 Very valuable insights. Very poor writing., 2010-05-01
This is a book on people's tendency to not recognise random events as such. We seem to have a natural urge to look for meaning and/or intention in events and actions that have neither. For instance, you have probably heard a story or two about a mother worrying about her child and hearing shortly afterwards that he'd had an accident. In a case like that, she and many of her friends would be convinced that it was some supernatural precognition. They conveniently forget the well-known fact that mothers are constantly worried about something bad happening to their children, and in 999 cases out of 1000 nothing happens. Illogical as it is, people often attribute more meaning to that 1 occasion than to the remaining 999. Or stuff like someone praying that a hopelessly ill person be cured, and he is cured. That must be divine intervention, right? It can't just have happened at random, right? A mathematician will shake his head in astonishment because he knows perfectly well how things like that can happen at random, but the general public tends to have a tough time realising that.
In this book, Mr. Taleb discusses this subject at length. The author is a successful stock market trader. He says in the introduction that this book is not about stock markets, but actually most of his practical examples are. One of the main themes of the book is the fact that many (not all, as the author stresses) successful investors are actually lucky fools. That is, if you let a big enough number of clueless investors loose on the market, a certain number of them are statistically bound to be successful over a certain period of time, just like occasionally the roulette wheel would turn out ten reds in a row. (Or as Laurence J. Peter has said: "Make three correct guesses consecutively and you will establish a reputation as an expert.") But those lucky investors tend to not see that they have just been lucky, and their luck might turn any moment. Instead, they start to believe that they understand the markets and are using good methods, and it's easy for them to convince other people that that is the case - after all, they have an impressive track record to show. And everyone will be so amazed when their luck finally runs out and they go bankrupt.
A year or two ago, I started to read "The Black Swan" by the same author but never finished it because it was so terribly depressing. In a nutshell, Mr. Taleb's message is that you have no chance of having control of your life - sooner or later something horrible will happen to you. So you can imagine that I was highly skeptical of Mr. Taleb. That's why I spent quite some time at the bookshop reading this book before I bought it. I saw that it had the same gloomy attitude, but I hoped that the valuable insights which were undeniably there would outweigh Mr. Taleb's negativism.
Just as "The Black Swan", this book is so incredibly pessimistic. In the beginning, Mr. Taleb tells an Ancient Greek story about a wealthy, powerful and happy king whom the wise man Solon warned how everything that he had achieved might just disappear some day. And it's almost sickening to see Mr. Taleb so fascinated with that philosophy of hopelessness. On p 56, he actually admits that he is obsessed with Solon's warning. That's precisely what he is, obsessed. The very purpose of this book seems to be to hammer it into you head never to truly enjoy anything. Always keep in mind that a horrible disaster might ruin your life any moment. Not only that - sooner or later it actually will. Do you know who invented the saying "Should you ever feel truly happy, be patient. This will pass"? After reading this book, I have an idea who it might have been.
My other major complaint is that Mr. Taleb really is an awful writer. His writing is very unclear. He routinely begins chapters and subchapters with a page or two of irrelevant, largely impenetrable blabber, and then eventually reveals what he was trying to say. The book's back sleeve quotes a (obviously professional) reviewer's opinion: "an iconoclastic tour de force". Let me assure you that a large percentage of this book's content is precisely that - a sequence of sophisticated-looking phrases without any meaning I could detect. The chapters have titles and there are occasional references to other chapters which would suggest that the author had some idea as to the book's structure. Unfortunately, the book is chaotic. Just read p 236, a near-perfect example of absolute nonsense. On the cover, they quote someone else's opinion: "one of the smartest book of all time." The person who wrote that is obviously not smart. Incomprehensible and smart are not the same thing.
I laughed out loud when I read Mr. Taleb claim to have an "allergy to nonsense and verbiage" (p 75). What do you say to a 200-kg man who says he likes to keep himself physically fit? By the way, just read the paragraph that follows that quote. Do you have any idea what that incoherent gibberish could possibly mean?
One good example of Mr. Taleb's awful style is the part where he tells how one can gain better understanding of certain processes by simulating them on a computer a large number of times to see what kinds of results might turn up. (I guess it starts on p 43 but I'm not sure. Short bits of relevant text begin to show up around p 48.) It is indeed a great research method which I have used myself. But it's amazing how Mr. Taleb manages to make this simple thing so complicated. I kept wading my way through several pages of seemingly random meditations about everything and nothing. Then he finally revealed what it was all about (that computer simulation thing which Mr. Taleb calls "Monte Carlo toy"), and I was like: oh, that's what you're talking about; why did you have to beat around the bush for so long?
In this connection, I'd like to quote an amusing style example of Mr. Taleb: "My Monte Carlo toy taught me to favor [---] thinking based on information around us that is stripped of meaningless but diverting clutter". It's unbelievable to see such platitude served with such pomp. He needs computer software to get the idea of basing his thinking on relevant information instead of meaningless clutter?? I'm speechless.
Not only is Mr. Taleb strikingly incapable of writing clearly. He's also very, very, very, very arrogant. Honestly, I wouldn't be surprised to find Mr. Taleb insisting that his feces smell good.
Now, I am quite an arrogant person myself, and arrogance by itself isn't bad. But the thing is: if you're arrogant, you have to make damn sure you're right. To a writer who is modest, I can forgive an occasional mistake. To a writer who writes interestingly, I can forgive even more. But if you're as arrogant as Mr. Taleb, and your style is as tedious as Mr. Taleb's, then you can't afford to make such elementary mistakes as misspell the name of Mongolian currency (p 37), or (repeatedly) the name of Robert Nozick (e.g. p 106) whom you claim to be a sort of a role model to you. You're just making yourself a laughingstock.
Apart from such ridiculous, easy-to-avoid mistakes, Mr. Taleb occasionally expresses very stupid opinions. I'll give you just one example (from p 52): "It is a platitude that children learn only from their own mistakes; they will cease to touch a burning stove only when they are themselves burned; no possible warning by others can lead to developing the smallest form of cautiousness." Note the word "only". Note the words "no possible". Note the word "smallest". He doesn't say that children often fail to learn from other people's mistakes. He states very clearly that no child in the world ever learns anything from anybody else's mistakes even once.
It should be plain obvious to anyone with brains that that "platitude" is not only not a platitude, it's far from being right. An example that came to my mind the moment I read it was something that happened when I was 7 or 8 years old. (That's still a child, isn't it?) Our teacher told us that when it's extremely cold outside, some bad children sometimes like to play this joke on others: they claim that a metal object, for instance a door handle, tastes sweet, and invite the other child to taste it himself. The teacher warned us never to do that because at such a low temperature, the tongue will stick to the metal object and you can't get it loose except by tearing the skin.
Now, did I believe that warning? Of course I did. I never felt the temptation to try it out. "No possible warning can lead to the smallest form of cautiousness"?? That is so retarded. If a man says something so obviously wrong, how can you ever take anything he says seriously? Of course people, including children, learn a lot from other people's mistakes. Like, when I was a child, I saw on TV what happened to a car when it collided with a train, and I never felt the wish to get in front of a moving train myself. I have burned myself touching a hot stove all right, but it was because I was careless, not because I wouldn't believe that the stove would be hot.
The book contains some more amazingly stupid stuff, but there is one thing that saves Mr. Taleb from much of the possible ridicule. He writes in such a chaotic manner and his definitions are so vague that often you won't be able to recognise what it is that he's bashing with such vigour.
Now, I can imagine you wondering why I've given the book 4 stars. Well, that's because, awfully written as it is, the book contains some incredibly valuable insights.
Firstly, in that plentitude of nonsense and verbiage, there are some phrases that are just brilliantly hilarious. Examples:
"Carlos supposedly comes from a patrician Latin America family that was heavily impoverished by the economic troubles of the 1980s, but again, I have rarely run into anyone from a ravaged country whose family did not at some juncture own an entire province or, say, supply the Russian czar with sets of dominoes."
"Let us remember that economists are evaluated on how intelligent they sound, not on a scientific measure of their knowledge of reality."
"An optimizer, by comparison, is the kind of person who will uproot himself and change his official residence just to reduce his tax bill by a few percentage points. (You would think that the entire point of a higher income is to be free to choose where to live; in fact it seems, for these people, wealth causes them to increase their dependence!)"
Secondly, just before reading this book, I had grown increasingly reluctant to spend time on stock markets (learning about them as well as actual trading), to the point that I just submitted trailing stop orders for all my open positions and left them to their own devices for months. I couldn't understand what was wrong with me. This book explained (on pp 64-68) exactly what the matter was. I am now active on the stock market again and am doing my best to avoid that motivation killer.
Thirdly, Mr. Taleb gave me an idea to a trading strategy which looks very promising. My research of historical data suggests that the strategy might be profitable, and I am currently testing it with a part of my capital. (I just want to make it clear to you that the strategy is not in the book - I invented it myself using ideas from this book. Mr. Taleb does not reveal anything about his own trading strategy. He just keeps telling how he is one of the very few smart guys inamidst this ocean of fools, and I have no way of telling if that new strategy of mine has anything in common with his. Strictly speaking, it's not even a strategy. It's a way of creating strategies, or you could even say a different way of looking at the market. It's an inspiration I got out of this book and that's why I'm happy that I read it. But there is obviously no guarantee that you'll be able to achieve the same.)
Thanks to the valuable ideas in this book, I actually began to re-read "The Black Swan". So far, it seems somewhat less chaotic than this book, although just as pessimistic.
So, to sum up:
The good thing about this book is that it might give you some very valuable (as well as profitable) ideas.
The bad thing about this book is that it's awfully depressing and boring at times. In fact, I only kept reading because I was on an overseas trip with nothing better to read. At home, I probably would have quit long before page 100. I'm glad I didn't because the nuggets of gold were worth wading through all that mud.
 Nice one, 2010-06-29
Really good book. Can definetely recommend it for anyone having the slightest interest in markets, and the random events that rule our life.
Entertaining and interesting, 2010-07-07
As the message goes, we, as humans, underestimates rare events with catastrophic consequenses. Even if we are intellectually aware of such events, we may not react emotionally and be motivated to take the necessary precautions. An ignorant trader can be very successful, accumulating great prosperity and get standing as a financial genius (by taking high risks without knowing the risks) until one day he runs out of luck and lose everything. It seems that the author considers most traders (and MBA's) as overblown egos with small brains. I agree with some critics that the author appears arrogent, but at the same time I can connect with his frustrations with many people he has met during his long career. I enjoyed this book because I had a curious interest in the subject matter before reading, the anecdotes (I admit, often read with some glee), I like to read first hand experiences and because of the amusing way many of the thoughts were presented (though nothing was very unexpected or not treated in literature before). Avoid this book if you are looking for background material for a master thesis, a step by step guide to trading or want something really serious and objective.
Good read for current times, 2010-07-26
A very interesting read. Not just in today's economic climate! It is the perfect counter-point to the other "get-rich-quick just like me" books, which are flooding the book market with their own systems, investment guidance. This takes a step back & takes a clear look at the impact of random luck in our lives & financial markets; and the difficulties we have in trying to understand this in daily life without stopping our brain from taking automatic short-cuts (e.g. through cause-and-effect). These brain short-cuts have kept us alive for the last couple of thousand years but are now sometimes out-dated in current times. I struggled with some of the meandering & disjointed paragraphs which is the style of the author, but still a good read.
 Promises much but ends flatly, 2010-09-03
In short, this book started brilliantly, opening up a different viewpoint of the investment world and investment methods. However, the author never offers constructive answers to the questions and flaws he sees about him. As I came to the end of the book my initial admiration for the author ebbed away as it became apparent this is simply a diatribe against the investment industry, to which he takes an aloof and distainful view, but provides no tangible solutions of his own.
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