'Fooled by Randomness', by Nassim Taleb

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This is Taleb’s earlier book, which I read later. It addresses many of the same themes as ‘The Black Swan’ – indeed, the Black Swan metaphor is used and explored in this book. The title is quite self-explanatory: in judging human success we are frequently fooled by random effects. In many walks of life, people can just get lucky and then are wrongly regarded as being made of superior stuff. This is particularly true of financial traders and fund managers, to which he devotes a lot of time.

He is eloquent about the social interactions between the apparently successful and the apparently unsuccessful. A trader in dangerous emerging market bonds snubs his neighbour, who also works in finance, but does not earn so much – until the trader loses everything in a sudden market crash.

This book is a good complement to ‘The Black Swan’, since it covers different ground. In essence you can say here he focuses on the random roulette wheel of life and how to avoid being fooled by it, whereas in the other book he focuses more on the extreme tails of the frequency distribution of life that is created by that roulette wheel.

I think he would have felt more at home in the Middle Ages, with their fixation on the wheel of fortune, though he greatly enjoys laughing at and being enraged by the absurdities of modern life.

The unfolding appalling events in finance and the real economy make him an important prophet of wisdom. He wrote these books before the financial crisis, and is not just one of the cacophony of wise-after-the-event commentators now.