clips of logic

Having read books like The Black Swan and Fooled by Randomness (both by Nassim Nicholas Taleb), I’m somewhat terrified by how often we misunderstood probability and randomness. Consider these scenarios.

Probability of getting head tossing a fair coin is 1/2

Probability of tossing 5 heads in a row is 1/2 * 1/2 * 1/2 * 1/2 * 1/2 = 1/32

Probability of getting heads after tossing 4 heads in a row is 1/2

The last scenario is where most of us make the mistake of thinking, since there’s already 4 heads before this, the chances of getting another head is pretty slim.

This is known as the Gambler’s fallacy. The probability is 1/2 because that is probability of getting head tossing a coin. It doesn’t matter if we get 4 or 100 heads in a row, the probability remains the same because those events have already occurred and the last coin flip can be viewed as an independent event like the first scenario.

It should be obvious by now that, misconception on randomness and probability can be very dangerous to a gambler but what about the rest of us? With today’s ever more complex financial instruments, we are all exposed to certain degree of risk with our investments.

In order to minimize risk, we need to understand probability. Nothing is certain in our lives and not knowing that is dangerous.

From the guys that brought you Pulp Fiction and Good Will Hunting, here’s a video of 2009 in summary created using Google Wave.

Recently, I read this article by Derek Sivers about an advice given by his music teacher, Kimo Williams. He told Derek that there’s no speed limit in life and taught him a few semesters worth of materials within weeks. Derek went on and graduated from college within 2 and half years.

Most systems (e.g. education) are designed so that everyone can keep up. And by that definition, meeting expectations simply means you have succeeded in being average. What if you are more motivated and driven than the average person?

The good news is, you don’t have to follow the expected pace and speed. You can go as fast as you can. There are many shortcuts you can take in life and you should raise your expectations as high as possible.

Now armed with this insight, how would you live your life? Will you start do anything differently?

Remember them? We were supposed to be driving or flying in one a decade ago. But it turns out that we don’t need them at all. With the internet, the need to physically move from one location to another have been reduce significantly.

Why drive to work when you can teleconference over Skype. It’s no longer about how fast you can get from one place to another but being virtually present in as many location as possible.

Disruptive technologies like the Internet often remind us that sometimes the best way to solve a problem is to change the rules both physically and virtually.