The Difference between Risk & Uncertainty - Poll #1

[robster970]

@Fomo - Have you ever studied any probability theory?

 

[Forexmospherian]

@Fomo - Have you ever studied any probability theory?

Yes - for 5 years - my own ;-)

 

[Trader333]

But if you look at facts over last 19 years - more winners with non consecutive numbers

The past is irrelevant for lottery draws as it is a totally random event that has no predictability based on history at all. The only thing that is interesting is that if the numbers 1,2,3,4,5 and 6 were drawn then the prize money would be very low as so many peole will have to share it.

 

[Forexmospherian]

The past is irrelevant for lottery draws as it is a totally random event that has no predictability based on history at all. The only thing that is interesting is that if the numbers 1,2,3,4,5 and 6 were drawn then the prize money would be very low as so many peole will have to share it.

Hi Trader 333

Professor Charles Simonyi and Professor Marcus Du Sautoy - Oxford Professors of Maths and Science - agree with you

Its connected with the "6 degrees of seperation" logic

Loads of punters chose 6 consecutive numbers - simply down to them believing simple probability theory - ie the chances being the same etc etc

So if you are fortunate to win with 1 2 3 4 5 6 - you might find a few hundred thousand other punters with same idea

Just have 2 or 3 consecutive is maybe random enough etc -

But 6 consecutive numbers one after the other - well possible - but don't back the farm on it lol


Regards


F

 

[Mr. Charts]

Pat did NOT say in the OP that the colour of the balls in box B was random. Since they were placed in box A 50/50, then they were placed by a person who had a financial interest in minimising the risk of paying out $1,000,000 so that person would NOT place random balls in box B.
Most people are assuming that the colour of balls in box B was random and appear to me to be answering what they assume to be the question which is NOT the one asked.

In other words, some people see what they want to see, not precisely what is there - a bit like trading

 

[trade2windows]

Pat did NOT say in the OP that the colour of the balls in box B was random. Since they were placed in box A 50/50, then they were placed by a person who had a financial interest in minimising the risk of paying out $1,000,000 so that person would NOT place random balls in box B.
Most people are assuming that the colour of balls in box B was random and appear to me to be answering what they assume to be the question which is NOT the one asked.

In other words, some people see what they want to see, not precisely what is there - a bit like trading

It doesnt matter what the ratio of red to black are ,its the same probability

 

[Pat Riley]

I am sure you will find that out of the near 14 million combinations that have never been drawn - a massive number of 6 consecutive numbers

A less massive set than the set of non-consecutive combinations.

 

[Mr. Charts]

"Loads of punters chose 6 consecutive numbers - simply down to them believing simple probability theory - ie the chances being the same etc etc"

And because they are easy to remember to use every time, like using 1,2,3,4 as the code in your burglar alarm

 

[Pat Riley]

============================================================================================
That was me drawing a line under the poll, such as it was. Not on the discussion which followed or which may follow, Inshallah.



The right answer is, there is no ‘right’ answer.

You were asked to compare a known risk (Box A - 50/50) with the apparent uncertainty (Box B – R/B). That’s the difference between risk and uncertainty. One has been quantified probabilistically, the other not.

Basically people will tend to opt to take action on a known probability, even if unfavourable, rather than an unknown probability even if it could potentially be more favourable. So the majority will pick Box A, but there is more to uncover in peoples’ choices than this.

In order of responses.

Forexmospehrian said either box, but with a preference for Box A.

Ffsear said he couldn’t see how this showed the difference between risk and uncertainty, but in the very next sentence summed up that difference perfectly; “Risk is tangible and can be defined.”.

Robster went for Box B. To be expected for his type. He then went on to hypothesise that box B had a better than evens chance. And hypothesised further he might be wrong. He did identify the ambiguity issue with Box B, but in spite of that stated both boxes had the same probability which is quite true, but then went on to declare his choice in Box B was driven by his beliefs (heart) than any mathematically edge (head). He’s clearly unwell and needs counselling.

Trader333 didn’t choose a box but made a significant point in that most traders assume they’re entering with a 50/50 chance (or with some quantifiably probabilistic risk), but in reality are likely to have far less certainty in terms of any probabilities. I’ll cover this point more fully at the very end on me post.

Darktone eventually went for Box A after much deliberation. Anal retent.

Mr. Charts went for Box A. But that’s ISIL for ya.

NVP went for Box A without any attempt at correlation which must have been torture for him.

Triggerfish did good. He identified precisely the issue (on which I’m goin ta focus at the end) by falling for the premise that Box B probabilities were unknowable rather than just unknown.

Brewski suggested (correctly) that over time (N plays) the Box B distribution should normalise ta 50/50, but, unless he’s got more than one set o balls himself that’s a moot point.

Trade2windows also spotted the principle and in a later post went on to explain why both boxes carry the same probability. A real old clever clogs.

The point? Box A and Box B had the same probability, but this wasn’t the point. The poll was phrased in such a way as to imply that the probability of Box B was unknowable and therefore uncertain. I agree with Trader333 that most traders probably operate on probabilities which they have no right ta in reality. Triggerfish also encapsulated the fact that traders think they can apply risk to their trading in a probabilistic manner, but only when risk is quantifiable. My argument is that risk is far less quantifiable than ya might think and to take the view that you’re operating mostly in a sea of uncertainty without any undue reliance on probabilities of any kind will serve better.

And the real point? Ya have no control over which box ya choose even when you correctly identify they have equal probability. It’s yer amygdala I’m afraid. We are hard-wired, each of us, to handle uncertainty with different degrees of comfort and tolerance and there’s no changing it. Even knowing each box has the same probability, those choosing box A will likely do so again.

The careful types will go for Box A. The more adventurous types will go for box B. There’s a place for both. What’s important out of all of this is to be able to recognise when you have genuine quantifiable risk as in a given odds or probability (roulette, a bookie’s odds, tossing a coin) and when you have nothing but uncertainty (trading, women, the weather).

Now poll #2 was goin ta be the same setup but yer have to pick a black ball. The logic being whatever box you thought favoured selecting a red, you’d logically switch to the other box , while the fact is it’s more likely you’ll pick the same box the second time for exactly the same rationale you chose it the first time. I see no point flogging this horse in a different thread so we may as well finish up any residual discussion on this thread if that’s alright with ya all.



I’m off sailing this weekend and Monday off ta NY so me inputs will be sparse to say the least.

 

[Mr. Charts]

If you had a roulette wheel which was covered over by a cloth so the players didn't know the black/red distribution (which they assumed to be even or near enough even) but that in reality it was rigged so the casino was less likely to pay out by their being only one red and all the others were black, then you would go and play a different and normal roulette wheel.

 

[Pat Riley]

If you had a roulette wheel which was covered over by a cloth so the players didn't know the black/red distribution (which they assumed to be even or near enough even) but that in reality it was rigged so the casino was less likely to pay out by their being only one red and all the others were black, then you would go and play a different and normal roulette wheel.

Reminds me of a game I played with a lass once. She had to guess what was under the cloth on me lap - it was either going to be an engagement ring or something else and I had to stop meself givin the game away. Long story short we're not married but I don't think she was overly disappointed.

 

[darktone]

Darktone eventually went for Box A after much deliberation. Anal retent.

I reject that! The only reason I went for Box A is cos rob gave me no choice by choosing Box B!
It had nothing to do with my anal condition!

We are hard-wired, each of us, to handle uncertainty with different degrees of comfort and tolerance and there’s no changing it.

Do you really believe that?

Coach Pat, is this correct?
The risk is your Nads
The reward is the dosh
Your odds are 50/50 for both boxes

 

[robster970]

I’m off sailing this weekend

Everybody loves a sailor eh Pat.

 

[Pat Riley]

Everybody loves a sailor eh Pat.

Ya told me you'd deleted all of em!

Last time I let yer get yer hands on me rigging that's for sure.

 

[Pat Riley]

It does rather beg the question though how Robster can get his hands on this sort of material so readily. I'm not sayin anything other than it's a bit of mystery, that's all.

 

[robster970]

Ya told me you'd deleted all of em!

Last time I let yer get yer hands on me rigging that's for sure.

You actually sailing or are you on something with twin volvo engines?

 

[Pat Riley]

You actually sailing or are you on something with twin volvo engines?

I have no problem with cruising if that's what yer referring to, and indeed, that's how I made me pocket money in the early days, but no, this weekend I'm on a proper sailing boat. 66 footer ketch.

It's not mine. I don't sail often enough to warrant balancing the pleasure of sailing one with the millstone of ownership. Far better to ingratiate yourself with those that have and get the ride for free.

 

[robster970]

I have no problem with cruising if that's what yer referring to, and indeed, that's how I made me pocket money in the early days, but no, this weekend I'm on a proper sailing boat. 66 footer ketch.

It's not mine. I don't sail often enough to warrant balancing the pleasure of sailing one with the millstone of ownership. Far better to ingratiate yourself with those that have and get the ride for free.

It's nice being on the water. I miss it. I have owned two motor cruisers. You are familiar with this Q&A:

Q: What are the two happiest days of a boat owners life?
A: The day you buy your boat and the day you sell your boat.

God knows why I did it twice. That said, we're moving to the coast in the new year so another one may be on the cards. We'll see.

Have a good weekend.

 

[Forexmospherian]

I have done quite a bit of sailing - down from Portsmouth - got my captain's certificate there about 15 yrs ago and since enjoyed sailing around the Med ( mainly off Minorca and Greek Islands ) and a couple of great trips in the Caribbean staying in an Antigua bay

Not been over 45 ft - mainly chartered all 30 -40 footers - but great way to enjoy and relax.

When I am older - ( ok over 65 ) want to spend 3 months plus sailing around the Med - too many pirates in the Caribbean still ie ex banker types lol

Enjoy your weekend and trip to NY

Regards

f

 

[chetalien]

The chances of me picking the right one is the same in either box. if i were going in blindly and risking it might as well go for the unknown.