We Are Probability Blind
The chapter overview lists topics about probability, intuition, and randomness, but does not supply the chapter’s arguments or stories.
THE IDEA
ELEVEN: RANDOMNESS AND OUR MIND: WE ARE PROBABILITY BLIND
On the difficulty of thinking of your vacation as a linear combination of Paris and the Bahamas. Nero Tulip may never ski in the Alps again. Do not ask bureaucrats too many questions. A Brain Made in Brooklyn. We need Napoleon. Scientists bowing to the King of Sweden. A little more on journalistic pollution. Why you may be dead by now.
Only the chapter overview is provided here; the arguments and stories it introduces are absent.
When to use it
Evaluating investment risks by acknowledging the unpredictability of stock market fluctuations rather than relying on gut reactions.
Understanding medical test results: recognizing that a positive result may still have low probability of disease due to base rates.
Assessing the likelihood of rare events (e.g., plane crashes) by comparing to common risks like car accidents.
Avoiding the gambler's fallacy by remembering that past outcomes do not affect independent probabilities.
FROM THEORY TO EVERYDAY LIFE
In practice
Vacation as a Linear Combination
The overview mentions treating a vacation as a linear combination of Paris and the Bahamas, but does not explain the example.
Nero Tulip's Skiing
The overview says 'Nero Tulip may never ski in the Alps again', but omits the story that would explain why.
Bureaucratic Questions
The overview warns against asking bureaucrats too many questions, but does not explain how this relates to probability.
A MOMENT TO REFLECT
Put it to work.
Think of a recent decision you made based on a single dramatic event. How might considering base rates have changed your choice?
Consider a situation where you misunderstood the likelihood of an outcome. What cognitive error led to that misunderstanding?
How might you adjust your thinking about risk if you consciously applied probability theory instead of intuition?
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)