“It’s really hard for me to review these two books separately. I’ve always looked at them as one, simply because I read them one after the other and perceived them that way. They are a brilliant work by the Libyan-born author, Nassim Taleb. As a former Wall Street financial trader with a background in mathematics and finance, Taleb deals with risk assessment, probabilities, and randomness. These are the themes central to these two books.
The main idea in “The Black Swan“ is that in the world, and especially in the financial world, there is always a chance of a very rare event with an exceptionally strong effect occurring, which no one anticipated and could not have predicted. Essentially, the book is a serious warning to the most confident and overly optimistic investors that no one is truly insured against such an event and its consequences. Taleb preaches moderation, humility, and caution against overexposing investments and overly trusting the “experts” who supposedly always know what lies ahead.
Another strategy he advises on is the so-called barbell strategy. What he means is combining a large amount of conservative investments balanced with a few high-risk ones that have the chance to yield significant returns.
“Fooled by Randomness” is a celebration of mathematics. For readers who love math, statistics, probabilities, bets, odds, etc., this will be an exceptional adventure they’ll relish. Taleb doesn’t give anyone 100% credit for their achievements. Whether an investor has become incredibly wealthy or, conversely, has gone bankrupt, he sees the hand of luck. In the book’s title itself, Taleb conveys his idea, namely, that many of us are deceived, or rather deceive ourselves, believing the outcome of our actions is solely and always a result of our actions. We often tend to perceive pure chance as personal skill, leading us toward overconfidence that lures us into taking even bigger risks.
Taleb is the one who taught me to pay no attention to praises or criticisms. Be it from others or from myself. Whenever I achieve good results, I remind myself that this success could easily turn into a failure and always try never to forget that I am somewhat or significantly in the hands of randomness. Even when I invest in assets, no matter how conservative or how high their chance of profit, I never risk more than I can afford to lose. In an opportunity with a 99% chance of success, mathematically calculated and backed by analysts and experts, there will always be that 1% chance where the investment could fail.
Never forget randomness and give it its due, because it never forgets you.