Fooled By Randomness

Fooled By Randomness explores the importance of random events in life and society. On the outset, the author states that he wanted this book to be fun to write, and tried to avoid too many citations. He does cite some literature, but more often he helps provide alternate explanations for results. For example, many studies have tried to tease out what makes successful businessmen. Intelligence is not seen as super important. However, the propensity to take risks does stand out. However, if you looked at bankrupt businessmen, you may see similar results, likely with an even higher "risk taker" rating. The highly successful may appear to be average because they are. They just happened to get lucky. The finance world tends to revere the young, successful traders. However, finding the next "big shot" is essentially a crap-shoot. One person may take risks and get lucky. However, many others will not have the same luck. An older trader is probably your best bet, because they have managed to survive for a long time without imploding.
It is very hard for us to separate out the "random luck" from "skill". Today CEOs get paid enormous salaries to lead companies. However, do they really bring anything to the table? It is difficult to precisely quantify the value that they add. It could be that they just happen to be charismatic and happened to be heading a well-run company. Lower level individual contributors tend to produce results that are much more easily quantified. But as you move up the management chain, randomness plays a larger and larger roll. Even companies as a whole benefit enormously from randomness. Microsoft became a mega software company because IBM used DOS and IBM's architecture became the dominant in the industry. A lot of dice rolls went their way and resulted in a mega company. How much of Bill Gates' fortune is due to luck and how much due to skill? His net worth may be a million times that of some contemporary programmers with equivalent talents. (This also brings in to place network and building effects. Due to "randomness", early success may lead to greater future opportunities that can help develop different skills in the future.)
Even when we know the role of randomness, we are still likely to "fall for it." This can sometimes result in self-defeating behavior, as the mental benefit from a gain less than the harm from a similar loss. It takes skill to avoid "distractions" of randomness and live our lives in the best way possible.