Sublime

There are three important aspects of probability that we need to explain so you can integrate them into your thinking to get into the ballpark and improve your chances of catching the ball: Bayesian thinking Fat-tailed curves Asymmetries

“There is something in probability theory called a Poisson process, giving amazingly good descriptions of such random independent events occurring through time, like customer arrivals at a fast-food store, cosmic rays striking a planet, accidents in a factory, airplane mishaps, and maybe shark attacks.”

In fact, for any possible drawing of w winning tickets in n attempts, the expectation is simply the number of wins plus one, divided by the number of attempts plus two: (w+1)⁄(n+2). This incredibly simple scheme for estimating probabilities is known as Laplace’s Law,

100% Certainty The General Area of Possibility 93% Give or take about 6% Almost certain 75% Give or take about 12% Probable 50% Give or take about 10% Chances about even 30% Give or take about 10% Probably not 7% Give or take about 5% Almost certainly not 0% Impossibility

Modern Portfolio Theorists analyze data and figure out likely outcomes based on probability. One example of this is called expected return. If we feel an investment will most likely return 8% and has a 75% probability of actually doing so, we can say the investment has an expected return of 6%. In other words 8% times the 75% probability of getting

For laypeople, however, probability (a synonym of likelihood in everyday language) is a vague notion, related to uncertainty, propensity, plausibility, and surprise.