Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
originally posted January 24, 2016|last updated January 24, 2016
In 100 Words or Less: Luck or randomness frequently plays an under-appreciated role in successful outcomes, and is instead assumed to reflect skill or intelligence. Human brains look for patterns but make wrong inferences; human brains tend to simplify things but some, important ideas cannot be readily simplified. "Lucky fools do not bear the slightest suspicion that they may be lucky fools." Random doesn't mean equally probable; average should not be confused with median. We pay special attention to observed outcomes, but have great difficulty imagining unobserved outcomes (survivorship bias). Rare events are fundamentally unpredictable, yet we behave as if they can be predicted.
