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Talking randomness in life…

June 13th, 2009 | Add a Comment

Leonard Mlodinow, a physicist/author who also, apparantly, understands the impact of random events and the ‘illusion of control’ in everyday life.  In this talk he adresses randomness, the illusion of control, probability misinterpretations (i.e. in medicine, sports), psychology (i.e. Kahnemann, Taversky) etc., basically the insights similar to The Black Swan.

He talks about randomness, confirmation bias, unpredictabile events, silent evidence, statistical fallacies, ludic fallacies, the illusion of control etc. and gives more examples than explanations. It all comes down to the same; the impact of the random, highly unpredictable high impact events in life and some of the psychological traps we tend to fall into without realizing.

But anyhow, despite the lack of explanations here and there these are entertaining talks to watch, especially if you’re familiar with The Black Swans and randomness in general.

He even wrote a book in 2008 about randomness and complexity in social situations… Hmm, sounds familiar?!

I would say; thumbs up for the mindset, a thumb down for originality…

@Fora.tv

@Google Talks

About Leonard Mlodinow:
As a physicist at California Institute of Technology and the author of many books and articles, a number of them on the science of probability, Leonard Mlodinow spends a lot of time considering the question, What are the odds?

Leonard Mlodinow teaches randomness to future experimenters at Caltech. His books include “The Drunkard’s Walk: How Randomness Rules Our Lives” and “Euclid’s Window: The Story of Geometry from Parallel Lines to Hyperspace.” More of his writing and information about his work can be found at his Web site.

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Filed under: Fora.tv, Life, the Universe and Everything, Psychology

Taleb’s map of ‘The Limits of Statistics’

May 9th, 2009 | 1 Comment

The graph shows the daily variations a derivatives portfolio exposed to U.K. interest rates between 1988 and 2008. Close to 99% of the variations, over the span of 20 years, will be represented in 1 single day—the day the European Monetary System collapsed. As I show in the appendix, this is typical with ANY socio-economic variable (commodity prices, currencies, inflation numbers, GDP, company performance, etc. ). No known econometric statistical method can capture the probability of the event with any remotely acceptable accuracy (except, of course, in hindsight, and "on paper"). Also note that this applies to surges on electricity grids and all manner of modern-day phenomena.

Voor als de schemering precies de juiste gloed van roze heeft; raadpleeg deze essay van Taleb. Het gaat het over allerlei ‘fallacies’ (drogredenen) en valkuilen waar men te maken heeft in sociale situaties: o.a.

  • de problemen met het bepalen van de juiste distributies (in bepaalde sociale situaties waar men foutief de normale distributie veronderstelt) 
  • confirmation bias
  • ’silent evidence’
  • en andere fallacies uit de Zwarte Zwaan. 

    • First Quadrant: Simple binary decisions, in Mediocristan: Statistics does wonders. These situations are, unfortunately, more common in academia, laboratories, and games than real life—what I call the "ludic fallacy". In other words, these are the situations in casinos, games, dice, and we tend to study them because we are successful in modeling them.

    En de schrijver laat ook een map zien waarme men beter de sociale situaties, waar onvoorspelbaarheid van grote-impact gebeurtenissen de dienst uitmaakt (Extremistan),beter kan inschatten. En de suggesties over hoe men het beste erop kan anticiperen. Kortom; lees dit, laat het een dag bezinken, en lees het nogmaals! 

    Een essay op niveau zoals NNT betaamt.

    http://www.edge.org/3rd_culture/taleb08/taleb08_index.html

    Technische uitleg

    En voor de wiskundige en statistische sceptici onder ons, hier vind je meer emprische data en technische verklaringen voor het bestaan van the Black Swans. In dit geval in grote economische instituties, bedrijven, financiele markten en eigenlijk bijna elke sociale situatie die onderhevig is aan een groeinde compexiteit en derhalve onvoorspelbaarheid:

    http://www.fooledbyrandomness.com/EDGE/index.html

    Hier is de introductie:

    Data: Note that the analysis here is exhaustive: it is done systematically on almost ALL  transacted macro data representing >98% of worldwide volume. I used interest rates, commodities (oil, agricultural), all available equity indices (US, UK, Continental Europe, Russia, Indonesia, Brazil), main traded currencies. I selected tradability because of its “cleanliness” compared to merely computed data. I also added some micro data: although indices encompass single equities, I processed >18 million pieces of single stock daily data, and select industry datasuch as  drug sales, movie returns, etc. (what “clean” data I could find).  While we have a plethora of data with business variables, we don’t have enough in epidemics, terrorism, wars, etc.   

    Logical and Mathematical Commentary
        1) Telescope problem, insufficiency of data in the tails;  consequence on left-skewed and right-skewed distributions;  
        2) Preasymptotics of probability distributions, classification of convergence, or why the central limit theorem is too Platonic;  

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    Filed under: In Dutch, Nassim Taleb, The Black Swan, The Long Tail