Monday, December 15, 2008

Fooled By Randomness: Chapters 4 and 5

The following summary was written by Frank Voisin, who regularly writes for Frankly Speaking. Recently, Frank sold four restaurants and returned to school to complete a combined LLB/MBA.

Chapter Four: Randomness, Nonsense, and the Scientific Intellectual
Simulators can create beautiful things that appeal to our senses (e.g. abstract artwork and poetry). Why is this important? What motivates us in some things (e.g. poetry) is not rational and scientific.

Conclusion: We do not need to be rational and scientific in all things - only in those that can harm us and threaten our survival. Taleb says that modern life invites us to do the opposite: become realistic and intellectual when it comes to matters such as religion and personal behaviour, yet irrational when it comes to markets and matters ruled by randomness.

Chapter Five: Survival of the Least Fit - Can Evolution be Fooled by Randomness?
In this chapter, Taleb discusses the characteristics that make someone a fool to randomness:

  1. An overestimation of the accuracy of their beliefs
  2. A tendency to get married to positions. Loyalty to ideas is not a good thing!
  3. The tendency to change their story.
  4. No precise game plan ahead of time as to what to do in negative events.
  5. Absence of critical thinking.
  6. Denial.

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