Fooled by Randomness
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, is one of Nassim Nicholas Taleb's best works. As author of many top sellers including Black Swan and Skin in the Game, he is known for casts doubt on the validity and power of economic models and can sometime even come off as anti-academic. He challenges the work of many academicians and economists and this book truly embodies the same ethos.
Through Fooled by Randomness, Taleb challenges the validity of successful traders, investors, and economists- and one way he does this is through thinking probabilistically. In essence, he highlights that, as an ex-trader, take what investors (especially the big and successful ones) say with a pinch of salt. At the end of the day, the game of Finance is one that is hard to distill luck and randomness from skill. After all, if there are billions of people flipping coins, there will inevitably be a number of them who is capable of flipping ten, twenty, or even fifty consecutive heads. Does this mean that they are necessarily expert coin flippers? Or perhaps, with enough trials there will inevitably be winners, losers, and those who "seem" to have mastered the craft.
Overall, this book highlights a different way of thinking about finance, particularly to those who have been sucked deep into the various world of supposed money making strategies including technical analysis and value investing to name a few. Sometimes, it is important to realise that the results are highly based on luck and that one is merely swimming in a wave of randomness. That way you can more easily accept your losses and better appreciate your gains.
Taleb, N. N. (2005). Fooled by randomness: The hidden role of chance in life and in the markets (Vol. 1). Random House Trade Paperbacks.