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Fooled by Randomness Overview

The document provides an outline of the book "Fooled by Randomness" by Nassim Nicholas Taleb, which discusses the hidden role of chance in life and markets. The book is divided into three parts that introduce the concepts of randomness, rare events, and human bias towards randomness, as well as explaining how humans deal with uncertainty and the difference between luck and skill. Taleb argues that people are often fooled by randomness and fail to properly account for the impact of rare and unexpected events.

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Nikunj Patel
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251 views31 pages

Fooled by Randomness Overview

The document provides an outline of the book "Fooled by Randomness" by Nassim Nicholas Taleb, which discusses the hidden role of chance in life and markets. The book is divided into three parts that introduce the concepts of randomness, rare events, and human bias towards randomness, as well as explaining how humans deal with uncertainty and the difference between luck and skill. Taleb argues that people are often fooled by randomness and fail to properly account for the impact of rare and unexpected events.

Uploaded by

Nikunj Patel
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
  • Introduction
  • Author Background
  • Outline of the Book
  • Part 1: Solon’s Warning
  • Part 2: Monkey’s on Typewriters
  • Part 3: Wax in My Ears
  • Theory of Determinism vs. Theory of Randomness
  • Mediocristan vs. Extremistan
  • Luck or Skill?
  • Past is Imperfect Guide of Future
  • Black Swan Event
  • Silent Evidence
  • Process is Important
  • Frame of Reference
  • Useless Bell
  • Taleb’s Distribution
  • Learned Statistics - Unlearn it
  • Incorrect Application of Statistics
  • What We Don’t Know
  • Noise vs. Information
  • Timescale and Noise
  • Madhucan Projects Ltd. Graph Analysis
  • Graphical Data Continuation
  • Graphical Data Continuation
  • Graphical Data Continuation
  • Decision-Making Considerations
  • Decision-Making Framework
  • Decision Influencers
  • Our Conflicts
  • Further Reading

Fooled by Randomness

The Hidden Role of Chance in Life and in the Market

By: Nassim Nicholas Taleb

Presented By:
Nikunj Patel (10029)
Piyush Kakkar (10030)

E-mail: nikunj02patel@[Link]
Nassim Nicholas Taleb

An MBA from Wharton and a PhD from the University of Paris.
He is currently a Distinguished Professor of Risk Engineering at
New York University's Polytechnic Institute and Visiting Professor
of Marketing (Cognitive Science) at London Business School.
Outline of the book
Book is divided in three parts:
• Part 1: Solon’s Warning

• Part 2: Monkey’s on Typewriters

• Part 3: Wax in My Ears


Part 1: Solon’s Warning
• 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: Monkey’s on Typewriters
• Explains the human biasness towards the
randomness

• Explains the luck factor and probability


blindness of human beings
Part 3: Wax in My Ears
• How human beings deal with the
uncertainties/randomness
Theory of Determinism
Vs.
Theory of Randomness
Mediocristan
Vs.
Extremistan
Luck or Skill???
Ten Thousand Monkeys on
Typewriter
Past is Imperfect Guide of
Future
Black Swan Event
Something did not happen till now
that does not mean that it will not
happen in the future
Silent Evidence

We always try to
learn from the
winners
Process is Important…
Good Bad
Process Process
Good
Outcome Skilled Lucky

Bad Fool who


Unfortunate deserves that
Outcome
Frame of Reference

We always try to
relate our
success with
others
Useless Bell...

Life is not always 50:50


Taleb’s Distribution
High probability of a small gain, and a
small probability of a very large loss
Learned statistics ???
Please…
Unlearn it
Most Dangerous Knowledge Given by Professors and Teachers
Incorrect application of
statistics
Dr. John(statistician) & Tony(Layman)
What we don’t know is more important than
what we know…

Our decisions depends on only


what we know.
Noise ??? Information
Timescale and Noise
Probability of
Timescale Noise
success
1 sec 50.02% 49.98 %

1 min 50.17% 49.83 %

1 hour 51.3% 48.7 %

1 day 54% 46 %

1 month 67% 33 %

1 quarter 77% 23 %

1 year 93% 7%
Madhucon Projects Ltd.
Take Your Decision

25 % How
Much???

10 %
Unpredictable
Frame of Market
Reference Event

Comparison Analyze

Gain / Significant
Loss ???
Outcome Yes

Decision
Black Swan
Event

Don’t Know

Past Vs.
future
Decision
Noise/
Information
Silent
Evidence
Taleb
Distribution
Our Conflicts
• Statistics Vs. No Statistics
• Theory Vs. Reality
• How to identify Noise (Randomness)
Further Reading…
• After “Fooled by Randomness” in 2001 N.N.
taleb has published…
• “Black Swan” in 2007 and
• “The Bed of Procrustes- Philosophical and
Practical Aphorisms”in Dec-2010.
Any Noise???

Fooled by Randomness The Hidden Role of Chance in Life and in the Market By: Nassim Nicholas Taleb Presented By: Nikunj Patel
Nassim Nicholas Taleb An MBA from Wharton and a PhD from the University of Paris. He is currently a Distinguished Professor
Outline of the book Book is divided in three parts: • Part 1: Solon’s Warning • Part 2: Monkey’s on Typewriters • Part 3: Wax
Part 1: Solon’s Warning • Introduces the concept of randomness and rare events (the black swan) • Explains the understanding
Part 2: Monkey’s on Typewriters • Explains the human biasness towards the randomness • Explains the luck factor and probabil
Part 3: Wax in My Ears • How human beings deal with the uncertainties/randomness
Theory of Determinism Vs. Theory of Randomness
Mediocristan Vs. Extremistan
Ten Thousand Monkeys on Typewriter Luck or Skill???
Past is Imperfect Guide of Future

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