Taleb – Fooled by Randomness

Meine Unterstreichungen:

My motto is „my principal activity is to tease those who take themselves and the quality of their knowledge too seriously.“ (S. ix)

Casually, the quality of the discussions correlates inversely with the luxury of the studios. (S. xvi)

Probability theory is a young arrival in mathematics; probability applied to practice is almost nonexistent as a discipline. (S. xli)

In my experience (and in the scientific literature), economic “risk takers” are rather the victims of delusions (leading to overoptimism and overconfidence with their underestimation of possible adverse outcomes) than the opposite. Their “risk taking” is frequently randomness foolishness. (S. xli)

We are flawed beyond repair, at least for this environment – but it is only bad news for those utopians who believe in an idealistic humankind. (S. xliv)

Delivering advice assumes that our cognitive apparatus rather than our emotional machinery exerts some meaningful control over our actions. (S. xlv)

Arguably, in expectation, a dentist is considerably richer than the roch musician who is driven in a pink Rolls Royce, the speculator who bids up the price of impressionist paintings, or the entrepreneur who collects privat jets. For one cannot consider a profession without talking into account the average of people who enter it, not the sample of those who have succeeded in it. (S. 20f)

For most people, probability is about what may happen in the future, not events in the observed past; an event that has already taken place has 100% probability, i.e. certainty. (S. 21)

… the public observes the external signs of wealth without even having a glimpse at the source… (S. 23)

… Both risk detection and risk avoidance are not meditated in the “thinking” part of the brain but largely in the emotional one (the “risk as feelings” theory) The consequences are not trivial: It means that rational thinking has little, very little, to do with risk avoidance. Much of what rational thinking seems to do is rationalize one’s actions by fitting some logic to them. (S. 38)

From the standpoint of an institution, the existence of a risk manager has less to do with actual risk reduction that it has to do with the impression of risk reduction. (S. 41)

I need people to remain fools of randomness, but not all of them. (S. 42)

Age is beauty, almost always, and the new and the young are generally toxic. (S. 43)

Mathematics is principally a tool to meditate, rather than to compute. (S. 44)

People’s understanding of probability does not translate into their behavior. (S. 49)

Our minds are not quite designed to understand how the world works, but, rather, to get out of trouble rapidly and have progeny. (S. 56)

A mistake is not something to be determined after the fact, but in the light of the information until that point. (S. 56)

To be competent, a journalist should view matters like a historian, and play down the value of the information he is providing, such as by saying: “Today the market went up, but this information is not too relevant as it emanates mostly from noise. (S. 58)

… when in doubt … systematically reject the new idea, information, or method. (S. 59)

The opportunity cost of missing a “new new thing” like the airplane and the automobile is minuscule compared to the toxicity of all the garbage one has to go through to get these jewels (assuming these have brought some improvements to our lives, which I frequently doubt). (S. 59f)

If an event is important enough, it will find its way to my ears. (S. 67)

A trader’s mental construction should direct him to do precisely what other people do not do. (S. 85)

And, at any point in time, the richest traders are often the worst traders. This, I will call the cross-sectional problem: At a given time in the market, the most successful traders are likely to be those that are best fit to the latest cycle. (S. 86)

John had earned for the employers, New York investment banks, around $250 million in the course of the seven years. He lost more than $600 million for his last employer in barely a few days. (S. 90)

Robert Lucas dealt a blow to econometrics by arguing that if people were rational then their rationality would cause them to figure out predictable patterns from the past and adapt, so that past information would be completely useless for predicting the future. (S. 114)

If rational traders detect a pattern of stocks rising on Mondays, then, immediately such a pattern becomes detectable, it would be ironed out by people buying on Friday in anticipation of such an effect. (S. 114)

Popper believed that any idea of Utopia is necessarily closed owing to the fact that it chokes its own refutations. The simple notion of a good model for society cannot be left open for falsification is totalitarian. (S. 128f)

Optimism, it is said, is predictive of success. Predictive? It can also be predictive of failure. Optimistic people certainly take more risks. (S. 148)

a population entirely composed of bad managers will produce a small amount of great track records. (S. 154)

We can see here that volatility actually helps bad investment decisions. (S. 154)

I will get to see only the best of the managers, not all of them. (S. 154)

A result is that in real life, the larger the deviation from the norm, the larger the probability of it coming from luck rather than skills: Consider that even if one has 55% probability of head, the odds of ten wins is still very small. (S. 155)

I can create a conspiracy theory by downloading hundreds of paintings from an artist or group of artists and finding a constant among all those paintings (among the hundreds of thousand of traits). I would then concoct a conspiratorial theory around a secret message shared by these paintings. This is seemingly what the author of the bestselling The Da Vinci Code did. (S. 161)

The problem is that a finding of absence and an absence of findings get mixed together. There may be great information in the fact that nothing took place. (S. 171, vgl. Sherlock Holmes, The Silver Blaze: The dog that did not bark.)

Chaos theory concerns itself primarily with functions in which a small input can lead to a disproportionate response. (S. 173)

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. (S. 179)

[Herbert Simon’s] idea is that if we were to optimize every step in life, then it would cost us an infinite amount of time and energy. (S. 187)

Normative economics is like religion without the aesthetics. (S. 189)

Mathematicians tend to make egregious mathematical mistakes outside of their theoretical habitat. (S. 195)

Unless the source of the statement has extremely high qualifications, the statement will be more revealing of the author than the information intended by him. (S. 223)

One of the most irritating conversations I’ve had with people who lecture me on how I should behave. Most of us know pretty much how we should behave. It is the execution that is the problem, not the absence of knowledge. (S. 232)

We need tricks to get us there but before that we need to accept the fact that we are mere animals in need of lower forms of tricks, not lectures. (S. 232f)

Carneades was not merely a skeptic; he was a dialectician, someone who never committed himself to any of the premises from which he argued, or to any of the conclusions he drew from them. (S. 236)

My lesson from Soros is to start every meting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it. (S. 243)

Empfehlenswert für alle, die eine Erklärung brauchen, warum sie sich vom Zufall täuschen lassen. Für alle die ihre Täuschungen behalten wollen, da der Abgrund zu tief ist, ist es nichts.

Vermutlich ist Antifragile das bessere Buch von Taleb.

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