Adonis Diaries

Posts Tagged ‘gambler’s fallacy

Consequences of Neglecting Base-Rates in your behavior

“When you hear hoof beats behind you, don’t expect to see a Zebra”: Zebras are minority among all the hoof species.

Nothing is certain but death and Taxes” Benjamin Franklin

It is a good habit that physicians are practiced to learn Not to neglect base-rates when diagnosing ailments: The physicians learn to investigate the most likely ailment before starting any exotic diagnosis of the disease.

For example, the probability that a new firm will survive the first 5 years is at best 50%.

Depending on you level of education, the university you graduated from, the social class you are allotted to, your genders, your height, your handsomeness, the color of your skin… the chances of landing a high spot on a Fortune 500 company is alarmingly low.

Get data and statistics on the base-rates of your status conditions before you invest all your strength and energy on a selection process.

You heard of the Gambler’s Fallacy: “Something must change eventually…”

Actually, outside casinos, lottery, coin tossing (not loaded or tampered with)…events in nature are interrelated and you should Not bet on them as “independent” or “memoriless events“.

We also tend to fall prey from drawing universal certainties based on individual observations. This is called the Induction bias.

Do you remember the feeding goose allegory? The goose started to have confidence of the feeder just before Xmas Day slaughter-hood.

We tend to fall hook, line and sinker for induction in our lives.

We believe that aerodynamic laws are totally understood and applied in designing airplanes: As if only aerodynamics is the major safety issues in plane accidents.

Read: Art of Thinking Clear

 


adonis49

adonis49

adonis49

November 2020
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