Fooled by Randomness - Nassim Taleb

• It is as simple as that: Past events will always look less random than they were (it is called the hindsight bias) I would listen to somehone's discussion of his own past realizing that much of what he was saying was just backfit explanations concocted ex post by his delutet mind.
• Probability is not a mere cmoputation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance. Outside of textbooks and casinos, probability almost never presents itself as a mathematical problem or a brain teaser.
• I spend all my career attacking the quantitative use of propability
• Let me make it clear here: Of course chance favors the prepared! Hard work, showing up on time, wearing a clean (preferably white) shirt, using deodorant, and some such conventional things contribute to success - they are certainly necessary but may be insufficient as they do not cause success. The same applies to the conventional values of persistence, doggedness and perseverance: necessary, very necessary. One needs to go out and buy a lottery ticket in order to win. Does it mean that the work involved in the trip to the store caused the winning? Of course skills count, but they do count less in highly random environments than they do in dentistry.
• That all millionaires were persistent, hardworking people does not make persistent hard workers become millionaires: Plenty of unsuccessful entrepreneurs were persistent, hardworking people.
• Clearly risk taking is necessary for large success - but it is also neccessary for failure. Had the author done the same study on bankrupt citizens he would certainly have found a predilection for risk taking.
• It is a mistake to use, as journalists and some economists do, statistics without logic, but the reverse does not hold: It is not a mistake to use logic without statistics.
• Most journalists do not take things too seriously: After all, this business of journalism is about pure entertainment, not a search for truth, aprticularly when it comes to radio and television.
• Regrettably, some people play the game too seriously, they are paid to read too much into things. All my life I have suffered the conflict between my love of literature and poetry and my profound allergy to most teachers of literature and "critics". Te French thinker and poet Paul Valery was surprised to listen to a commentary of his poem that found meanings that had until then escaped him (of course, it was pointed out to him that these were intended by his subconscious)
• Probability theory is a young arrival in mathematics; probability applied to practice is almost nonexistent as a discipline.
• Needless to say that the ideas of this book fall sqwuarely into the Tragic category: We are faulty and there is no need to bother trying to correct our flaws. We are so defective and so mismatched to our environment that we can just work around these flaws.
• Work ethics draw people to focus on noise rather than the signal
• He is extremely rich on the average of lives he could have led - he takes so little risk. [...] He protects himself from the rare event. [...] Arguably, in expectation, a dentist is considerably richter than the rock musician who is driven in a pink Rolls Royce [...] For one cannot consider a professino without taking into account the average of the people who enter it, not the sample of those who have succeeded in it.
• An event that has already taken place has 100% probability, i.e. certainty
• When you look at the past, the past always be deterministic, since only single observation took place. [...] While we know that history flows forward, it is difficult to realize that we envision it backward.[...] Those, who are very good at predicting the past will think of themselvey as good at predicting the future.
• If there is anything better than noise in the mass of "urgent" news pounding us, it would be like a needle in a haystack. People do not realize that the media is paid to get your attention. For a journalist, silence rarely surpasses any word.
• It takes a huge investment in introspection to learn that the thirty or more hours spend "studying" the news last month neither had any predictive ability during your activities of that month, neither had any predictive ability during your activities of that month nor did it impact your current knowledge of the world.
• Over one year we observe roughly 0.7 parts noise for every one part performance. Over one month 2,32 for 1, one hour 30 to 1, one second 1796 to 1. [...] I deal with it by having no access to information. [...] If an event is important enough, it will fnid its way to my ears. [...] Why I prefer not to read the newspaper.
• Finally, this explains why people who look too closely at randonmness burn out, their emotions drained by the series of pangs they experience. [...] negative effect for an average loss (then mostly by noise) to be up to 2.5 the magnitude of a positive one (also here from noise))
• Let us remember that economists are evaluated on how intelligent they sound, not on a scientific measure of their knowledge of reality.
• Investors and businesses are not paif in probabilities, they are paid in dollars. Accordingly, it is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration.
• The best description of my lifelong business in the market is "skewed bets", that is, I try to benefit from rare events that do not tend to repeat themselves frequently, but, accordingly, present a large payoff when they occur. I try to make money infrequently, as infrequently as possible, simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price. In addition to my own empiricism, I think that the counterintuitive aspect of the trade (and the fact that our emotional wiring does not accomodate it) gives me some form of advantage.
• The agent would prefer the number of losses to be low and the number of gains to be high, rather than optimizing the total performance.
• No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.
• There is a severe aspect of naive empiricism. I can use data to disprove a proposition, never to prove one. I can use history to refute a conjecture, never to affirm it.
• The Astologist can always find a reason to fit the past event, by saying that Mars was probably in line but not too much so.
• In other words those that have failed do not show up in the sample. (...) By living on Park Avenue, one does not have exposure to the losers, one only sees the winners.
• The social treadmill effect: You get rich, move to rich neighborhoods, then become poor again. To that add the psychological treadmill effect, you get used to wealth and revert to a set point of satisfaction. This problem of some people never really getting to feel satisfied by wealth.
• Real randomness does not look random
• You may study for a year and learn nothing, then, unless you are disheartened by the empty results and give up, something will come to you in a flash. (...) Those who go the extra mile are rewarded.(...) Most people give up before the reward.
• Better to be loved by a dozen than liked by the hundreds.
• Recall that the accomplishment from which I derive the most pride is my weaning myself from television and the news media.
•  The so-called attribution bias. You attribute your successes to skills, but your failures to randomness.
• The findings that 80 to 90% of people think that they are above the average in many things.
• How to behave:
• Dress at your best
• Leave a good impression
• Try not to blame others for your fate
• Never exhibit any self-pity
• Do not complain
• The only article Lady Fortuna has no control over is your behavior

Epicurus

“Self-sufficiency,” wrote Epicurus, “is the greatest of all wealth.” Epictetus added that “wealth consists not in having great possessions, but in having few wants.”