Fooled by Randomness - The Hidden Role of Chance in Life and in the Markets | South China Morning Post
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Fooled by Randomness - The Hidden Role of Chance in Life and in the Markets

PUBLISHED : Sunday, 17 June, 2007, 12:00am
UPDATED : Sunday, 17 June, 2007, 12:00am

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


by Nassim Nicholas Taleb


Penguin, HK$165


Hong Kong is awash with financial and economic analysts who use all sorts of software to anticipate events and make lots of money. Nassim Nicholas Taleb thinks it's all a waste of time. Market forecasts can never be like predicting the weather because the unexpected always happens. When Fooled by Randomness was published in 2004, Taleb was confirmed as a guru for recognising the human tendency to explain random events. Writer Malcolm Gladwell says Taleb operates on the assumption that 'in the world we live in something utterly unexpected always happens'. Taleb takes bets; he doesn't make them. He only buys options, which investors use to hedge risk because they believe risk can be quantified by attributing causes to random patterns. Taleb rejects this because markets aren't physical entities but dependent on human reaction to random events, which lead people to act stupidly or panic when things don't go the way they expect. His new book, The Black Swan - The Impact of the Highly Improbable, warns that the marriage of financial theory and information technology creates a false sense of security because no one can expect the unexpected.


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