probability   10513

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The Probability Distribution of the Future
The key point is that the future should be viewed as a range of possibilities and their respective likelihoods - essentially, a probability distribution.

Learn to adjust the probabilities on the fly as you get more information. Bayesian updating.

But ... in reality, only one thing will happen. So, are you comfortable if that does happen? As Buffet says, "In order to win, you must first survive". Consequences matter.

In the real world, risk = probability of failure x consequences. Risk is not only financial.

Most importantly, knowing the outcome does not teach you about the risk of the decision. Knowing that something worked out, we argue that it wasn't that risky after all. But what if, in reality, we were simply fortunate?

The truth is that most times we don't know the probability distribution at all. Because the world is not a predictable casino game — an error Nassim Taleb calls the Ludic Fallacy — the best we can do is guess. With intelligent estimations, we can work to get the rough order of magnitude right, understand the consequences if we're wrong, and always be sure to never fool ourselves after the fact.
future  probability  risk  consequences  howardmarks  warrenbuffet  farnamstreet  nnt  taleb 
18 hours ago by drmeme
Probability Theory (For Scientists and Engineers)
Formal probability theory is a rich and complex field of mathematics with a reputation for being confusing if not outright impenetrable. Much of that intimidation, however, is due not to the abstract mathematics but rather how they are employed in practice. In particular, many introductions to probability theory sloppily confound the abstract mathematics with their practical implementations, convoluting what we can calculate in the theory with how we perform those calculations. To ma...
tut  math  probability  overview 
5 days ago by cjitlal

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