3 ms·

Imagine you're figuring out the chance that you'll die this year. Let's say you're 30--probably a common age on HN. There's a 10% chance that you're in the last

Imagine you're figuring out the chance that you'll die this year. Let's say you're 30--probably a common age on HN. There's a 10% chance that you're in the last 10% of your life. Therefore, there's a 10% chance that you'll die in the next three years. If you sold life insurance using those kinds of numbers, you'd have some woes. If you can't use probability meaningfully, it's better not to use it at all; it obfuscates.

Houshalter 11y ago
Actually if you don't have any other information about life expectancy, that's a perfectly reasonable prior distribution. We have much more data on life expectancy, and so can give much more accurate probability distributions. But if you didn't have that, the uninformed prior is the best you can do. See https://en.wikipedia.org/wiki/Prior_probability#Uninformative_priors https://en.wikipedia.org/wiki/Prior_probability#Uninformativ... J. Richard Gott famously invented this method to estimate the lifespan of the berlin wall, and predicted a 75% chance that it wouldn't be there by 1993. Also relevant is this article, Risk-Free Bonds Aren't: http://lesswrong.com/lw/hy/riskfree_bonds_arent/ http://lesswrong.com/lw/hy/riskfree_bonds_arent/ >A list of major governments in 1900 would probably put the Ottoman Empire or Austria-Hungary well ahead of the relatively young United States. Citing the good track record of the US alone, and not all governments of equal apparent stability at the start of the same time period, is purest survivorship bias. >But even if you don't share those particular assumptions, do you expect the United States to still be around in 300 years? If not, do you know exactly when it will go bust? Then why isn't the risk of losing your capital on a 30-year Treasury bond at least, say, 10%?

3 ms·

Imagine you're figuring out the chance that you'll die this year. Let's say you're 30--probably a common age on HN. There's a 10% chance that you're in the last

by maldusiecle 11y ago

Houshalter 11y ago
Actually if you don't have any other information about life expectancy, that's a perfectly reasonable prior distribution. We have much more data on life expectancy, and so can give much more accurate probability distributions. But if you didn't have that, the uninformed prior is the best you can do. See https://en.wikipedia.org/wiki/Prior_probability#Uninformative_priors https://en.wikipedia.org/wiki/Prior_probability#Uninformativ... J. Richard Gott famously invented this method to estimate the lifespan of the berlin wall, and predicted a 75% chance that it wouldn't be there by 1993. Also relevant is this article, Risk-Free Bonds Aren't: http://lesswrong.com/lw/hy/riskfree_bonds_arent/ http://lesswrong.com/lw/hy/riskfree_bonds_arent/ >A list of major governments in 1900 would probably put the Ottoman Empire or Austria-Hungary well ahead of the relatively young United States. Citing the good track record of the US alone, and not all governments of equal apparent stability at the start of the same time period, is purest survivorship bias. >But even if you don't share those particular assumptions, do you expect the United States to still be around in 300 years? If not, do you know exactly when it will go bust? Then why isn't the risk of losing your capital on a 30-year Treasury bond at least, say, 10%?