Financial Freedom Is Merely Organized Common Sense

The World Series of Poker is on these days. Winning poker relies on many factors. One that you won’t hear from the commentators is how the best players are adept at understanding Bayes theorem. Bayesian inference is about calculating probabilities in a changing environment. The easiest way to think about it is if you can estimate the beginning probability you can gradually change those odds to something closer to reality as events unfold.

The formula is:

= | events | |

= | probability of A given B is true | |

= | probability of B given A is true | |

= | the independent probabilities of A and B |

From Wikipedia

Most people use Bayesian ideas without the formality. If you forgot your girlfriend’s birthday you might estimate the odds she is angry at maybe 70%. You send her a friendly text and get no response. That’s not normal. Now the odds are higher, right? So you phone. That goes to voice mail. Odds, now. Not 100%, but much higher than they were.

In poker every new card you see, changes the odds and the best players sort it out almost instantly.

People generally do it informally too, but in more complex situations.

So what is thinking all about? In our world today there are many people who don’t think much or often. That’s unfortunate because even a little is far better than none. It is a bit like exercise. The difference between no exercise and little exercise is large. The difference between working out 2 hours a day instead of 30 minutes is proportionally not as much. Trying to become an Olympic athlete is about the last 1% or 2% of what’s possible but might require tripling the time commitment.

A little thinking goes a long way to improving your life.

George Bernard Shaw had this thought, “**Few people think more than two or three times a year. I have made an international reputation for myself by thinking once or twice a week**..”

There remains the question of how you do it. Thinking about the architecture of a computer program is quite different from thinking about how you think about voting preferences given a political platform.

With most things there is an opening question that clarifies the process. In this case, it is a question, “What’s it for?”

This answer makes some sense.

“**Thinking – or reasoning – involves objectively connecting present beliefs with evidence in order to believe something else.”** David T. Moore from his book, Critical Thinking and Intelligence Analysis

In that sense, it is Bayesian. Everything you think about changes your fit to the world.

And that is quite useful if you use good evidence and sound reasoning

Evidence matters, feelings don’t

Practice makes you better at thinking

Thinking improves your ability to predict outcomes

Predicting outcomes helps you adapt to changing circumstances. .

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com

%d bloggers like this: