Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb

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The Essence

Nassim Nicholas Taleb aims to change our preconceived notions of what chance is and how it is more widespread in each of our lives then we care to realize. We are predisposed to be fooled by the randomness of events, and our emotional coloring of events is what the basis of most, if not all, our decision are made. Mathematical models and empirically identified psychological bias are evidence for our innate disregard for the uncertainty that surrounds our every decision. Knowledge of the unavoidable force that is randomness will improve our abilities to identify what breeds success and what is just plain old luck. Fooled by Randomness defends science and attacks the scientist— mostly in economists—who use snail-oil to justify claims used to predict future outcomes.

Fooled by Randomness Summary Journal Entry:

This is my book summary of Fooled by Randomness by Nassim Nicholas Taleb. My notes are a reflection of the journal write up above. Written informally, the notes contain a mesh of quotes and my own thoughts on the book. The Journal write up also includes important messages and crucial passages from the book.

• The observation of numerous misfortunes that attend all condition forbids us to grow insolent upon our present enjoyments or to admire a man’s happiness that may yet, in the course of time, suffer change. For uncertain future has yet to come, with all variety of future; and him only to whom the divinity has [guaranteed] continued happiness until the end we may call happy” -Solon
• A Black Swan is a rare event.
• We are not wired to understand probability
• Asymmetry in knowledge: You would assume that the more information you have the more confident you are about the outcome. However, as we acquire more information, we become no better a predictor of events; there are information thresholds and plateaus when predicting future outcomes.
• Sensationalism can divert empathy towards all the wrong causes: MEDIA
• Media’s primary purpose is to steal our time and attention and nothing better excites us then emotionally backed assertions rhetoric.
• Media is full of noise. We can drown out our exposure by avoiding news media at all cost. By selectively exposing ourselves to only information that does not attempt to blatantly play at our emotions, we become less susceptible to manipulation via sensationalism.
• Mathematics does not compute information to the extent that it is valued. We need to remember that math is only a tool to meditate and provides no absolute certainty.
• Abstraction confuses us. We are highly aversive to ensuring against things that are not obvious. Risks that capture our attention are the ones that are vivid.
• The misinterpretation of a mistake: Mistakes are NOT to be made in hindsight. Rather, what is to be considered a mistake in to be determined based on the information gathered up until the event.
• Ergodicity: over the long term, paths that may not look so similar end up reverting their long-term Meaning that under certain circumstance, long samples of information end in fairly similar conclusions.
• We are unable to learn from our own reaction to past events. We identify past experiences and emotional reactions to events but choose to ignore the clues that give us insight into changing actions for the future. For instance, understanding the type of person that pesters you but continuing to seek those type of people out.
• A theory cannot be verified (only provisionally accepted).
• “There are routes to success that are nonrandom, but few, people have the mental stamina to follow them. Those who go the extra mile are rewarded.”
• We Favor: the visible, embedded, personal, narrated, and tangible. But we scorn the abstract.
• In science, it is disastrous to avoid contradictions; nature is not as consistent as our models would assume. Nevertheless, cultural has made self-contradiction shameful. What is to come of empirical work if alternative science becomes more attractive due to its consistencies?
• Luck is most frequently the reason for extreme success.
• The emotional systems that rule our decision-making function only under models of linear causality.
• Survivorship Bias: Arise due to our inclination to notice only the winners and get a distorted view of the odds. Said another way, we are biased to undervalue the importance of randomness.
• Monkeys on a typewriter: The impossible is only the improbable. While it is not likely a monkey placed in front of a typewriter will write a word for word copy of Homer’s Odyssey, it is not impossible.
• Overconfidence rules our perceptions. We tend to overvalue their knowledge and underestimate how often they are wrong.
• “Normative economics is like religion without the aesthetics”
• Today’s probabilistic errs are breed by the mental shortcuts we use to quickly make choices. These heuristic are very dangerous if left unattended.
• “Every man believes that he is quite different.”
• The social treadmill effect that Nassim Nicholas Taleb describes is similar to the idea of the expenditure cascade effect. As we begin to move up in socioeconomic status whom we compare ourselves to also changes. So as you continue up the income bracket there will always be someone new to make you feel poor again.
• “If I am going to be harmed by randomness, it better be of the beautiful kind.”
• Sand Pile effect: Nonlinear effect resulting from a linear force exerted on an object. This is one of my favorite models to think about progress. As I put in work on anything, it may seem to naturally lead to me getting better, but as we improve the effects of our actions become blurred and hence we fear we’ve entered a rut. I learned to have faith in my systems and to trust that while effects may not be initially clear, long-term growth is inevitable as long as I am consistent.
• Wealth does not make us happy. It is only the positive change in a given person wealth that brings This is especially true for gradual increases in wealth.
• If you have to choose between hiring a financial advisor and flipping a coin, choosing the latter will save you more money no matter the outcome.
• Mathematics is merely a way of thinking and meditating in a world of randomness
• When it comes to failures and successes. Not many people are willing to accept randomness in their successes. But will chalk up every lost to a misfortune outside of their control.
• Buridan’s Donkey: given two options, to eat or to drink water first. The donkey attempts to rationalize which would be more effective to do first. Weighing the options for too long, the donkey dies of starvation and thirst. The message here is that rational thought will not make your decisions, the emotional forces driving action that excite us to act. Without it, we may sit between choices deliberating the cost and benefits until it is too late.
• The cost of missing out on the next new thing like the new iPhone or Car is far too small when compared to the harmful effects of one has to go through to get the materials. This is the same with information. The benefits of staying ‘up-to-date’ does not outweigh the cost having to expose yourself to rubbish media.
• Karl Popper: Science is not to be taken as seriously as it sounds.
  • Karl states there are only two types of theories.
    1. Theories that are known wrong as they are tested and soundly rejected.
    2. Theories that have not yet been known to be wrong not yet falsified but are exposed to be proved wrong.
• “If people were rational, then their rationality would cause them to figure our predictable patterns from the past and adapt, so that past information would be completely useless for predicting the future.” –Robert Lucas
• Be Open. We need to have a critical open mind and alter our stances with minimal shame.
• Causality is easier to commit to memory. A pattern in our brains is easier to conceptualize then some numbers.
• “There is something philosophical about investing one’s pride and ego into ‘my house/library/car/ is bigger than that of others in my category’—it is downright foolish to claim to be first in one’s category all the while sitting on a time bomb.”

Reading Recommendations

If you liked what you saw. Here are 3 titles that I recommend based on what discussed in Fooled by Randomness.

1. Success and Luck: Good Fortune and the Myth of Meritocracy by Robert Frank.

2.The Drunkard's Walk: How Randomness Rules Our Lives by Leonard Mlodinow.

3.The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb.

Find the book on Amazon: Print | Audiobook

Check Out More 52 in 52 Challenge Summaries

Note: This page contains affiliate links. This means that if you decide to buy a product through them, I will receive a small commission. This has no additional cost to you. If you would like to support Forces of Habit, please use these links. If you do use them, thank you for the support.

Influence: The Psychology of Persuasion by Robert Cialdini

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The Essence

Written in 1984, Influence is a classic in the fields of marketing and sales that validates and categorizes the six key principles of human influence. Our lives are ruled by the automatic behavior patterns that govern human nature. With more information than ever available, our brains compartmentalize models of action that make up a majority of the conscious decisions we make. These mental shortcuts have been harnessed as ‘Weapons of Influence’ by compliance practitioners to exploit what science has discovered about persuasion. Cialdini isolates each of the ways we tend to be manipulated and educates and then educates us how we can harness and shield ourselves from unwarranted sway. The best defense is a good offense and Cialdini provides us with the weapons to start a war.

Influence Summary Journal Entry:

This is my book summary of Influence by Robert Cialdini. My notes are a reflection of the journal write up above. Written informally, the notes contain a mesh of quotes and my own thoughts on the book. The Journal write up also includes important messages and crucial passages from the book.

• We should not resist automatic behavior, it is fairly useful most of the time. But we ought to become mindful of the possibility that automatic behaviors have the ability to send us into set behaviors that manipulate our decision making.
• Organisms are driven by Automatic behavior patterns. This is just a technical way to say we are animals of habit. And in the hands of manipulators, habits can be isolated and dissected to send us on down a set course of action; we are at the mercy of our habits.
• By educating ourselves about the various form that influence can take, we can defend the ‘tricks of the trade’ that stimulate people to agree.

The Six Weapons of Influence

Reciprocation

• “If justice is to be done, exploitation attempts should be exploited.”
• The rules of reciprocation require that one try to repay what another has provided them; these rules run deep in our ancestral past. So we tend to feel obligated to repay those who provide us with something. This is a device for manipulating the compliance of others.
• Beware of the free sample! Free is never really free because still impacts of likelihood to reciprocate in the future.
  • Krishna benefactor-before-beggar strategy.
    By giving a flower before requesting a donation, the monks take advantage of the deeply rooted principle of reciprocation.
• The reality of internal discomfort and the possibility of external shame produce a heavy psychological cost
• Perceptual Contrast Principle: when you present stimuli one after another it can skew the proceeding choice. E.g. Price anchoring. If you give a consumer a high estimate price as for a product and then agree to ‘cut them a deal’ and do a lower price (the real price you are seeking), you increase the likelihood that your deal is positively perceived.

Commitment and Consistency

• Staying consistent with how we internally view ourselves is a central motivator for future behavior. Making a choice or taking a position creates an interpersonal and intrapersonal pressure to behave in alignment with the previously announced commitment. The pressures of hypocrisy cause us to become swayed by our earlier decisions.
• Foot in the door technique: Start with small requests and over time you’ll increase the likelihood of compliance for larger ones.
• Get it in writing: make people write something down to limit the dissonance between future behavior and what they have written
• Public commitments are commitments that last.
• The more you put in, the more it matters. As we put more effort into our commitments they become larger influencers on our attitudes.

Social Proof

• “Salt” the tip jar. By placing your own money in the tip jar initially it gives the impression that others are tipping and people will be more likely to tip due to social proof.
• “Truths are us”: one of the ways that we gauge what to believe is through an internal crowdsourcing. We look towards others for information as to what the majority of people believe is true, and then we have the tendency to accept this as truth.
• Embarrassment is a villain to be crushed.
• As the number of people who believe an idea is correct increases, the more the idea will become ‘correct’. Studies have been done that show that when a group of actors and one participant answer questions with one another, the subject will go along with the clearly wrong answer because a majority of the group members (actors) believe it to be true.
• Bystander effect: the legitimacy of an emergency can be based on the reaction of the surrounding audience. A woman was once stabbed in broad daylight while several people watched the crime. It is assumed that no one acted because no one else was acting. A distribution of concern across too many parties only breed inhibition.
• To prevent this try to isolate individual in a crowd when seeking assistance. Make it direct, assign the task. If you have a medical emergency in a crowd, it would not be in your best interests to assume help will come because of the number of people present. Instead, single someone out saying “Hey man with blue shirt and staring right at me, please call 911!”
• Social Proof influences us the most when we are observing people that we consider ‘just like us’.
• Influential leaders take advantage of social proof be arranging group conditions to maximize sway in their favor.
• We must become vigilant of information that is clearly attempting to sway our decision making using social agreement as a justification. For example, paying taxes because ‘70% of people in your neighborhood pay taxes’ is a ploy on your inclination to move with the crowd.

Liking

• People prefer to say yes to the requests of people they know and like.
• “We are phenomenal suckers for flattery.”
• The Halo effect: a single positive characteristic becomes the primary justification for how a person is then perceived by others.
• How we choose who we like is decided by several factors, can be boiled down to three things.
  • Similarities to ourselves.
  • Attractiveness.
  • Status.
• A way to manipulate how you are perceived is to emphasize the number of similarities between one another. ‘Wow, I like breathing too! We have so much in common’.
• How many times we have been exposed to something in the past has an impact on our attitudes towards it in the future. For instance, politician tends to send as many as five letters introducing themselves to the consistent. So when Election Day comes around, it's like we already know him; Familiarity breeds compliance.
• The Principle of association: Our feelings on a given matter are guided by the things that we associate with that subject. For example, a news story goes viral about how you saved a kitten from a tree. Now those who have seen this story can associate you with good things (like saving kittens). While they know absolutely nothing about you, they use the information they have to associate with you to create broader assumptions about your personality and character.
• People will try to sway us by making us team players. By establishing a connection that we are working towards a common goal for our mutual benefit, influencers play at our inclination towards agreeing with people who are ‘on our side’.
  • Good cop v. Bad Cop dichotomy: By presenting to contrasting figures to the criminal, the good cop seems comparatively nicer and the criminal may, therefore, feel more agreeable and give the officer exactly what he wants.
• In cases that lower our status, we purposefully do not identify as a member of groups that are found to be the losing party. Likewise, we are likely to claim the success of others whom we chose to connect ourselves with.

Authority

• Information from a recognizable figure of authority can provide us with an easy representation of how to act in a situation.
• Symbols of authority such as titles and clothing act as totems of legitimacy for our automatic behavior patterns. For instance, a nicely dressed man with a long title sounds professional—but he could also be a bum.
• A great illustration of the power of authority is shown in the movie Catch Me If You Can. Frank Abagnale Jr. maneuver as a pilot, medical doctor, and legal prosecutor all by appearing to have all the qualities of the roles that stereotypically are associated with them.
• Experts are not experts until proven otherwise. Base the merits of a person or request not on titles or external amenities, but on what has actually been proven. We need to clarify with ourselves that what constitutes as truth is not based creditably via authority.

Scarcity

• The Rule of the Few: Everything that seems to be less available becomes more desirable.
• Loss Aversion: Our intuitions take action to protect against losses. So when we are presented information that would lead us to ‘miss out’ on something we are inclined to take action to present the potential loss.
• We desire banned items. Because our freedom to obtain the item is being limited our desire for ownership increase. One can assume that since it is banned it has substantially more value because of its limited obtainability. For example, banned books tend to be a sought-after commodity in the areas that the item is prohibited.
• “Deadline technique”: Setting a time-based deadline creates the illusion of urgency. This explains why every store is “going out of business.” The deadline technique is also a very practical way to manipulate our own psychologies. By setting deadlines for our goals, we create the same sense of urgency for completion we would get from a limited product.
• Psychological Reactance Theory: we respond to the loss of freedoms by desiring them more. This is especially true for social commodities.
  • Cookie Study: Researcher’s presented jars of cookies whose contents had been intentionally lowered by the researchers. The differences in presentation of the scarcity caused different responses. Those who had cookies presented and then removed due to counting error found the cookies to be dull. While the group that was told that the cookies were given away due to demand by others found the cookies to be the some of the best cookies they ever had.
• The quantity of an item availability often impacts our assumptions on its quality. This holds true in most cases. A good deal is in part good because it is of limited by amount or time.

Interested in learning more? Check out this playlist from the College Info Geek Podcast that discusses each of the 6 Weapons of Influence in depth.

Reading Recommendations

If you liked what you saw. Here are 3 titles that I recommend based on what discussed in Influence.

1. How to Win Friends & Influence People by Dale Carnegie
   
2. Predictably Irrational, The Hidden Forces That Shape Our Decisions by Dan Ariely
3. Pre-Suasion: A Revolutionary Way to Influence and Persuade by Robert Cialdini

Find the book on Amazon: Print | Audiobook

Check Out More 52 in 52 Challenge Summaries

Note: This page contains affiliate links. This means that if you decide to buy a product through them, I will receive a small commission. This has no additional cost to you. If you would like to support Forces of Habit, please use these links. If you do use them, thank you for the support.

The Social Animal by David Brooks

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The Essence

In the form of a story, Brook’s attempts to dethrone what some would consider the center of the human experience; the conscious mind. Recent advancements in the science of the mind have been used to study the unconscious processes that influence our day to day lives such as our emotions, perceptions, and intuitions. Scientist's agree that a majority of what makes us human is not the autobiographical stories that we tell ourselves, it's the parts of the mind that we do not have awareness of. Brook’s offers an exploration into the depths of human experience to help us better understand why the relationship between our conscious and unconscious experiences is weighted against the logic we rely on heavily to organize ourselves in a social world. Logic and reason will only lead to superficial forms of achievement. It is only through our habits, perceptions, and other various unconscious mechanisms of the mind that we develop individual character.

The Social Animal Summary Journal Entry:

This is my book summary of The Social Animal by David Brooks. My notes are a reflection of the journal write up above. Written informally, the notes contain a mesh of quotes and my own thoughts on the book. The Journal write up also includes important messages and crucial passages from the book.

• The 3 crucial points Brooks wants us to understand
  • The power of the unconscious: It is the powerhouse of our conscious experience.
  • The centrality of emotion: all actions converge or diverge from one visceral sensation or another.
  • Deep interpenetration of minds: We become who we are in conjunction with other people becoming who they are; we truly are social animals.
• Noncognitive Skills: the catch-all term for the hidden qualities that cannot easily be accounted for.
• Decision making is an inherently emotional business. Every choice is somewhat flavored in our current emotional state.
• “A Brain is a record of life. The networks of neural connections are the physical manifestations of your habits, personality, and predilections.”
• Fake it till you make it: If we are willing to commit to a behavior frequently enough, we become the identity that coincides it.
• Change your environment if it is not benefiting you: a bad environment can overpower your conscious intentions by presenting the similar bad emotional cues.
• As the Greeks say: We suffer our way to wisdom.
• “Freedom without structure is its own slavery”.
• Incompetent people have the tendency to be in denial about how incompetent they actually are.
• We are overconfidence machines; overestimating what we know is both a blessing and a curse.
• Limerence: a feeling of flow between our inner and outer worlds. We are constantly at battle with ourselves attempting to reach this state of harmony.
• “The art of being wise is the act of knowing what to overlook.” –William James
• Unconscious learning is mostly done through imitation. This emphasizes the importance of finding a mentor(s) to guide you.
• Mistakes are important in learning. By interrogating ourselves, we learn to see what bias may be impacting our clarity of mind.
• Steps of Learning
  • Knowledge Acquisition.
  • Automaticity; achieved through repetition. Expand and integrate the knowledge you have gathered
  • Disfluency; work with the thoughts, organize them in a meaningful way.
  • Take a stance. Make a position about what you have found.
  • Find feedback; edit your stance accordingly.
• “Reason and emotion are not separate and opposed.”
• Self-control is by far the one essential ingredient of a fulfilling life. PERIOD.
• Failure is only a step towards growth.
• Culture is the scaffolding of a house for a given group. It acts as a collection of habits, practices, beliefs, and other various predispositions that regulate human life.
• Memory is less of a retrieval of information, and more of a reweave. No idea we have ever had is the same as it was before, our present moment transforms the makeup of our ideals. What we hold in our minds is therefore constantly being altered with every new case you remember something; we should be cautious of this.
• Memory is not absolute, they represent fragmented versions of our subjective reality.
• Epistemology: the study of how we know what we know.
• Epistemological Modesty: the knowledge of how little we know and can know.
• Events are not understood in isolation from its place in the flow of history. With an infinite possibility of prior events, minute causes can drastically alter the outcome of an event in ways we can never predict.
• As we accept our place within the institutions inhabit, the rules that make up that institution become deeply rooted within us. Since I live in my college town, I have helped perpetuate a desire to learn. Internally, there is less friction between me and intellectual curiosity due to my inhabitance (working in my old college library).
• Institutions are valuable! They inescapably merge with who we are.
• “Party affiliation often shapes values, not the other way around.” The philosophies and perception often change, as the person unconsciously seeks to align themselves with the group it affiliates with.
• Due to the internet, our minds are now becoming overwhelmed by the amount of information available. We cannot stop the speed & quantity that it is produced. But we can work to maintain a healthy relationship with how we receive loads of information.

Reading Recommendations

If you liked what you saw. Here are 3 titles that I recommend based on what is discussed in The Social Animal. 

1.  The Road to Character by David Brooks
2.  Thinking Fast and Slow by Daniel Kahneman
3.  Blink by Malcolm Gladwell

Find The Social Animal by David Brooks on Amazon: Print | Audiobook

Note: This page contains affiliate links. This means that if you decide to buy a product through them, I will receive a small commission. This has no additional cost to you. If you would like to support Forces of Habit, please use these links. If you do use them, thank you for the support.

Check Out More 52 in 52 Challenge Summaries

David and Goliath by Malcolm Gladwell

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The Essence

The conventional wisdom underlying what we identify as advantages and disadvantages are not for everyone. To beat the Goliath’s (giants), the David’s (underdogs) can choose to play by a different set of rules. Once the underdogs realize it is the perspective that they take that impacts the outcome, obstacles, weakness, and adversity become the tools that breed strength, resilience, and grit.

David and Goliath Summary Journal Entry:

This is my book summary of David and Goliath by Malcolm Gladwell. My notes are a reflection of the journal write up above. Written informally, the notes contain a mesh of quotes and my own thoughts on the book. The Journal write up also includes important messages and crucial passages from the book.

• “Underdogs win all the time, but the strategies they use will be hard.”
• Giants are not always what they seem. Many advantages are shrouds for the large weaknesses they hold. 
• Inverted U-Curve: A model that helps us conceptualize that too much can be a bad thing.
  • Left Side: Doing more or having more makes things better.
  • Middle: Doing more does not make much of a difference.
  • Right Side: Doing more or having more makes things worse.

• Nearly everything of consequence follows the inverted U.
• Relative Deprivation: our impressions are not formed globally, but by placing ourselves in local categories that we compare excessively to people in similar areas or circumstances.
• Big Fish Little Pond Effect
  • Entering an environment that disenfranchises your abilities to compete due to such large disparities in ability
  • Great students can develop fixed mindsets through comparison with students way out of their league (the big fish).
  • If a student would attend a smaller institution (little pond) where they can be given the proper attention and not be debilitated via comparison with the superstars, they can thrive, and even achieve more than the big fish.
• Having peers who outperform you by large deviations will make you feel dumb.
• Desirable Difficulty: not all difficulties are negative.
• Putting deliberate emphasis on a skill can make other disabilities that would normally be cues for failure meaningless.
• “The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”
• "Courage is what you earn when you’ve been through the tough times and you discover they aren’t so tough after all”
• Many successful entrepreneurs have undesirable predispositions that ultimately become the reasons for great success; they must work harder, and this hard work pays off.
• Remote Misses: those who have endured and survived a trauma have experienced a liberating effect.
• Difficulties are paradoxically a desirable outcome. We must recognize the freedom that comes from high-risk situations. A man with nothing to lose is a man that isn’t afraid to get his hands dirty.
• Learning how to deal with failure prepares you for a career in business.
• Disobedience can be a response to authority.
• Principles of Legitimacy: People in Authority desire those being ruled to behave. What they miss is that how they behave will indicate how the subjugated respond to the power.
  • The people who are asked to obey authority have to feel like they have a voice.
  • The law has to be predictable: Reasonable expectations that ensure what is the law today will be the law tomorrow.
  • Authority has to be fair: No coalitional favorites.
• Todd Clear — indirect effect of prison on crime is an example of how power must be seen as legitimate or else its use has the opposite intended effects
  • If you lock up too many people far too long, the damage will outweigh the benefits (Inverted U curve at work here).

Reading Recommendations

If you liked what you saw. Here are 3 titles that I recommend based on what is discussed in David and Goliath.

1. Outliers: The Story of Success by Malcolm Gladwell
2. The Obstacle is the Way by Ryan Holiday
3. How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life By Thomas Gilovich

Find David and Goliath by Malcolm Gladwell on Amazon: Print | Audiobook

Note: This page contains affiliate links. This means that if you decide to buy a product through them, I will receive a small commission. This has no additional cost to you. If you would like to support Forces of Habit, please use these links. If you do use them, thank you for the support.