Friday, February 25, 2005

What Are the Chances It’ll Happen?

The following point is very obvious—but only when one thinks about it. The reason I bring it up is that I suspect, all too often, many people, especially when in haste, don’t think about it.

I was discussing something with someone and he said that a certain event we were discussing would likely occur. I pressed him and asked him how likely he thought it would be. He said he guessed it’d be about 80%.

When I asked him why, he said, event A is about 80%, which leads to B which is about 80%, which leads to C which is about 80%. So, he concluded, the likelihood of C occurring is about 80%.

Now this man is not a stupid man; he just wasn’t thinking. When I pointed out to him on that chain of probabilities, C is about slightly better than 50%, he immediately realized I was right.

I suspect that all too often, when people are estimating probabilities they merely average them out in their heads rather than multiply them; what I mean is, that if you asked many people about the probability of an event occurring when the prior events leading up to it all have a probability of around 80%, many people would unthinkingly answer about 80%. Yet, if there are five events in the 80% chain of events, the likelihood of the final event occurring is less than 1/3.

Just something to be mindful of.


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