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22 Jan 2007, 08:06
Kudos
Bookmarks
The next couple of months will be my last chance to read as much as I'd like, so I'd like to hear if you have any recommendations.
What is your favorite book? (does not have to be business realted
)
What is your favorite book? (does not have to be business realted
) 
22 Jan 2007, 08:27
Kudos
Bookmarks
"Fooled By Randomness" by Nassim Nicholas Taleb. Totally changed the way I think about everything.
Here's an example (I haven't read the book in a while so I forget the exact numbers and the exact way its presented in the book, but bear with me):
Some people look at successful traders (or any sort of successful person) and assume that that person is really good at what they do. Imagine you have 100,000 people, and every year on Jan 1st they all play Russian Roulette with a gun with six chambers, and one bullet. Every year a certain number of people will die. After 30 years, there won't be many left, maybe around 500 people from the original 100,000. Are these people really good at playing Russian Roulette? Or are they lucky? Similarly, is a successful trader really good at what he does? Or is he lucky?
Another thing discussed in the book is a study where they asked a hundred people in an airport if they would be interested in buying insurance for ten dollars. That insurance would cover absolutely anything that would go wrong on the person's vacation whether their baggage was lost, or they were killed or dismembered. People weren't very interested in this all-inclusive insurance that would cover absolutely anything. Another group of a hundred people at the airport were asked if they would be interested in insurance that would cover them only for anything that went wrong that was related to a terrorist activity. And people were very interested in this insurance. So the book goes into some discussion about the way people's perceptions of risk are totally flawed. Some really interesting stuff.
Here's an example (I haven't read the book in a while so I forget the exact numbers and the exact way its presented in the book, but bear with me):
Some people look at successful traders (or any sort of successful person) and assume that that person is really good at what they do. Imagine you have 100,000 people, and every year on Jan 1st they all play Russian Roulette with a gun with six chambers, and one bullet. Every year a certain number of people will die. After 30 years, there won't be many left, maybe around 500 people from the original 100,000. Are these people really good at playing Russian Roulette? Or are they lucky? Similarly, is a successful trader really good at what he does? Or is he lucky?
Another thing discussed in the book is a study where they asked a hundred people in an airport if they would be interested in buying insurance for ten dollars. That insurance would cover absolutely anything that would go wrong on the person's vacation whether their baggage was lost, or they were killed or dismembered. People weren't very interested in this all-inclusive insurance that would cover absolutely anything. Another group of a hundred people at the airport were asked if they would be interested in insurance that would cover them only for anything that went wrong that was related to a terrorist activity. And people were very interested in this insurance. So the book goes into some discussion about the way people's perceptions of risk are totally flawed. Some really interesting stuff.
