Rating: 
Summary: Try Thinking Out of the Box
Review: Taleb's latest is a refreshing look at the world of trading, and moreover, at the tired world of thinkers who all think alike. Thank heaven there is someone who is not another lamb heading off to slaughter. He pokes fun at philosophers, journalists, and all those who are pretentious. A great book for the lay reader, unlike the brilliant Dynamic Hedging, which is for those who read formulas. After finishing this masterpiece, you will see the world of trading, writing, and culture with amusement and clarity.
Rating: 
Summary: just how intelligent am I?
Review: The book is disappointing because of the authors need to prove how intelligent he is compared to the rest of us mental pigmies. Although taleb infers thaty he has a small ego in trading, it seems that in everything else in life he suffers from a massive one (ego). there are some interesting facets in the book ,but these are clouded by the disappintments.
Rating:
Summary: Managing Unpredictable Variations in Order to Prosper!
Review: Every person who is interested in investing should read this book!In investing, few can tell the difference between being lucky and smart. Being successful in the short term can come from either source. If it is coming from unrecognized sources of luck, however, the behavior that the investor associates with success can sink the ship. The cautionary tale of Long Term Capital Management is cited in the book as an example of this point. 'If you're so rich, why aren't you smart?' is the wonderful reversal here on the old saw. I see this effect all the time in my consulting practice with helping companies understand how their decisions affect their stock price. A large percentage of people feel that they know all the answers when their stock price is rising. They keep doing the same things when the stocks are falling. Few survive to still have top jobs when the cycle shifts again. Then a new group of self-confident people take over who often don't know any more than those who preceded them. It's just that their track records look better. Fooled by Randomness will help make you more knowledgeably humble about what you can expect to accomplish with investments. Not only do fewer than one percent outperform the market averages over long time periods, the ones who do are probably often being aided by luck as well. 'Get thee to the index funds as soon as possible' is the message that most should take away from this book. Better yet, buy them when multiples are low! The book's fundamental point is that there is tremendous volatility in any investment. Ignore that volatility to your peril. At the same time, you should be cautious about how well you understand the volatility. Stocks at their lows can still go to zero. There are all kinds of events that can happen, that have not done so yet. When they do, throw out all the old rules of investing. The terrorist attacks on the United States last week are probably an example of this. So each investment must be made as though you could be totally wrong. This means that you have to manage your risk exposure to events you don't even know how to expect. I loved his example of the joint probabilities of having a rare disease if you get a positive result on a test for that disease. Even most doctors apparently don't know how to evaluate that one. If even well educated people cannot quantify two known risks occurring simultaneously in their own field, how can investors be expected to make good decisions? Dr. Taleb has some very good advice for how to handle the psychology of being able to do this. He upholds the Stoic ideal -- 'the attempt by man to get even with probability' which encourages 'wisdom, upright dealing, and courage.' This means not chasing the latest investment fad or fashion, not looking at your investments very often, and being open to both sides of any idea (it could go wrong as well as right --what are the consequences of both?). I especially liked his idea of watching CNBC with the sound off so that the 'experts' seem humorous and you are less likely to hear and follow their advice. Even more poignant was his advice not to live on Park Avenue where living with all of the arrogant, temporarily lucky can make you feel small. Instead, live somewhere that the results of your cautious approach will cause you to be the envy of all. Dr. Taleb impressed me with his willingness to tell stories on himself about how quickly he can become superstitious when things are going well, take on excess risks, and start looking too short term. After all, we are only human! The importance of this book can only be appreciated if you go back and think about your biggest investing successes. How much was luck versus skill? A good way to test is to see if the same approach has continued to work for you whenever you use it. Another good test is to see how often it would have backfired in the past. In my research on good decision making, I find that those who guard the downside first make the most money in the long run. They are able to find ways to get the best of both worlds! Remember that the two-edged sword can cut in either direction!
Rating:
Summary: Fooled by the Author
Review: This book has little substance on the central theme of people having a poor understanding of the cause and effect of events, and that people with poor math literacy are often misled by numbers.
A far better book on this topic is "Innumeracy: Mathematical Illiteracy and its Consequences by John Allen Paulos. More than the lack of substance the tone of this book makes one think that the author doesn't respect the intelligence of others. Yet he doesn't any new value to this subject as you'll see if you read other authors on this topic. Perhaps the author was fooled by the fact that someone would publish his book, but that doesn't make him a mavin on this topic, especially since his examples are retreads.
Rating: 
Summary: Important topic - flawed explication
Review: I really wanted to like this book because the it discusses an important topic. The role of randomness in our everyday lives versus our innate (lack of) capacity to deal with it without careful education is one that we need to talk about more in the popular culture. However, the problems with this book are several. Its casual and meandering exposition is supposed to make it more accessible, but it actually makes it harder to come to terms with the topic. Also, Mr. Taleb is a bit difficult to warm to, although there are occasional flashes of wit and humor that help. For example, he is so proud of his personal achievements that he both disparages them (he is ashamed of his Wharton MBA), and uses them as proof of his superiority of almost everyone (he read a lot at the library). He also has some strange peccadilloes such as his passionate and disproportionate dislike of George Will because he interviewed Robert Shiller (Taleb's friend and author of "Irrational Exuberance") in a rather feckless manner. In the second half of the book he does explain some interesting phenomena about human psychology and randomness in interesting ways, but he goes completely overboard on certain points. On page 173 he states that Khaneman and Tversky have exerted the most influence on economic thinking in the past 200 years. Come on! Name any major economics department that has become behaviorist in any major way. (Taleb might find such resistance to acceptance a proof of concept - but people weighing evidence seriously would find it a chink in Talebs case. I think the reality is that what Taleb points to is important and does exist, but that it is something like a second order effect in the big scheme of things. It may matter an extreme amount in the narrow world of options trading where Taleb indicates he lives, but for most of us it is a minor issue. Not one of no consequence, but not a determinative effect in the broad sweep of our lives. So, I continue to look for a really good book on this topic. If you know of one, please email me with information about the book.
Rating:
Summary: One big texas hedge (long implied volatility)
Review: Read the other reviews to get the flavour of the book. I'll only add a few points that haven't been mentioned. 1) There is good advice on avoiding some common mistakes that lead to "blowing up", which will prove useful to inexperienced market practitioners.
2) Taleb's own (claimed) trading methodology (buying OTM options) could easily fall victim to the "black swan" problem. A regime change to persistently higher implied than actual volatility would result in extended losses for his fund (unless he is bluffing us about its methodology).
3) Taleb only focuses on cases where volatility is underpriced - but some of the best opportunities come when it is overpriced, during market panics. Yet according to what he says in the book, one should continue buying such overpriced volatility! As someone whose bread and butter trade is fading market panics, I can confirm that premium selling can be highly profitable - the trick is to sell at the right time, and to employ risk control. Just because some practitioners are incapable of this, does not invalidate the method, any more than OTM options buying is invalidated because many naive speculators buy in a panic just before the VIX is about to collapse.
4) Taleb lumps MBA and businessmen types into the "fool" category. This misses the point. 99% of business is not about risk-assessment, dazzling insight, or grand strategic thought, but about successful *execution* of obvious ideas, and hard work. How many eggheads have had great ideas, but never done anything to put them into action? There is no point knowing that a beach bar in the Bahamas might be destroyed every 10 years by a hurricane, if you aren't even capable of raising capital, employing people, or working 16 hour days getting it off the ground. Good MBAs and CEOs will in any case employ people like Taleb to assess risk for them.
5) Taleb ignores the possiblity of using praxeological analysis (i.e. taking a set of demonstrable a priori truths, then using a logical train of deduction to discover what those truths necessarily imply about reality) to avoid the survivorship bias & noise problems. E.g. you can predict the effect of supply and demand on price without having to test it in the real world. This technique has been used by Murray Rothbard in economics (which has an even greater "non-falsifiability" problem than trading), and Warren Buffett in investing. As an example, you *can* judge if a good track record is "skill" or "luck", by examining the methodology of the trader/investor. If they operated solely during a period favourable to their style, it is probably luck e.g. if they made money buying emerging market bonds from 1994-1998. If they made a bucketload trading a style that was *against* the market regime, then it is almost certainly skill e.g. someone who made good returns as a shortseller of tech stocks from 1997-2000; or someone who has successfully sold premium during market panics. Since Taleb is a follower of Popper, and a hardened quant, it should come as no surprise that he is ignorant of praxeology, but it is a huge oversight all the same.
6) Taleb's scorning of Buffett as a lucky fool is ignorant in the extreme. Buffett clearly did *not* use naive analysis of past data to make his investment decisions, or rely on luck (he did well from 1969-82, a terrible period for equities). Rather he deduced highly probably consequences from demonstrable truths about investment (i.e. firms with pricing power, high barriers to entry, and low working capital requirements are likely to perform very well), and then saw that the market was not pricing these factors efficiently. Anyone reading his writings can see this. And Buffett's approach is ironically more rigorous and less dependent on luck than Taleb's professed trading methods. To elaborate - Taleb is relying on "black swan" events happening more often than people think. Therefore EITHER a reduction in the frequency of these events, OR an increase in people's expectation of them, would be enough to invalidate Taleb's approach - clearly neither can be ruled out. Taleb thinks he is betting on black swan events occuring, whilst ignoring the possibility of the "black swan" of major regime change making his own system unprofitable. Whereas with Buffet, the laws of supply and demand, and basic investment/economics, ensure that certain business methods will *always* work better than others. To conclude - Taleb thinks he has a great idea, but it was already well known by most experienced market practitioners (see the Market Wizards books etc where multiple traders continually bang on about rare event risk and fat tailed probability distributions). He then goes on as if this idea is the only important thing, which is clearly not the case. Finally, he critiques some people, such as Buffett, who use totally rigorous methodologies, whilst himself employing a strategy that is by no means foolproof, and relies largely on past observation (data-mining!) to form its conclusions. All I can say is that he better watch out for the black swan of long-term declining volatility over the next decade! Finally, I would just say that I found the book enjoyable, it's just that (luckily for future my P&L) Taleb hasn't got everything worked out just yet :) Looking forward to the follow-up Nassim!
Rating:
Summary: loves and hates
Review: so taleb loves
1) Sir Karl Popper
2) The Skeptic philosopher David Hume
3) Michel de Montaigne
4) Charles Sanders Pierce
5) Daniel Kahneman et al.
6) George Soros (with a tinge of patronizing)
7) Bob Shiller
8) Nassim Nicholas Taleb (sometimes; depends on his mood)
9) Constantine Cavafis Taleb hates
1) George Will (he despises him)
2) Nassim Nicholas Taleb (sometimes, especially when exhibiting superstitions)
3) Myron Scholes Robert Merton, MErriwhether , etc. Notes that he says nothign of Fisher Black
4) Hegel
5) Spontaneous reviewers
6) Lawyers Etc... Fun read
Rating: 
Summary: Interesting but the author's pedestal is too high
Review: Luck and the random events playing a large role in "inducing" this luck in life and various tasks in life is something even the most intelligent of people fail to perceive. This book brings this to our attention and from a traders' percepective, highlights the importance of not being fooled by lady lucks role in providing the "comet" trader with a shine of glory.
Unfortunately, this important subject is over shadowed by Mr Taleb's pompous and condescending style of expression in his attempt to flex his intellectual muscles. Mr. Taleb should beware as history is full of such people being knocked off their high pedestals, a victim of their own arrogance.
Nevertheless, an enjoyable book.
Rating:
Summary: The Rich Art Different from You and Me -- They're Luckier
Review: On Wall Street and in life, people make two big mistakes. They think there is always a reason other than randomness that the winners come out on top. And they undervalue the albeit remote likelihood of catastrophic setbacks. A great book by a delightfully cranky author.
Rating:
Summary: Great Book
Review: Not a "trading idea" book, but an interesting look at how randomness fools some into thinking they "know" something when it is really no more than chance that provided the opportunity. I highly recommend it to anyone in the financial arena or interested in probability.
| 
