Fooled By Randomness: The Hidden Role of Chance in Life and in the Markets

The distinction between luck and skill is a central theme in the book, one which Taleb points out has gotten little attention from scientists. The distinction tends to be either overlooked or entirely misunderstood. Among scientists, this is because factoring uncertainty into prediction models is notoriously difficult. However, the distinction is often misconstrued by ordinary people as well, particularly those who experience great success. Taleb explains that “Mild success can be explainable by skills and labor. Wild success is attributable to variance” (44-45). Those who experience these wild successes are not aware of the way luck and randomness exert influence. This is due to the attribution bias, which Taleb describes as the way people tend to attribute failures to bad luck and success to skill.

Mistaking luck for skill has wide-reaching repercussions. Taleb points out that “that which came with the help of luck could be taken away by luck (and often rapidly and unexpectedly at that). The flipside […] is that things that come with little help from luck are more resistant to randomness” (35). The attribution bias blinds successful traders to the fact that their success is thanks to luck as much or more than skill, which makes their failure more likely.