Named by Fortune ONE OF THE SMARTEST BOOKS OF ALL TIME FOOLED BY RANDOUNESS The Hidden Role of Chance in Life and in the Markets NASSIM NICHOLAS TALEB SECOND EDITION, UPDATED BY THE AUTHORAbout the author N assim Nicholas Taleb is the founder of Empirica Capital LLC, a crisis-hunting hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. Taleb received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine. He is the author of Dynamic Hedging: Managing Vanilla and Exotic Options (Wiley, 1997). FOOLED BY RANDOMNESS The Hidden Role of Chance in the Markets and in Life + NASSIM NICHOLAS TALEB TEXERE New York # LondonCONTENTS a Preface and Acknowledgments Chapter Summaries Prologue Mosques in the Clouds PART I: SoLon’s WARNE InpucTion ASYMMETRY, On If You're So Rich Why Aren’t You So Smart? Nero Tulip Hit by Lightning Temporary Sanity Modus Operandi No Work Ethics There Are Always Secrets John the High-Yield Trader ‘An Overpaid Hick xili xvii cir 11 uu 2 14 16 7 7 19