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

In "Fooled by Randomness," Taleb describes his experiences with traders in the stock market who mistook their luck for skill and ultimately paid a high price for their overconfidence. One of the strengths of us humans is our ability to recognize patterns. Unfortunately, due to this strength, we sometimes fall into the narrative trap. Fools of chance are deceived by observations. Past data has no relevance for predicting the future. Fools underestimate the role of luck and rely on forecasting models or their own intuition in decision-making situations where they have no place. What they observe is translated into a narrative that they can understand but does not reflect reality. The world of a hunter-gatherer was simpler and more straightforward in the past. Biologically, we are not optimized to live in the complex environments we encounter today.