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Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Taleb

October 7, 2009

Taleb has the unique emotion of a savant whose prescient inspiration from having been both quant & academic has left him better than those ‘fooled’; if not in his own opinion as one of the first to call a bear market although he has not chosen to make a fortune at it. ‘Fooled’, a more substantial and better first ‘read’ over ‘The Black Swan’ and is sure to impress upon those who have errored in modeling finance. Both books present the case well that a ‘model’ is a model and that ‘boundary conditions’ once assumed, are the pratfall of finance. Taleb is often misrepresented as not favoring modeling or methods and that is not the case. Taleb suggests, to academics, appropiately, that assumed Dirichlet boundary conditions are often inappropiately selected and extramodal risk by definition is not in the model. Taleb is reinforcing a more critical assessment of financial modeling and ‘Fooled’ is worth a reading regardless of circularity or philosophic stance.