How To Benefit From Probability Theory In Life?

How can the typical average person benefit from probability theory? Probability theory is one of the newest and toughest branches of mathematics. It also has a reputation for being one of the most counter-intuitive branches of science / mathematics there is. The works of authors such as Daniel Kahneman and Nassim Taleb just reinstate the counter-intuitive nature of this field. But with this article, I would like to argue that it is counter-intuitive only if approached from a scientific point of view. The notion of probability actually comes from human logic, and if built upon an intuitive basis, knowledge of this field could be very helpful in day-to-day life. Let’s see how an intuitive understanding of probability theory could help us with our daily challenges.

This essay is supported by Generatebg

Basic Understanding

To understand probability theory, let’s first see what it is. The definition of probability theory is the study of the likelihood that an event will occur. It can be understood intuitively as a number which describes what happens to be the case out of all the possibilities for something to happen, or not to happen. It can also be understood as a ratio between two numbers, where the numerator is the number of times an event could occur, and the denominator is the total number of opportunities all potential events (including the event considered in the numerator) event to occur. For example, if I flip heads thrice out of four flips, then 3/4th of my flips are heads.

A more mathematical definition would be: A probability is a number between 0 and 1 that measures how likely it is that a given event will occur. If an event has a probability of 0, it cannot possibly happen, and if an event has a probability of 1 it must necessarily happen. A probability near 0 indicates an unlikely event while a probability near 1 indicates a likely event. To put it simply, when you toss a (fair) coin in the air, there is a 50% chance that it will fall on heads and 50% chance that it will fall on tails (we do not consider the very rare case of the coin landing on its seam).

Intuitive Understanding

Consider a case where a hypothetical person may have 80% chance to miss his flight from London to Paris because he doesn’t have enough time to reach London Heathrow airport in time due to traffic jams! Notice how we are able to intuitively understand this example (except the-80%-part)? It’s because probability theory stems from human logic, and not the other way around. The quantification (the-80%-part) is rather difficult to calculate but it is seldom required in real world heuristic-based applications. The quantification is difficult because it requires in-depth knowledge of all possible parameters and factors that go into the analysis of an event’s likelihood. 

Furthermore, one more important thing about probability is that it does not imply anything about the size of an effect but only about its likelihood! So, you can have high probabilities with small effects (example: mild showers) just like small probabilities with big effects (like insurance protection against fire accidents)! So far so good, but how does this intuitive understanding help us in our day-to-day life? The answer is with the help of probabilistic heuristics.

Probabilistic Heuristics

Probability theory can be used in real world applications by understanding its fundamentals and using it in conjunction with human logic. The following are examples of probabilistic heuristics that you can use in day-to-day life:

Example 1

Consider a hypothetical example where we advise people who are looking for jobs to utilize their network (friends and relatives) rather than just relying on job portals (like monster) or head-hunters. Why is this? Because the probability of finding a job through one’s own network is higher than the probability of finding a job through job portals and head-hunters! We have an intuitive understanding of the probabilities here. If you think about it, when you compare a scenario where one relies just on job portals and head-hunters against another scenario where one relies on his or her own network, job portals, and head-hunters, the overall probability of landing a job increases in the second scenario. We cannot put a precise number on it, but we know that it is higher because the second scenario increases the number of potential ways in which success (landing a job) could be achieved. Low key take-away if you have missed it so far: In the context of looking for jobs, one’s own network is not to be overlooked.

Example 2

Consider a hypothetical example where we advise students to study hard for their exams to increase their probability of scoring well. If we think about it, hard work alone is not enough to score well in an exam. One needs to know the subject matter as well. So, an intuitive understanding of probability theory tells us that to increase our chances of getting a good grade in an exam, we need to put in hard work and effort (the first item) and study (the second item). What’s more interesting here is if one puts in the hard work and effort, the probability of studying well increases, and consequently scoring well in the exam increases. This is known as conditional probability in the business, and we seem to be doing fine in this example even without knowing the technical subtleties.

Example 3

Consider a hypothetical example where there is a chance that you may get drugged and robbed if you go out on a night! This is a real-world scenario which can be analysed from a probabilistic perspective. Of course, just going out on a night-out does not imply that you will get drugged and robbed, but there is a chance of this happening (we do not know the exact number, but we know there is a non-neglectable chance). The intuitive notion here is that the probability of getting drugged / robbed increases when you take more risks! For example, going out at 2 AM by yourself in an unfamiliar location might significantly increase your chances of being drugged and robbed when compared to going out at just 11 AM with friends in a well-known location. So, even though the probability of being drugged and robbed is small, it increases as you take more risks! Using probabilistic thinking, you may choose to act in a way that minimizes risks, and thereby reduce the probability of getting drugged / robbed.

Conclusion

Probability theory is not just for mathematicians. It is a branch of mathematics that has humble roots in common human reasoning and logic. Based on this, I would like to argue that the probabilistic approach is accessible to all human beings, and many of us use such an approach even without realizing it. Probabilistic heuristics can be used in real world applications by understanding its fundamentals and using it in conjunction with human logic. When we learn the intuitive notion behind probability theory, we can hone our skills to make quick real-world decisions that focus on better outcomes. And the best part is, the whole subject matter is fun if we learn it this way as opposed to how probability theory might be taught in school.

I hope you found this article interesting and useful. If you’d like to get notified when interesting content gets published here, consider subscribing.

Further reading that might interest you: Top 5 Pot Secrets of Ultra Success and The Hindsight Bias: Cause and Effect.