Dance with Chance by Spyros Makridakis & Robin Hogarth & Anil Gaba

Author:Spyros Makridakis & Robin Hogarth & Anil Gaba
Language: eng
Format: epub
Publisher: Oneworld Publications
Published: 2009-09-14T16:00:00+00:00

THE LUCK OF THE DRAW

Life, unlike roulette, is not a pure game of chance. Our personal Fortunes are the cumulative results of both chance events and our own actions. But, as Jules and Jim showed us, these two elements are hard to quantify. Indeed, since we usually focus on the outcomes of events rather than their causes, we rarely stop to unravel luck from design. Consider the case of a man who won a huge prize in Spain’s national lottery. Curious journalists asked him how he did it. The winner replied without any hint of shame that he had deliberately selected a ticket ending with the numbers four and eight. “But why?” pressed the reporters. “Ah,” he explained. “I dreamt of the number seven for seven nights. And seven times seven is forty-eight.” He may have got his multiplication tables wrong but he certainly struck it rich.

One way of figuring out the roles of chance and deliberate actions in producing outcomes is to create a baseline of Fortunes generated solely by chance processes. If we can just figure out what chance “looks like,” we should get a better appreciation for what we can and cannot predict.

To do this, let’s imagine the following game. Assume you’re going to bet €500 on the single toss of a coin. If you bet on heads, you have a 50% chance of winning €500 and a 50% chance of losing €500. Once the coin is tossed, you either win or lose. The game is over.

So far, so simple. Now let’s assume that, instead of playing once, you agree to play 100 times, betting €500 on heads each time. Then you plot your winnings and losses on a graph to see exactly what chance looks like. Having done that, you repeat the process a few times – until you have six graphs. Figures 9a–f show some that we prepared earlier, revealing some typical and not so typical patterns of outcomes. They’re genuine examples of what can happen.

The trouble is, as you’ve probably noticed, that chance has many different faces. Each of the figures shows the cumulative effects – winning and losing – of flipping the coin 100 times and betting €500 on heads each time. In other words, the situation at any point in the graphs shows the sum of wins and losses up to that point.

Figure 9a looks a lot like what most of us would imagine. The end point is zero – the same as the starting point. And the net losses and gains jump either side of zero across the 100 tosses. In this particular case, the chance Fortune is on average a little bigger in the first fifty goes than it is for the second half of the experiment. But we know this is just due to luck.

Figures 9b, 9c, and 9d are like figure 9a, in that the net losses or gains at the end are zero, or very close to zero. Back to square one, as it were. However, the patterns across the 100 tosses are quite different.

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