Er.
Akash Sharma
PRESENTS
Fooled By Randomness
Uncertainty In Certainty
KEY FACTS
New format of Mathematics
Randomness present in surrounding
environment and its impact
Revel many perceptions and
misconceptions about luck and chance
Explains theory of randomness in light of
the theory of determinism
Uses various true and hypothetical
examples
Introduces a new facet of normal
distribution curve with all dimensions of
skewness
Theory Vs Theory
Theory of determinism- everything can be determined
with certainty from pervious patterns, accidents never
happen and everything is reason based
Theory of randomness- nothing can be determined
with 100 % certainty, accidents do happen and
everything is not reason based
Earth, SUN and the Solar System.
Integrate both the theories- current research methods
are deterministic
Outline of the BOOK
Starts with the table of distinction
One side (randomness side)- posses all
those items that are caused by chance
causes, that can not be controlled and
that can only be qualitatively justified,
ex- luck, noise etc
Other side (determinism side)- posses
all those items that are caused by
assignable causes, that can be
controlled and that be justified
quantitatively, ex- skills, signals etc
PART -1
Introduces the concept of randomness and rare events
(the black swan)
Explains the understanding of human beings towards
randomness
Explains the impact of these rare events
PART-2
Explains the human biasness towards the
randomness
Explains the luck factor and probability blindness
of human beings
PART-3
• How human beings deal with the
uncertainties/randomness
DERIVATION 1
By using the hypothetical example of Nero tulip
and John, author tries to explain the nature of
investors and impact of randomness on humans
Nero takes less risk, doesn’t account for previous
patterns , poor trade record, less rich (resistive to
randomness)
John takes high risk, accounts for previous
patterns, good trade record, more rich (victim of
randomness) (fooled by randomness)
Principal applicable everywhere, no hidden
patterns exist
Derivation 2
Explains the risk, its impact and role of randomness in
risk- Russian roulette
Rare event/ black swan is always going to happen
whose impact will be 4 times of every associating
favorable and expected event
Under such event, every conclusion/
studies/optimizations goes wrong
Financial markets as well as human research
DERIVATION 3
MONTE CARLO ENGINE- sample paths (sample
histories)
One sample path leads to generation of certain
result
Deviation in results of various sample paths will
give the resistance measure against randomness
Financial markets as well as research (leads the
formation of wrong conclusion due to wrongly
adopted sample paths)
Derivation 4
One randomness influenced person will
generate such information that generate
further randomness
Previous information is detrimental
Third law of thermodynamics
DERIVATION 5
Normal distribution curve- 50 % are not
resistive to randomness, 50 % people are over
resistive to randomness
Both are fooled by randomness
Derivation 6
Human beings re fooled by
randomness to such extent that
rational people are commonly
considered as irrational and
vice versa.
Research various facts that
sound irrational may find major
relevance with the subject
matter
DERIVATION 7
Fittest is richest but not observed to be surviving on LONG
TERM (JOHN)
Not fittest is not richest but observed to be the only surviving
on LONG TERM (NERO)
So the principal of survival of fittest is also fooled by
randomness
Derivation 8
Normal distribution curve never holds good in
actual practices
There will always be some skewness
There will always be two events A and B, one with
high probability of occurrence and other will less
probability of occurrence, the one with less
probability will have 4 times the impact
APPLICABLE EVERYWHERE
Time series analysis
method used by
mathematics and social
sciences is major blunder
No previous patterns can
be used to make future
assumptions/predictions
Ex- the black swan, bush’s
age statements
Derivation 9
All major success stories are luck
enforced
10000 investors (313 lucky) (coin)
10000 investors (184 lucky) (balls)
All these lucky rich people will be
successful at short term, but in long
term they will be busted out from
market, due to some black swan
event i.e. random in occurrence
(fooled by randomness)
So randomness impacts everything in
practice including the research
FINAL STRIKE
The cancer randomness
Actors selection
Not lucky ones are lucky ones and lucky ones are not
lucky ones
Nero also ignores randomness at somewhere in some
concern (everyone is susceptible for the black swan
event)
CONCLUSIONS
Every one gets fooled by randomness
No one is able to understand the trap of randomness
Less resistive people gets busted by randomness
Over resistive ones get tortured by randomness
Normal distribution curve is not applicable in actual world
Mathematical methods are not applicable in behavioral and
qualitative researches
Future predications cant be made on basis of previous
information
Luck is qualitative aspect but can be exhibited quantitatively
Backlogs
The concept is very subjective in
nature
Book leaves no space for
negotiation, sometimes it defend
science and sometimes it
underestimate the scientific laws
Alternative theories = opportunity
cost equations
Book is silent about non-
distribution based statistical tests
like ANOVA and chi-square.
THANK
YOU
