Fooled by Randomness, by Nassim Nicholas Taleb

Nassim Nicholas Taleb, a former trader turned philosopher (a too-limited description. . . .), came to wide renown with his book The Black Swan, the second book in his Incerto series.  Fortune magazine called his first book, Fooled By Randomness: The Hidden Rule of Chance in Life and in the Markets, one of the 75 "smartest books of all time."  It's full of thought-provoking and provocative reflections on the market.  It certainly challenges conventional thinking about the market.

While Taleb doesn't completely disregard the skills required for profitable investing, he does argue that much of what we call success in the market is attributable to luck.  All of our back-testing, portfolio analyzing, and fund manager evaluation is full of biases and mistaken methodologies that give us skewed results.  Often, people we think are successful in the market are "acute successful randomness fools" who have benefited from randomness.

Even as an investor, Taleb doesn't read the Wall Street Journal.  He prefers poetry.  He does keep the financial TV channels on, but with the sound down.  He says the commentators look so ridiculous when he can't hear them that it reminds him they have nothing productive to say.  Taleb draws from a large array of philosophical and mathematical sources.  He speaks of his aversion to outlines when writings, as well as limitations on the length of pieces he writes.  This leads to a somewhat rambling narrative that could have been cleaned up and organized.  But too much editing would deter from the beauty and pleasure of reading Fooled By Randomness. 

If you're looking for a guidebook for investing, keep looking.  If you're looking for a confirmation to your suspicion that success in the markets requires a great deal of luck, you may have found it here.  Whatever the case, Fooled By Randomness is guaranteed to give you a lot to think about.