3 ms·
"Take a random sample of any two people from the U.S. population who jointly earn $1 million per annum." This is where the author loses me. Where is the random
by mmt 17y ago
"Take a random sample of any two people from the U.S. population who jointly earn $1 million per annum."
This is where the author loses me. Where is the randomness of the sample, when there are two items which are interdependent?
Later, he criticizes standard deviation as applied to stocks and bonds (decidedly non-random data), finding fault with the bell curve, rather than the misapplication.
Does this chapter make any more sense in the context of the entire book?
- DenisM 17y agoI recommend to read the book. Taleb's point is that applying gaussian instruments to mandelbrotian data is not only wrong, it has a peculiar characteristic of being mostly right all the way until it goes horribly, horribly wrong. The time lag is crucial at it allows people to accumulate risks without realizing what they do.
- mbrubeck 17y ago"Where is the randomness of the sample, when there are two items which are interdependent?" Given all pairs of people whose join income is $1M, select a pair at random. "All pairs" is an unusual population to select from, but mathematically it's a perfectly valid way to define a random variable.
- mmt 17y agoThis makes sense, to be, so, perhaps, I'm confused by how he would then go on to talk about the individual values that make up the pair. Is that, then, exactly his point? That a random sample of a group can't be modeled like a group of random samples, yet this is what's being done?