Fooled by Randomness: Unraveling the Unpredictable Forces in Success and Finance - Essay Sample

Undoubtedly, in some professions, one can never be guaranteed success unless with the required skills; for instance, a surgeon or a plumber is unlikely to succeed for long in the career without the necessary skills (Lewis, 2010). In the 2005 second edition of the book by Nassim Taleb, "Fooled by Randomness: The Hidden Role of Chance in Life and The Markets," the author explores the unpredictability of the stock markets as it answers the uncertainty, risk, luck, and error that is entailed in the financial markets (Taleb, 2005). Unfortunately, in the stock markets, the inherent randomness can lead to unskilled investors producing impressive track records of profits. Unlike in other professions where skills really matter, chance and randomness could translate into an individual’s success.

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As to the suggestion of the book's title, many individuals underestimate the role of random factors in their lives. All of these are evident in individuals who take credit for their successes along with those straining to find a common recipe for success. Everyone at some point in life is frequently "fooled by randomness," implying that individuals might underrate the effects of luck and random occurrences in their lives (Gainsbury, 2010). People apply the terminologies "determinism" and "skills" while in a real sense, randomness and luck were the reasons behind the success. Therefore, nowhere in the business world is such an event more evident than in the stock markets. A capable investor could easily be substituted with a "lucky idiot," as Taleb insinuates (Taleb, 2005). Further, just as Taleb asserts, rather than people acknowledging the role of luck, individuals are constantly seeking patterns and connections, even though they are non-existent (Gainsbury, 2010).

I liked how Taleb engages his ideas in the book productively in a dialogue in which the human tendency views patterns of success and ascribes casualty, where it is not viable (Lewis, 2010). There are numerous suggestions from Taleb I liked from the book: First, individuals should not be inclined to believe in success stories, as successful people at the top are just lucky, and neither credit can be taken for what they have achieved nor specificity for the success. Second, success should not be envied as the tides might turn due to random factors. Third, randomness rules the markets; therefore, individuals should protect themselves from rare occurrences that might eradicate their existence.

Moreover, as Taleb documents, take, for instance, 10,000 relatively incompetent investors who annually only have a 45% chance of turning out successful (Taleb, 2005). Concisely, from that standpoint, it would be better to base the investment on a flip of a coin. In the long run, luck and randomness that maintained these "acute successful randomness fools" will eventually turn against them- as Taleb documents. Taleb's book is not a scientific disquisition- though it has concrete references to modern-day research (Gainsbury, 2010). In most of the sections, it is an assemblage of stories that are both real and fictional. I guess it was intentional to use the collection of stories, as stories usually impress deeper than facts do. Definitely, "Fooled by Randomness" is a book I would recommend for other readers to take a peep into. It entails deep facts in finance and more specifically, of the intertwining financial markets and how luck, chance, and randomness define different individuals' success. Nassim Taleb (a former options trader) is arguably one of the contemporary world's intellectuals as his thoughts cut through the complexities and get to the fundamentals of the financial markets (Lewis, 2010).

References

Gainsbury, S. (2010). Fooled by randomness: the hidden role of chance in life and in the markets.Lewis, T. G. (2010). Cause-and-Effect or Fooled by Randomness? Homeland Security Affairs, 6(1).

Taleb, N. (2005). Fooled by randomness: The hidden role of chance in life and in the markets (Vol. 1). Random House Incorporated.