Fooled by Randomness

I always love when I meet with a Stern student as I know I will get a lesson in marketing, investing, or some other business type learning.  This was no different.  In fact, I learned about probability and economics by reading Fooled by Randomness by Nassim Nicholas Taleb.  Did I mention this is a best-selling book by an NYU faculty member… ah gotta love NYU!  Taleb illustrates throughout the book how randomness is found in so much of our lives, yet we as humans are constantly looking at the stats to make our economic decisions (investments, how we respond to illness and looking for medicinal results, etc.). We as humans believe on causation in everything.  I love his examples of how we look at medians and averages.  Taleb mixes the story of fictional characters, Nero and his neighbor, John the High Yield Trader.  Trading with calculated risk may actually pay off more than the get rich fast method.  His own experience as a trader and seeing the inside world of it gives insights to how crazy the investing went during the time of the huge stock market crashes.  Some of the concepts he presents includes: if you’re so rich, why aren’t you smart  (is there really a correlation??), randomness and science, math throughout history, and the millionaires next door.  I loved the concept of how one can look at the glass… think about the guy who graduated from Harvard and Yale Law School and lives in upper east side NYC.  While he makes $500,000 a year, the choice of where he lives makes him the lowest paid person in his building, yet he is in the 99.5% of income in the world.  Or how many years one will live depends on how old you are at the time.  If you are 60 years old, more chance to live to 73 years of age, because you have already outlived those who died and bring the age range down.  And yes, real life phenomena are really a 50-50 proposition, aren’t they?  Yes I do believe so.  So I guess that leaves me thinking… will I be a millionaire someday?  Let me flip a coin.  I’ll say heads… here goes… oh dear, tails.  Guess not.  Worth reading for sure!   Common sense made simple.  Pick it up and learn something.