Wednesday, July 07, 2010

Review of Fooled By randomness!

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

I enjoyed this book and kudos to Taleb for making such a dry subject very interesting.

I prefer this book over the Black Swan since this book attacks all uncertainties in life than Black Swan which is focused on just one type of uncertainty.

My biggest beef is when Taleb proudly proclaims - "Instead of immediate philosophizing and working at McDonald's, he went to work as a trader to become financially secure"

Now Taleb is it not the whole idea of your book that many people are stuck in dead end jobs, suffer misfortunes or experience bad health just because of pure randomness in life in-spite of their best efforts and advises people to practice stoicism?

It looks like you did not follow your own advice by deterministically trying pursue illusory financial freedom at the same time making fun of Carlos and John who were trying to do the same.

My personal experience has been you need to have personal conviction about your positions in order to make money in the markets. Yes you could go wrong and lose your ass as happened to Carlos and John. But even the most successful investors/traders like Warren Buffet and George Soros had personal conviction. Do you really think Soros bet billions against the British Pound without personal conviction that he is going to make a profit?

Taleb is right on one aspect which is we need to have an open mind and review ones position constantly but not having personal conviction on your position is a sure way for mediocrity.

Peter Lynch clearly put it - "Show me a trader who always has a 10% stop loss and I will show you a portfolio with 10% loss"

No comments: