Fat Tony

November 4, 2010 at 8:59 pm | Posted in Uncategorized | Leave a comment

Nassim Taleb, author of the Black Swan makes an excellent point about the nature of probability:

Imagine you had a coin that was tossed 100 times. The first 99 times yields heads. What is the probability of it being tails on the 100th attempt? “That’s easy”, a statistician says, “, “it’s 50% because each coin toss is independent”. So you ask the same question to “Fat Tony”, a Brooklyn bookie hell bent on making a buck. (Read this in a thick Brooklyn accent). . .

Fat Tony: “Whatta you tawkin’ about?. . . that’s easy, no more than 1%”.

“Why?”, you ask.

Fat Tony: “You’re a pure sucker to believe in that ‘50% business’. That coin’s gotta be loaded. . .”.

The problem with most people’s thinking is that they place way too much emphasis on what they know and put no emphasis at all on the things they DON’T know. The statistician (as well as most academics) think entirely in the box in terms of information given to solve a problem. Fat Tony thinks almost entirely outside the box.

The most common error in thinking doesn’t really happen from strict logical errors. They happen because most errors in thinking are errors of PERCEPTION. But the problem with perception errors is that it’s hard to know what we don’t know, so we naturally ignore it.

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