In both life and investing, we often underestimate the role of luck and randomness in determining outcomes, whether related to business or personal affairs. Taleb's book “Fooled by Randomness” serves as a powerful reminder to stay humble in all aspects of daily life.
We do not need to be rational and scientific when it comes to the details of our daily life—only in those that can harm us and threaten our survival.
For us, this book ranks among the top three down-to-earth books for understanding how our brain works and how to achieve lasting success.
For quality growth investors, it is crucial to maintain rationality and minimize the influence of luck, whether favorable or unfavorable, on our returns. Our goal is consistency: we seek companies that reliably compound shareholders' capital through a repeatable playbook.
Nonetheless, we are always exposed to uncontrollable factors, and overreacting to these can hinder our ability to make future rational decisions. We should avoid desperation when underperforming the benchmark and refrain from feeling invincible after a short-term success.
In his book, Taleb outlined the following:
Earning $10 million through Russian roulette is not the same as earning $10 million through the diligent and skilled practice of dentistry. While both sums can purchase the same goods, the former relies far more on randomness and luck than the latter.
We will share some of the book's best passages/quotes, and put them into our quality growth investing strategy framework.
We strongly encourage you to read the book yourself to fully grasp all the concepts Taleb discusses in his first masterpiece. This foundational work paved the way for "The Black Swan" and "Antifragile".
Each chapter in "Fooled by Randomness" builds on the central theme of the pervasive and often misunderstood role of randomness in life and markets, challenging readers to reconsider their assumptions about success and expertise. Don't let this book lead you into indecisiveness or cause you to question every investment decision. Instead, let it encourage you to remain humble about past and future triumphs.