17 February, 2009


Probability theory for journalists

A pointless interview by Mr Humphrys on the Today programme just now, one of many such over the past few days in which broadcasters and meeja people generally fail to come to terms with the fact that if something is very, very improbable indeed, such as two stealthed nuclear submarines accidentally bumping into each other in the middle of the Atlantic ocean rather like two lurking characters in a farce backing in to each other, that is not the same thing as the event actually being impossible.

If the probability of something is 1 in 1,000,000,000, that does not mean that the "1" cannot actually happen.

The near collision of the subs is one of those 'fat tail' events on which you can't perform an adequate 'risk assessment .In our risk averse age that is a terrible prospect.
BBC interviewers aren't the only ones who have difficulty understanding probability theory- Bank CEOs/CFOs obviously thought that, via hedgeing, 'credit default swaps', and all the other financialisation paraphernalia, that hitherto 'risky' lending was a one way ticket to riches. More fool them- and more fool us for letting them fill theirs boots when the going was good.

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