Let me begin by confessing that the main reason I bought this book was because it was significantly discounted: £1 in the remaindered bin at Blackwells in Oxford. It then took me a while to get down to reading it. Once I started though I enjoyed it. So, well done Nassim for turning something about probability into something approaching fascinating.

Nassim Taleb, it turns out, is a famous Wall Street trader. I read the second edition of this book but I think the third edition has already been published.

I want to make a couple of general points before I look at the central theme of the book:

• I got the feeling towards the end of the book that it had been written backwards: if he'd started with chapter 13 then written chapter 12 then 11 and so on, it would help anyone who is looking for a pure book on a general review of probability
• Nassim is a polymath: this book is much more than an exposition of probability as it is handsomely littered with literature, philosophy, psychology and, let's be honest, downright prejudice.

I enjoyed the book I have to say and should admit that if I ever teach probability or practice it, this is a book I will turn to for help and guidance.

As part of his perorations, Nassim provides us with a number of case studies: people whom he has probably met and who come in for praise (eg George Soros) or scorn (eg, most economists I think!). These cases are very revealing if it is fair to assume that Nassim's version of events is accurate and objective. If they are valid then it probably comes as no surprise that he thinks that there are traders and bankers and economists who are significantly unfit to ply their trade as they do. We get this impression from page one and it doesn't stop.

I think one of the key aspects of all of Nassim's arguments are that in many analyses and studies is that we tend to concentrate on the successes in life whilst forgetting about the failures. Towards the end of the book he reminds us that it's not uncommon to see the dust cover of a book telling us that successful people take risks ... so do the failures, opines Nassim!

Journalists come in for some criticism; and I have to admit that I feel at one with Nassim's distaste for the "commentator" type of journalist who infects British newspapers now: there are just too many of them. Nassim points out that these people are never wrong: isn't that the truth!

As proof of this, take a look at Nassim's comments of great insight when faced with this:

As I am writing these lines I see the following headlines on my Bloomberg:

• Dow is up 1.03 on lower interest rates
• Dollar is down 0.12 Yen on higher Japanese surplus

You wouldn't want to be a journalist writing that sort of thing once you've read Nassim's fair evaluation of that tripe!

Then again, here's a description to delight, page 46:

The stereotype of a pure mathematician presents an anaemic man with a shaggy beard and grimy and uncut fingernails silently labouring on a Spartan but disorganised desk. With thin shoulders and a pot belly, he sits in a grubby office, totally absorbed in his work, oblivious to the grunginess of his surroundings ...

Well, you get the idea! That's not to say he doesn't like such people, I think he does!

We are also regaled with things like Life is coincidental, to be found on pages 145 et seq:

The Mysterious Letter. You get an anonymous letter on 2nd January informing you that the market will go up during the month. It proves to be true; but you disregard it owing to the well known January effect ... Then you receive another one on 1st February telling you that the market will go down. Again, it proves to be true. Then you get another letter on 1st March: same story. By July you are intrigued by the prescience of the anonymous person and you are asked to invest in a special offshore fund. You pour all your money into it. Two months later, your money is gone.

What happened? The trick is ... take a look and find out how simple it probably is to get away with things like this.

Nassim has a passion for the Monte Carlo technique; and that caught my eye as I use the technique myself from time to time. There are two pages on my web site on this very topic: first one ... second one. Of course, you need to read what Nassim says about the technique because he is a major Monte Carlo technique user as opposed to me, someone who plays with it from time to time.

You will also come across the phrase Black Swan early in the book too: from page 110

In his Treatise on Human Nature, the Scots philosopher David Hume posed the issue in the following way (as rephrased in the now famous black swan problem by John Stuart Mill): no amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.

Hume is given a good press in this book for his work on induction as is Sir Karl Popper, although Popper warrants more words.

There is a lot of prejudice in this book as well as some more serious and scientifically founded work. Moreover, whilst the book is 277 pages long, Nassim says he wrote it, essentially, from memory: in such a way that whilst he has quoted many sources, he has done so without the need to copy word for word, or by scanning in page after page of a book. Surprisingly, perhaps then, that the list of references amounts to 13 and a half pages' worth! It's true, though, there are no major quotations.

Now, what about the small matter of probability, then? Well, the book is riddled with it. So much so that it is buried into just about every idea in the book but I cannot say that there are vast tracts that I can point you to if you are, say, seeking to resolve a conditional probability exercise or something like that. You really need to read the whole book: dipping into the book will get you nowhere ... I know, this is how I started to read it and failed!

Even if probability is of no interest to you, induction, inference and a more scientific approach to business must be. Consequently, I recommend this book to anyone who is seriously concerned with business, markets and finance. Seriously, you should read it! Certainly all undergraduates and really good pre university students.

I also recommend all managers to read it too: you might even see yourself in it. If so, it will probably be a timely warning for you.

Duncan Williamson
31st May 2006