Statistics & Probabilities

Statistics and probabilities are an offshoot of mathematics. These ideas are incredibly important to understand to effectively operate in the world and make better decisions. Thinking in this manner is quite difficult and often counterintuitive, but a basic understanding of statistics and probabilities, coupled with concepts we’ll tackle later on like compound interest, the time value of money, and opportunity costs, provide the foundation for making effective decisions. This process will help us see reality for what it is, rather than how we wish it to be.

Many of these ideas aren’t complex, but a number of biases make it hard for us to adhere to statistical and probabilistic thinking. People can be overconfident, misunderstand the role of luck and skill, overweight losses compared to gains, overvalue the things they currently own, and much more. However, by keeping some of these big ideas in mind, we can mitigate these biases and make more effective decisions that align with the probabilities we face.