Math: The ultimate decision-making tool...

[Jon822]

In machine learning, there is a technique in the data processing phase where you have to "vectorize" categorical fields. The reason this must be done is so a computer does not make false inferences based on arbitrary differences in labels. Or if someone incorrectly decided to encode labels with integers, a computer could make false inferences based on the numerical differences. For example, if you replaced New York with 1 and California with 2, a computer might conclude that California = 2*New York and generate inaccurate predictions based on this. As silly as this might sound, human beings are far worse at making false inferences -- look no further than the sports enthusiast who insists on wearing the same unwashed jersey while his team is on a winning streak.

In the book "Fooled by Randomness", these quack inferences also exist in the investment world and this is one of the major things the author criticized -- short term windfalls without an understanding of sample size and statistical analysis leads to bogus theories about how the market operates. Come up with enough investment strategies that you know are ridiculous, and one of them is bound to be successful in some small window of the market's history (or possibly in the future). It's worth noting that if you applied that strategy over a long enough period of time, it would approach it's actual return rate.

This is precisely where kepton is getting his inflated ideas about luck: because SOME investors get lucky in SMALL windows of time (just like some people win the lottery despite the odds being near zero), everything must be based on luck. One major problem with this (aside from the lack of understanding of conditional probability and sample size) is that it makes false equivalences based on arbitrary language usage. Just because we use the word investment to refer to buying stocks and for putting resources into a self-made business does not mean they both carry the same risks and rewards.

Create your own conditions which manipulates your individual probabilities (favorably or unfavorably) to make your own luck. Would you flip a coin for your success if you get to use a rigged coin that you made? I would. With the right conditions, success can be the mathematically expected outcome -- no luck required.

 

[MJ DeMarco]

Today's newsletter is on decision making, and this little exercise isn't included.

Read the entire article.

*THIS* is the best decision-making tool ever, PERIOD.

However, one decision-making strategy is to analyze things from simple math.

Per below, if Stripe owes you $5000, you can be charged $50 to get your payout 3 days early.

If you work out the math, you'd be mortified. But I guess Stripe hopes you won't work out the math.

What is the annualized return for Stripe? Or the annualized cost for your impatience?

3 days of impatience costs you an annualized interest rate of 121%. On the other side, Stripe will earn 121% on your impatience.

Question: Would you take a loan @ 121% interest rates?

You wouldn't and math exposes the right decision. It also exposes Stripe for charging mob-like rates that should be illegal.

 

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[heavy_industry]

you think you just deserve it cause you're more intelligent. What a shame.

I deserve nothing and am entitled to nothing.

Everything that I got in life (including life itself) was a gift from the heavens.


But this doesn't change the fact that we are making our own "luck" through repeated action.

• If you smoke 2 packs a day and in 10 years you die from cancer that's not bad luck.
• If you run businesses in a smart way and in 10 years you're at $100MM, that's not good luck.

It's Karma.
It's determinism.
It's cause-and-effect.

Pareto distributions, normal distributions, and the Matthew principle are very powerful concepts to understand, and I use them in my business and life on a regular basis.

But they have no predictive power over individual outcomes. This is not how statistics work.

Extreme levels of success may occur in 1% of the population, but your individual probability of achieving success ranges from 0% to over 99%, depending almost entirely on your own actions.

Not sure what is the point you're trying to make, and I'm not sure if you're just trolling, so I will stop replying because what's happening on this thread starts to resemble a circus.

 

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[MJ DeMarco]

Bro, I got you!

Join my coin flipping investment newsletter (link coming soon), and I'll make sure you have plenty of time and money to weave baskets underwater.

I'm the luckiest guy on the forum, so just follow my lead.

Ooo, that should be the tagline...

If it's luck you need, follow my lead.

Can't miss.



First of all, you absolutely can sell luck. And the perception of luck.

Second of all there is a Grand canyon sized difference between entropy and luck.

If you want to come on here and sound dumb, expect to be treated like you're dumb.

But if you want to come on here and try and sound intelligent, make sure you are precise in your language.

By the rules of entropy, some small percentage of people who do absolutely nothing will become rich. I'm not talking about people who buy lottery tickets. They at least took an action. If you really talking chaos theory, then people who sit on their a$$ and never stand up have the potential to get rich. That person would be truly lucky. And luck is all you need, apparently.

Since that seems to be the belief that you are espousing, since you are saying that providing value has nothing to do with becoming successful...

Well you're actually even dumber than I first thought.

Your first comment made you just sound ignorant.

Your last comment made you sound willfully, mentally handicapped.

I hope you break through this limiting belief one day. I really do.

This is the real truth.

but I would like to let know to people what I've learned by experience.

Wow, how shocking. Your mental approach to life sucks, so it's no shock your life also probably sucks. Poor me.

Of course, conditional probability doesn't apply to you right? If I smoke 3 packs of cigarettes a day, my odds of lung cancer is EXACTLY the same as the average joe, eh?

Based on what I've read, your odds of "wealth" is exactly the same (and what I've read here, worse) than any Joe Blow riding the bus.

This is the real truth.

This is cruel and this is how this world works.

Yes, in your world. Your ignorance on such matters is astounding. But what's more astounding is your confidence in them.

This is the real truth.

I know MJ will not like my comment

What's more interesting is you've waited 6 years to share with us your unlucky victim philosophy. Sad, perhaps you should disappear for another 6 years as you have nothing to offer us, as if the world needs another World Economic Forum stooge.

This is the real truth.

Of course it is good luck! It's incredible to see your denial to such a simple and essential fact.

You're a moron. And removed from the thread.

This is the real truth.

 

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[xShepherdx]

Just curious, how did you do the math on this? Seems like a useful mental model and I would like to learn how to calculate these things.

You can calculate APR pretty easily in Google Sheets/Excel using the formula on this page: APR - Investopedia

Here's a rough example of how the math works:


It may look a bit complicated but all you need to do is line out the variables and then plug them into the APR formula. Very easy and you can find calculators online to do this for you.

It's good stuff to know though!

 

[BizyDad]

I think this post ignores the real truth. The truth is that house pricings not always go up and that the investment was just lucky. It's not MATH what decides the prices, but luck.

I find the information misleading, trying to know an investment like math when this is never the case. All investments are based on pure luck, guys. This is the real truth.

This real truth explains so much.

And that's why people who go to casinos are known as "investors".

And why my flip a coin strategy for picking stock is working out so well. I'm going to start an investing newsletter.

I can't wait to get a few friends together to invest some poker.

I love when I find out the really true meaning of words. I can't wait to tell all the economists I know that market forces is just coded language for luck. They'll probably deny it, but they're just drinking the Kool-Aid.

This forum is so full of excellent information! I'm glad we can speak the real truth here.

 

[heavy_industry]

I think this post ignores the real truth.

It's not MATH what decides the prices, but luck.

Doesn't surprise me to see rich people these are smarter instead of seeing the real reason they are rich: pure luck.

Wow, thanks for sharing the true, real, and actual truth.

All my life I've been misled by the idea that hard work and good choices lead to success. I had no idea that the real truth was luck.


@MJ DeMarco
We need to change C.E.N.T.S. with something else... L.O.S.E.R.

Luck
OpenSea NFTs
Stocks
Entropy
Reddit

Damn. I wish i would have known this before I got my degree in mathematics and statistics.

This is another example of the real truth in action.

You've got a STEM degree because you got lucky. This is the entropy of the universe!

 

[BizyDad]

This is the most absurd answer I've read on my life.

How can you affirm such a thing without providing more explanations?

Coming from the guy who said luck is the determining factor in success, this comment is hypocritical.

You can't prove your statement, therefore how can you affirm it?

If you can be absurd, I can be absurd. It's funny how it's not a two-way street for you though.

You nor anyone can sell luck cause it's impossible.

Luck cannot be controlled any way, just probabilities, which are not luck. I you could control luck, well, you would be GOD. And you aren't.

Look up indulgences.

Look up horse track betting.

Look up new age crystals.

Casinos sell luck all day every day. Bad luck is still luck, after all. And if you think about it in terms of selling bad luck, let's just go ahead and add cigarettes and alcohol companies to the list of organizations selling bad luck.

you're one of the lucky guys

Yes I am. I already admitted that. I'm super lucky. I'm even more blessed.

Now don't be getting jealous of me.

the reality is that you're not better than others

First of all, how would you know? You don't know me? There's no one I'm better than? Let's put a pin in that.

You're denying very basic facts here

Are you putting words in my mouth kepton? Show me my denial of basic facts...

I'm sorry but I see you're affirming something I've not said in any way here. Clearly you've got my point totally wrong, and insulting me betrays your lack of arguments.

If I misunderstood your point, maybe you should explain it better.

You correlated luck with entropy and chaos theory. I simply extrapolated meaning from that.

Granted, I didn't say it was your view, I said it SEEMS like you view. I admit I didn't have a lot of evidence to go on.

But again, maybe that's your fault for not explaining your thoughts fully or accurately.

saying that all the value in the world without luck, becomes useless

What?

If your point is simply that luck has a role to play in people's success, well then why didn't you just say THAT?

Because this was nowhere in your original post.

Because that's not actually your point and this is revisionist history. You didn't actually say that. You just want to change your point to this now that you got called out.

What you said was luck is the ONLY thing that matters. "The determining factor" was your exact words. The word THE in this sentence indicates that there is only ONE determining factor. The aforementioned Luck.

I apologize if English is your second language or if you simply didn't realize that this is how the word THE is used in this context.

Of course, since no one is better than anyone at anything, you probably don't need me to explain this to you because of course you and I are exactly equal in our ability to understand the English language.

I can't possibly be better at you at English. Or logic.

This is the most absurd answer I've read on my life.

How can you affirm such a thing without providing more explanations?

You nor anyone can sell luck cause it's impossible.

Luck cannot be controlled any way, just probabilities, which are not luck. I you could control luck, well, you would be GOD. And you aren't.

You're denying very basic facts here which demonstrates that you're one of the lucky guys who doesn't want to see that luck determined his life in reality, nor only his willpower. This is the illusion the ego is projecting on you, but the reality is that you're not better than others. You're showing you think you are better for your arrogant comments, which is a shame. But well, life teach us all, sooner or later.



I'm sorry but I see you're affirming something I've not said in any way here. Clearly you've got my point totally wrong, and insulting me betrays your lack of arguments.

I'm not despising value here, but saying that all the value in the world without luck, becomes useless. It's a very simple concept, but hard to really understand. Especially by the ego...

Funny if this isn't the pot calling the kettle black.

For all your talk about how egotistical I am, do you think maybe you should look in the mirror?

Did I hurt your fragile ego by calling you ignorant? Is that why you're on some high horse making assumptions about me, my, luck, my belief of others, and level of my ego?

Are you not in fact doing all the illogical things you accused me of doing?

Hey, I get it. I can be a hypocrite too sometimes. At least I own my mistakes.

But I didn't make one by disagreeing with you. You've already started to change your story because your original position was indefensible.

Which is sad. I was hoping for a proper debate with a proper self aggrandized mental giant. Oh well. I'll go look in other threads I suppose.

Hope your luck changes kepton.

On the forum 6 years and "luck determines success" is the best your life has taught you.

Such a shame.

 

[Andy Black]

"The harder I practice the luckier I get."

(Attributed to golfer Gary Player I believe, after a bit of Googling.)

 

[Mr.Maverick]

if luck doens't want you to be rich, you will not.

All this luck/randomness talk is really just operating from an external locus of control.

"Things are happening to me."
"I blame external forces"

This is a crippling belief system

Entrepreneurs don't believe this. We have an internal locus of control.

"We make things happen."
"We are responsible for our dreams and how we respond to external forces."

If you have an internal locus of control there's no point in focusing on luck

because if you could influence luck....
.... it wouldn't be considered luck.

 

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[MJ DeMarco]

What's scary is there are people like this all around us. Your cousin. The guy next to you on the train. The guy delivering your DoorDash. They read a book on "randomness" and pervert it into this mystical life philosophy that borders on nihilism. People like this have no business in my life, here at the forum, and god forbid, I ever hire one of these "types" as an employee.

In machine learning, there is a technique in the data processing phase where you have to "vectorize" categorical fields. The reason this must be done is so a computer does not make false inferences based on arbitrary differences in labels. Or if someone incorrectly decided to encode labels with integers, a computer could make false inferences based on the numerical differences. For example, if you replaced New York with 1 and California with 2, a computer might conclude that California = 2*New York and generate inaccurate predictions based on this. As silly as this might sound, human beings are far worse at making false inferences -- look no further than the sports enthusiast who insists on wearing the same unwashed jersey while his team is on a winning streak.

In the book "Fooled by Randomness", these quack inferences also exist in the investment world and this is one of the major things the author criticized -- short term windfalls without an understanding of sample size and statistical analysis leads to bogus theories about how the market operates. Come up with enough investment strategies that you know are ridiculous, and one of them is bound to be successful in some small window of the market's history (or possibly in the future). It's worth noting that if you applied that strategy over a long enough period of time, it would approach it's actual return rate.

This is precisely where kepton is getting his inflated ideas about luck: because SOME investors get lucky in SMALL windows of time (just like some people win the lottery despite the odds being near zero), everything must be based on luck. One major problem with this (aside from the lack of understanding of conditional probability and sample size) is that it makes false equivalences based on arbitrary language usage. Just because we use the word investment to refer to buying stocks and for putting resources into a self-made business does not mean they both carry the same risks and rewards.

Create your own conditions which manipulates your individual probabilities (favorably or unfavorably) to make your own luck. Would you flip a coin for your success if you get to use a rigged coin that you made? I would.

Do you really have a degree in statistics and math?

 

[Andy Black]

Today's newsletter is on decision making, and this little exercise isn't included.

However, one decision-making strategy is to analyze things from simple math.

Per below, if Stripe owes you $5000, you can be charged $50 to get your payout 3 days early.

If you work out the math, you'd be mortified. But I guess Stripe hopes you won't work out the math.

What is the annualized return for Stripe? Or the annualized cost for your impatience?

3 days of impatience costs you an annualized interest rate of 121%. On the other side, Stripe will earn 121% on your impatience.

Question: Would you take a loan @ 121% interest rates?

You wouldn't and math exposes the right decision. It also exposes Stripe for charging mob-like rates that should be illegal.

View attachment 48850

Companies are often excited to share the better deals they're getting.

 

[Panos Daras]

You can calculate APR pretty easily in Google Sheets/Excel using the formula on this page: APR - Investopedia

Here's a rough example of how the math works:

View attachment 48868
It may look a bit complicated but all you need to do is line out the variables and then plug them into the APR formula. Very easy and you can find calculators online to do this for you.

It's good stuff to know though!

Thanks, man that is what I needed to understand this post on the calculation. @MJ DeMarco refers to APR = The Annual Percentage Rate. So I also asked Chat GPT to simplify and this is what I got. Hope it also helps

 

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[BizyDad]

Damn. I wish i would have known this before I got my degree in mathematics and statistics. I could have gotten a degree in what I'm really passionate about: underwater basket weaving.

Bro, I got you!

Join my coin flipping investment newsletter (link coming soon), and I'll make sure you have plenty of time and money to weave baskets underwater.

I'm the luckiest guy on the forum, so just follow my lead.

Ooo, that should be the tagline...

If it's luck you need, follow my lead.

Can't miss.

Not popular because luck cannot be controlled, and it's something you cannot sell to anyone...

First of all, you absolutely can sell luck. And the perception of luck.

Second of all there is a Grand canyon sized difference between entropy and luck.

If you want to come on here and sound dumb, expect to be treated like you're dumb.

But if you want to come on here and try and sound intelligent, make sure you are precise in your language.

By the rules of entropy, some small percentage of people who do absolutely nothing will become rich. I'm not talking about people who buy lottery tickets. They at least took an action. If you really talking chaos theory, then people who sit on their a$$ and never stand up have the potential to get rich. That person would be truly lucky. And luck is all you need, apparently.

Since that seems to be the belief that you are espousing, since you are saying that providing value has nothing to do with becoming successful...

Well you're actually even dumber than I first thought.

Your first comment made you just sound ignorant.

Your last comment made you sound willfully, mentally handicapped.

I hope you break through this limiting belief one day. I really do.

 

[Jon822]

Oh really? Well if I sound like a dropout, read Nassim Taleb's "Fooled by Randomness" essay explaining exactly the same I'm saying here. He's not precisely a dumb individual.

I have read it. I recommended it in another comment of mine. You clearly did not understand a single thing in it.

 

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[Jon822]

What's scary is there are people like this all around us. Your cousin. The guy next to you on the train. The guy delivering your DoorDash. They read a book on "randomness" and pervert it into this mystical life philosophy that borders on nihilism. People like this have no business in my life, here at the forum, and god forbid, I ever hire one of these "types" as an employee.




Do you really have a degree in statistics and math?

Yes but it's one degree. The college I went to does not include statistics under the umbrella of mathematics because mathematics deals with certainty, while statistics deals with uncertainty. So I have one bachelor's degree in "Mathematics and Statistics."

 

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[Jon822]

This is the best thing I've read today.

I'm glad you found value in it

Edit: In 99% of places (both online and physical), I'd be better off with a degree in computer science or software engineering in terms of how it is valued. This is one of the few places that really understands and values mathematics for the insight it can give you. It really is the subject of problem solving and if there were to be a subject that is synonymous with entrepreneurship, it would have to be mathematics. But maybe I'm biased

 

[MJ DeMarco]

Updated!

*THIS* is the best decision-making tool ever, PERIOD.

 

[MJ DeMarco]

I think this post ignores the real truth. The truth is that house pricings not always go up and that the investment was just lucky. It's not MATH what decides the prices, but luck.

I find the information misleading, trying to know an investment like math when this is never the case. All investments are based on pure luck, guys. This is the real truth.

I never said housing prices always go up. Nice straw.

But you know what always goes up? Inflation. $1 dollar today is ALWAYS worth more than $1 tomorrow.

Luck has nothing to do with it.

This is the real truth.

 

[msufan]

I think the gumball machine example (from MJ's writing) is the perfect antidote to this thread's derailment

 

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[HabitsCampaigner]

Well said. Following the science, making the money.

 

[Jon822]

I hate to quibble over minute details, but the APR is actually 121.67% or higher since the fees are max($0.50, 1%). If $0.50 ends up being higher, then APR > 121.67%. For example, if someone were to pull $5 out early, the APR would be around 1216.67%. All of this to say that the Stripe punishment for being impatient is even worse.

I think this post ignores the real truth. The truth is that house pricings not always go up and that the investment was just lucky. It's not MATH what decides the prices, but luck.

I find the information misleading, trying to know an investment like math when this is never the case. All investments are based on pure luck, guys. This is the real truth.

Damn. I wish i would have known this before I got my degree in mathematics and statistics. I could have gotten a degree in what I'm really passionate about: underwater basket weaving.

 

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[Andy Black]

You got your degree and everything you have cause you got favorable circumstances. Those favorable circumstances depend on luck. You've got the health and the opportunities to be there, and you put the effort. But primarily, you needed the luck to be at the right place at the right moment. Think about it, if you can...

Some poker players win over the long run. Were they lucky to have figured out how?

Are you saying MJ was lucky to be able to make correct mathematical decisions?

It's true we all won the lottery just by being born, and that being able to argue online via our internet connection makes us some of the luckiest people born.

Apart from that, what MJ did made mathematical sense.

He borrowed money at x% and made it work at y% where y was greater than x.

He also converted cash in the bank (that would be devalued over time by inflation) into property (that would increase in value over time due to inflation and other factors).

 

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[MJ DeMarco]

Imagine if one day after you had a $200,000+ month from your original website profits, one of these 1% gurus emerged, "Hey MJ, just want to remind you that you only have a 1% chance of getting wealthy. This is a mathematical certainty. Don't try and argue with it." You'd laugh your a$$ off the entire way to the bank.

It's on par with, "Well, you're chances of getting lung cancer are only .3%, so feel free to smoke as much as you'd like."

 

[heavy_industry]

With the right conditions, success can be the mathematically expected outcome -- no luck required.

This is the best thing I've read today.

 

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[Jon822]

My girlfriend's brother has something similar called Daily Pay. He has had situations where he had to use it because his bank account is usually at 0 or negative. It's effectively a tax for being poor. "Great news! You can pay us more money when you're desperate for it."

 

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[kepton]

If you run businesses in a smart way and in 10 years you're at $100MM, that's not good luck

Of course it is good luck! It's incredible to see your denial to such a simple and essential fact.

I'm glad you will not participate in this post anymore, since you're who makes this a circus.
I'm very serious in my statements, you aren't and you're obviously trolling me. Glad you leaved here.

 

[<john>]

What's scary is there are people like this all around us. Your cousin. The guy next to you on the train. The guy delivering your DoorDash. They read a book on "randomness" and pervert it into this mystical life philosophy that borders on nihilism. People like this have no business in my life, here at the forum, and god forbid, I ever hire one of these "types" as an employee.




Do you really have a degree in statistics and math?

Not only nihilism but also marxism... Losers think it's unfair that other people can figure out how to better their lives and then these losers falsely believe that life & business is a zero sum game based on luck and privilege. They then demand the government should get involved and "redistribute" or "level the playing field". The truth is choices in life both personal and business-based have cumulative effects.

 

[farahead]

so basically if you pay 1 % of 5000 $ every 3 days, you end up paying them 121 % so 6000 $ for getting 5000 $ faster per year ? i dont really get it

 

[Makaveli7]

Just curious, how did you do the math on this? Seems like a useful mental model and I would like to learn how to calculate these things.