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> what is more improbable? that he is flipping a coin 40 times and got head all the time or that billions of people cant see what he sees? Actually, the probab
by hrzn 10y ago
> what is more improbable? that he is flipping a coin 40 times and got head all the time or that billions of people cant see what he sees?
Actually, the probability of getting a head 40 times is 1/2^40, which is 1 in about 1.1 trillion. If we assume there are 1 billions investors overall, the probability that at least one wins 40 times (which is the probability that one or several Warren Buffet could appear by luck in this simple model) is about 0.00091.
So yeah, in this particular phrasing of the question, with this model, the less likely option is to flip a coin and get head 40 times and the more likely option is that there is something else, like talent.
- felipemnoa 10y ago>>Actually, the probability of getting a head 40 times is 1/2^40, which is 1 in about 1.1 trillion I bet that the odds of beating the market 40 times are even worse since it is not a simple binary choice. The better analogy would be to choose the correct face of a 6 sided dice 40 times in a row, or even better a 100 sided dice. Calculate the odds for that! (I'm too lazy to do it myself)
- giardini 10y agohrzn says:"So yeah, in this particular phrasing of the question, with this model, the less likely option is to flip a coin and get head 40 times and the more likely option is that there is something else, like talent." Before concluding "talent" is responsible, you must exclude other possibilities in the "something else" category (e.g., intelligence, insider information, control of upstream/downstream resources, etc.). Wealth allows access to resources unavailable to those w/o wealth.
- hrzn 10y agoI Absolutely agree. Overall it's probably a mix of many things like luck, talent, insider information, ability to go against dominant investing ideas, where you start in life (if you are wealthy at birth that's equivalent to many coin-flips), etc.