Quotes from book

Fooled by Randomness

“We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract.”

“Wittgenstein's ruler: "Unless you have confidence in the ruler's reliability, if you use a ruler to measure a table you may also be using the table to measure the ruler."”

“Mild success can be explainable by skills and labor. Wild success is attributable to variance.”

“A mistake is not something to be determined after the fact, but in the light of the information until that point.”

“I always remind myself that what one observes is at best a combination of variance and returns, not just returns.”

“I try to make money infrequently, as infrequently as possible simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price.”

“Unlike a well-defined, precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality.”

“[E]conomists are evaluated on how intelligent they sound, not on a scientific measure of their knowledge of reality.”

“The more data we have, the more likely we are to drown in it.”

“Probability is not about the odds, but about the belief in the existence of an alternative outcome, cause, or motive.”

“It does not matter how frequently something succeeds if failure is too costly to bear.”

“At no point during his ordeal did Nero think of himself as 72% alive and 28% dead.”

“[E]conomics is a narrative discipline, and explanations are easy to fit retrospectively.”

“Trading forces someone to think hard; those who merely work hard generally lose their focus and intellectual energy. In addition, they end up drowning in randomness; work ethics draw people to focus on noise rather than the signal.”

“[In] economics… you can disguise charlatanism under the weight of equations and nobody can catch you since there is no such thing as a controlled experiment. Now the spirit of such methods, called scientism by its detractors, continued into the discipline of finance as a few technicians thought their mathematical knowledge could lead them to understand markets. The practice of financial engineering came along with massive doses of pseudoscience.”

“There is a saying that bad traders divorce their spouse sooner than abandon their positions. Loyalty to ideas is not a good thing for traders, scientists - or anyone.”

“Delivering advice assumes that our cognitive apparatus rather than our emotional machinery exerts some meaningful control over our actions.”