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It is common in knowledgeable circles to talk about the development of civilization in terms of entropy discussion. The term 'entropy...

Saturday, April 20, 2013

Beat the odds

We are continually being challenged to beat the odds. Headlines about lotto wins raises the possibility "Why not me?" despite the odds. The pokies are an easy way to pass the time that hopefully will throw out some cash - to the lucky few. Scratchies and lotteries attract a bevy of hopefuls. Many of those who go to the races hope that they will back enough winners to pay for the outing. But it is the bookies who have the odds on their side

 Putting money into superannuation in order to have a pleasing retirement is not seen to be a gamble. It is called an investment. Gambling is frowned on  by many in the community but investment is regarded as a fair way to make, rather than earn, money. The Melbourne 'Age' even has a section on Wednesday devoted to  that topic. It is a good prospect whilst the economy is growing but the odds have changed following the GFC. Of course, the financial advisers continue to make money by taking their cut for the service, good or bad, that they provide.

Many people are enjoying a comfortable retirement as the result of a growing economy during their working days. The politicians providing seemingly convincing arguments that the current sovereign debt problems in the financial market will be overcome by their decisions. Thousands of Americans, Greeks, Cypriots, Irish, Italians, Spanish, Portuguese wonder how the dice manged to get things so wrong for them in recent times.   

Many pundits proclaim how it is possible to have lucky runs. They have this belief because they do not understand that there is no connection between the spinning of a wheel and the previous one. They should toss a coin. Suppose the tossing produced three heads in a row. Some people think that heads are having a run so the next toss is likely to be a head. Others will quote the 'reversion to a mean' and expect a tail to be more likely. Neither is right! The result of the next toss cannot possibly be predicted. A complex mathematical model could calculate the dynamics of the spinning coin but it would not predict the outcome because the impulse applied was unknowable so could not be input to the model.

Entering into tipping competitions has become popular as people cannot resist the endeavor to show how smart they are in a harmless pastime. Some, with a mathematical bent, devise methods that use statistical principles in the expectation that this approach will produce better tipping performance than what tipsters relying on their skill can achieve. In soccer games with three possible outcomes, home win, draw or away win, good tipping could well have a success rate of 60 to 70 per cent. This rate will depend on an unknown combination of skill and luck because the outcome of matches is unpredictable to a large extent. A mathematical method may be good enough to out perform the vast majority of skilful tipsters so the mathematicians believe they can beat the odds and win the competition. That is spurious logic as the performance of a method will have an unknowable degree of luck. So will all the many skilful tipsters. Some will be very lucky and so have an unexpectedly and unrepeatable high success rate. The mathematicians will learn the hard way that their methods cannot beat the odds.
Naturally, many people know how to beat the odds. They embrace a fugal life style enhanced by family and friends in close knit communities. They obtain satisfaction by using their personal skills in gardening, cooking and repairing things, often for others. Without using the term, they embrace the 'precautionary principle' even though their governments do not.

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