2023 Author: Katelyn Chandter | [email protected]. Last modified: 2023-05-21 13:08
Risk is a noble cause, and who does not take risks does not drink champagne? We want to feel the thrill of winning, but we fail. What mistakes do we risk in vain.
Millionaire Jim Paul lost his entire fortune in seventy-five days. He was a trader, led a successful business for 15 years, but in just two and a half months he lost more than a million dollars. Say, unlucky? Jim himself does not think so. In his opinion, the collapse was absolutely natural, because all these 15 years … he was lucky. He believed so much that he was special that he missed the moment when he had to stop.
Jim cites unnecessary risk as one of the reasons for the collapse. In What I Learned From The Lost Of A Million Dollars, he talks about the mental traps we fall into when we want to experience intense emotions.
Gray Horse Betting
The first pitfall is the tendency to underestimate champions and overestimate gray horses. The best example is horse racing, where there are favorites and participants with low chances of winning. We are not attracted to small winnings, so we bet on the outsiders. Yes, the chances of making money are less, but at the same time we get sharp emotions! However, practice shows that you will be in a big disadvantage. You may be lucky once or twice, but in the long run, this tactic will turn out to be a losing one.
With every throw, my chances increase
We guess the number and roll the die. What do you think, if you roll the dice not once, but twice, the probability of getting a given number will double? No, the probability will remain the same.
Another example. We roll the dice four times and each time we get the number six, it seems to us that the next time the chances of opening a four become more. Accordingly, the chances of throwing six again decrease. But this is not the case! The probability that this or that number will be dropped is always equal, it does not change. The problem is that we tend to evaluate successive events in total, rather than each event individually.
Monte Carlo error
The third trap sounds like this: the belief that after several successful operations or actions, failure is inevitable, and vice versa. This phenomenon is known as "Monte Carlo error". A person can roll sixes on two dice at least ten times in a row, and this does not contradict the laws of probability, because all ten events are independent of each other.
In everyday life, this phenomenon manifests itself in the desire to divide life into black and white. "I've been so lucky lately, something bad is going to happen today." “I’ve been unlucky ten times in a row, it doesn’t happen. On the eleventh, you will definitely be lucky. " Once again: situations should be considered independently of each other, and not in the aggregate.
Winning the lottery is more likely to be struck by lightning
If we perceive a certain event as positive, then subconsciously we give more chances that it will happen. And vice versa. A negative event seems less likely to us.
For example, the probability of drawing a winning ticket in the lottery and the probability of being killed by lightning are approximately equal and amount to about 1 in 10,000, but, as a rule, it seems to us that the chances of buying a winning ticket with us are incomparably greater (positive event) than of suffering from a lightning strike (negative event).
Our brain is so arranged that it remembers large events, and most often deletes small ones from memory. If we have had a series of winnings in a card game or a series of happy events at some point in our lives, we will consider ourselves the masters of the card game and the lucky ones. At the same time, we will forget that everything was not so rosy. That there was a big loss before a successful streak, that in the intervals between money transactions there were minor unpleasant failures.
That is, people remember the "streaks" of wins or losses in a row, but at the same time they tend to underestimate the number of wins or losses that occur singly or in small series. Therefore, those who place bets on the outcome of sports matches are advised to record their results. Only in this way will you really understand whether you are acting in a minus or a plus.
I was one step away from winning
We also tend to confuse the occurrence of unusual events with the occurrence of unlikely events. For example, if a person buys a lottery ticket, the number of which is only slightly different from the winning one, it seems to him that he is faced with some particularly cruel form of bad luck.
In such cases, we say that "we were one step away from winning, but we were very unlucky." In fact, it doesn't matter which side fortune turns to you. The chance that we will get a win is equal to the chance of getting a ticket, where there is only one “wrong” number. When we take risks, we should think more about mathematical statistics, rather than luck.