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"One standard antidote to foolish optimism is trained, habitual use of the simple probability math of Fermat and Pascal." If somebody read the book, I'd like t
by gniv 7y ago
"One standard antidote to foolish optimism is trained, habitual use of the simple probability math of Fermat and Pascal."
If somebody read the book, I'd like to understand what he means. Why does he think people are generally so optimistic, and what is the math he's referring to?
- tommymachine 7y agoBy my reading of Munger, it’s not necessarily that people in general are optimistic, but rather that foolish optimism is one of the flavors of human misjudgment. Ever the practical ‘psychologist’, I don’t believe Munger focuses on diagnosing the causes of the various forms of human misjudgments (beyond their categorization into these forms) so much as he does on prescribing their potential resolutions, or ‘antidotes’ as he says here. The math he refers to is simply high school level probability math.
- emmelaich 7y agoWarren Buffett has said the same thing. All you need is high school mathematics and a sense of realism.
- westoncb 7y agoC3-PO: "Sir the probability of successfully navigating an asteroid field is approximately 3,720 to 1!" Han Solo: "Never tell me the odds!" -------- C3-Po has the habit Munger recommends. Han is probably an incorrigible optimist.
- hnhg 7y agoWorth a read https://www.countbayesie.com/blog/2015/2/18/hans-solo-and-bayesian-priors https://www.countbayesie.com/blog/2015/2/18/hans-solo-and-ba...
- neilkakkar 7y agoHey Gniv, I was supposed to link to this post (got kinda lazy and wanted to get this summary out) - will do so once it's ready!
- tim333 7y agoFermat and Pascal refers to basic probability theory as in this stuff https://en.wikipedia.org/wiki/Problem_of_points#Pascal_and_Fermat https://en.wikipedia.org/wiki/Problem_of_points#Pascal_and_F... He's saying rather than putting everything on red because you are optimistic you should figure the odds of red are 18(18+18+2) and your expected return on a dollar is 95c. Of course things like should I punt on a startup are more complicated than roulette but you can maybe benefit from looking at what proportion of similar ones succeed and that kind of thing I guess.