Fooled by Randomness by Nassim Nicholas Taleb Read Free Book Online

established in Table P.1 ).
    This free time has allowed him to carry on a variety of personal interests. As Nero reads voraciously and spends considerable time in the gym and museums, he cannot have a lawyer’s or a doctor’s schedule. Nero found the time to go back to the statistics department where he started his doctoral studies and finished the “harder science” doctorate in statistics, by rewriting his thesis in more concise terms. Nero now teaches, once a year, a half-semester seminar called
History of Probabilistic Thinking
in the mathematics department of New York University, a class of great originality that draws excellent graduate students. He has saved enough to be able to maintain his lifestyle in the future and has contingency plans perhaps to retire into writing popular essays of the scientific-literary variety, with themes revolving around probability and
indeterminism—
but only if some event in the future causes the markets to shut down. Nero believes that risk-conscious hard work and discipline can lead someone to achieve a comfortable life with a very high probability. Beyond that, it is all randomness: either by taking enormous (and unconscious) risks, or by being extraordinarily lucky. Mild success can be explainable by skills and labor. Wild success is attributable to variance.
    There Are Always Secrets
    Nero’s probabilistic introspection may have been helped out by a dramatic event in his life—one that he kept to himself. A penetrating observer might detect in Nero a measure of suspicious exuberance, an unnatural drive. For his life is not as crystalline as it may seem. Nero harbors a secret, one that will be discussed in time.
    JOHN THE HIGH-YIELD TRADER
    Through most of the 1990s, across the street from Nero’s house stood John’s—a much larger one. John was a high-yield trader, but he was not a trader in the style of Nero. A brief professional conversation with him would have revealed that he presented the intellectual depth and sharpness of mind of an aerobics instructor (though not the physique). A purblind man could have seen that John had been doing markedly better than Nero (or, at least, felt compelled to show it). He parked two top-of-the-line German cars in his driveway (his and hers), in addition to two convertibles (one of which was a collectible Ferrari), while Nero had been driving the same VW Cabriolet for almost a decade—and still does.
    The wives of John and Nero were acquaintances, of the health-club type, but Nero’s wife felt extremely uncomfortable in the company of John’s. She felt that the lady was not merely trying to impress her, but was treating her like someone inferior. While Nero had become inured to the sight of traders getting rich (and trying too hard to become sophisticated by turning into wine collectors and opera lovers), his wife had rarely encountered repressed new wealth—the type of people who have felt the sting of indigence at some point in their lives and want to get even by exhibiting their wares. The only dark side of being a trader, Nero often says, is the sight of money being showered on unprepared people who are suddenly taught that Vivaldi’s
Four Seasons
is “refined” music. But it was hard for his spouse to be exposed almost daily to the neighbor who kept boasting of the new decorator they just hired. John and his wife were not the least uncomfortable with the fact that their “library” came with the leather-bound books (her health club reading was limited to
People
magazine but her shelves included a selection of untouched books by dead American authors). She also kept discussing unpronounceable exotic locations where they would repair during their vacations without so much as knowing the smallest thing about the places—she would have been hard put to explain on which continent the Seychelles Islands are located. Nero’s wife is all too human; although she kept telling herself that she did not want to be in the shoes of