

Taleb Avoids Randomness

Several weeks ago I purchased Nicholas Taleb's  "Fooled by Randomness" book as an iTunes audio book, and have listened to it several times through.  My blog editor asked for a book review, and perhaps the conversational style is the most appropriate (from chat the other day):

MM: did you finish your book?
TS: yes, a couple of times. I guess I said I'd do a book report?? :-)
TS: I just downloaded audio version of Black Swan this morning...
MM: well, I was just wondering what were the main points....just for my experience
TS: hmmm main points. his primary point is its foolish to follow the day to day markets, that you're better off reading poetry and totally ignoring the day to day markets...
TS: (I'm totally serious - that's his main point).   should I post that as a book-review-in-a-sentence? :-)
MM: I've actually thought about that, its just if you do that, you need a totally mechanical system that can tell you what is going on in the world
TS: when he goes to a trading room, he'd rather talk to the mathematicians and secretaries...
MM: the markets tell you what is going on in the world....but I think that's naive because you don't really know what is influencing you then... you need to know the news, but have a jaundice eye to filter it out correctly. IMHO
MM: you know, the music in the background in a grocery store is going to influence you, unless you know to combat it....
TS: he says to ignore the news. reading the news, quotes etc., leaves you susceptible to being fooled by randomness. Poetry is a type of randomness he can be fooled by without being otherwise harmed...
MM: being aware of the news, lets you combat it    it must work for him, though
TS: he does not want to combat it. he wants to be totally cut off from it. combatting it assumes you know what is fooling you...  (I disagree with him, I love exposing myself to the random flow, but he's made his millions, so who cares?)
MM: that's my point, if one's not aware of it, how do you know its not fooling you.
TS: if you're not exposed to it (like a jury) you can make decisions about life in general outside of the stream of news...


[NB: after listening to the first sev chapters of Black Swan, I now understand Taleb's reticence to follow the news - he's seeking a philosophical angle, but is taking time to provide his views on history and markets, so the alienness of his outlook is actually refreshing, rather than disturbing.  ..TS.]

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