30 September 2008

Aldous on probability and the real world

In April, David Aldous gave a talk on the top ten things that math probability says about the real world.

My favorite (i. e. the one I hadn't really thought of before) was that news headlines are only interesting in real time. If you woke up twenty-five years from now and decided to read the last 25 years worth of news headlines, you probably wouldn't learn much. It's a good bet that at some point in that period the stock market had a really bad day, and will it matter, in 2033, that on September 29, 2008 the Dow lost 777 points? The trends are more important, but you can't see them from looking at individual headlines; you can only see them by looking at how many of different types of headlines there were.

Compare, for example, the fact that it's difficult to determine who's good at hitting in baseball by watching games; the difference between a good hitter and a poor one might be, say, one hit every five games, which is too small to measure without actually counting how many times they do various things.

3 comments:

michaeldcassidy said...

Yes and No. I'm 63 and my parents grew up in the depression. My mom the first high school graduate in both my families. Not go on, but for both my parents the Depression never quite went away; and for my wife and I the Depression is still in our minds as instilled by our parents.

Vietnam is over 25 years old and it is very much part of my life; including headlines.

The death of King is tatooed [sp] into my brain.

Good new name.

Joe said...

I liked the section about the 100% Kelly investing strategy. Very interesting. Of course, to find that strategy for yourself, you need to know how much randomness in investments you are able to remove. That's far from trivial. Overconfidence in your abilities leads to an insane strategy.

Michael Lugo said...

Joe,

I liked the Kelly criterion section, too; it got me interested in the Poundstone book "Fortune's Formula" which I think I'll pick up at the library tomorrow. (Why not today, you ask? I'm working from home.)