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Fooled by Randomness
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==Thesis== Taleb sets forth the idea that modern humans are often unaware of the existence of [[randomness]]. They tend to explain random outcomes as [[non-random]]. Human beings: # overestimate [[causality]], e.g., they see elephants in the clouds instead of understanding that they are in fact randomly shaped clouds that appear to our eyes as elephants (or something else); # tend to view the world as more [[explanation|explainable]] than it really is. So they look for explanations even when there are none. Other misperceptions of randomness that are discussed include: * [[Survivorship bias]]. We see the winners and try to learn from them, while forgetting the huge number of losers. * [[Skewed distribution|Skewed distributions]]. Many real life phenomena are not 50:50 bets like tossing a coin, but have various unusual and [[Benford's law|counter-intuitive distributions]]. An example of this is a 99:1 bet in which you almost always win, but when you lose, you lose all your savings. People can easily be fooled by statements like "I won this bet 50 times". According to Taleb: "Option sellers, it is said, eat like chickens and go to the bathroom like elephants", which is to say, option sellers may earn a steady small income from selling the options, but when a disaster happens they lose a fortune.
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