## Survivorship Bias

The Misconception: You should focus on the successful if you wish to become successful.

The Truth: When failure becomes invisible, the difference between failure and success may also become invisible.

In New York City, in an apartment a dozen blocks west of Harlem, above trees reaching out over sidewalks and dogs pulling at leashes and conversations cut short to avoid parking tickets, a group of professional thinkers once gathered and completed equations that would both snuff and spare several hundred thousand human lives.

People walking by the apartment at the time had no idea that four stories above them some of the most important work in applied mathematics was tilting the scales of a global conflict as secret agents of the United States armed forces, arithmetical soldiers, engaged in statistical combat. Nor could people today know as they open umbrellas and twist heels on cigarettes, that nearby, in an apartment overlooking Morningside…

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## Innumeracy

In one study, Gigerenzer and his colleagues asked doctors in Germany and the United States to estimate the probability that a woman with a positive mammogram actually has breast cancer, even though she’s in a low-risk group: 40 to 50 years old, with no symptoms or family history of breast cancer.  To make the question specific, the doctors were told to assume the following statistics — couched in terms of percentages and probabilities — about the prevalence of breast cancer among women in this cohort, and also about the mammogram’s sensitivity and rate of false positives:

The probability that one of these women has breast cancer is 0.8 percent.  If a woman has breast cancer, the probability is 90 percent that she will have a positive mammogram.  If a woman does not have breast cancer, the probability is 7 percent that she will still have a positive mammogram.  Imagine a woman who has a positive mammogram.  What is the probability that she actually has breast cancer?

Gigerenzer describes the reaction of the first doctor he tested, a department chief at a university teaching hospital with more than 30 years of professional experience:

“[He] was visibly nervous while trying to figure out what he would tell the woman.  After mulling the numbers over, he finally estimated the woman’s probability of having breast cancer, given that she has a positive mammogram, to be 90 percent.  Nervously, he added, ‘Oh, what nonsense.  I can’t do this.  You should test my daughter; she is studying medicine.’  He knew that his estimate was wrong, but he did not know how to reason better.  Despite the fact that he had spent 10 minutes wringing his mind for an answer, he could not figure out how to draw a sound inference from the probabilities.”

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## The Marvels and the Flaws of Intuitive Thinking (Daniel Kahneman)

A very interesting presentation by Daniel Kahneman on the Marvels and the Flaws of Intuitive Thinking  can be found here.

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## Risk: The Neural Basis of Decision Making

“Lecture presented by Professor John O’Doherty for the Darwin College Lecture Series 2010.

A deeper understanding of how the brain makes decisions will not only inspire new theories of decision making, it will also contribute to the development of genuine artificial intelligence, and it will enable us to understand why some humans are better than others at making decisions, why humans with certain psychiatric and neurological disorders are less capable of doing so, and why under some circumstances humans systematically fail to make rational decisions. Most decisions made in everyday life are taken for the purposes of increasing our well-being, whether it is deciding what item to choose off a restaurant menu, or deliberating over what career path to follow. Prominent amongst these is the value or utility of each decision option, which indicates how advantageous a particular option is likely to be for our future well-being. Another relevant signal present in the brain is the riskiness attached to a particular decision option, which can influence the decision making mechanism according to ones own individual preferences (whether one is risk-seeking or risk-averse).”

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## Stare at the dot

This is a lovely and somewhat strange illusion. Stare at the red dot in the left-hand image for about 20 seconds, and then look at the centre of the right-hand image. All being well, lots of strange stuff will happen in your brain…..

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## An interesting philosophical problem

Andrew Gelman points to a blog by philosopher Edouard Machery who presents the following problem

How do we think about the intentional nature of actions? And how do people with an impaired mindreading capacity think about it?

Consider the following probes:

The Free-Cup Case

Joe was feeling quite dehydrated, so he stopped by the local smoothie shop to buy the largest sized drink available. Before ordering, the cashier told him that if he bought a Mega-Sized Smoothie he would get it in a special commemorative cup. Joe replied, ‘I don’t care about a commemorative cup, I just want the biggest smoothie you have.’ Sure enough, Joe received the Mega-Sized Smoothie in a commemorative cup. Did Joe intentionally obtain the commemorative cup?

The Extra-Dollar Case

Joe was feeling quite dehydrated, so he stopped by the local smoothie shop to buy the largest sized drink available. Before ordering, the cashier told him that the Mega-Sized Smoothies were now one dollar more than they used to be. Joe replied, ‘I don’t care if I have to pay one dollar more, I just want the biggest smoothie you have.’ Sure enough, Joe received the Mega-Sized Smoothie and paid one dollar more for it. Did Joe intentionally pay one dollar more?

You surely think that paying an extra dollar was intentional, while getting the commemorative cup was not. [Indeed, I do–AG.] So do most people (Machery, 2008).

But Tiziana Zalla and I [Machery] have found that if you had Asperger Syndrome, a mild form of autism, your judgments would be very different: You would judge that paying an extra-dollar was not intentional, just like getting the commemorative cup.

So how do you see those cases and why?

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update:

An interview by Joshua Knobe and  Edouard Machery on the topic of intentional action by Natasha Mitchell in her program All In Mind on the Australian radio ABC. (intentions really puzzle me!)

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## Probability Games (Do you suffer from probability illusions?)

I) I have just tossed a fair coin 7 times. Guess which of the four sequences below is genuine (order them according to their plausibility):

.

1) HHHHTTT

2)THHTHTT

3)HHHHHHH

4)TTTTTTH

.

.

II) A die has been painted in such way so that it has four green faces and two red. I have thrown the die repeatedly into a table and produced one of the four sequences. Which one is the genuine one (please order them according to their plausibility)?

1.RGRRR

2.GRGRRR

3.GRRRRR

.

.

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## A “Turing test” of human perception

Hasanhodzic, Lo and Viola constructed a “Turing Test” to assess the ability of human subjects to distinguish between actual and randomly generated returns of financial securities. The researchers found that there is significant statistical evidence that humans can consistently distinguish between actual and artificial series and that the belief that financial markets “look random” (i.e. random walks) is hence probably erroneous.

The human eye has indeed a significant advantage over most current computer algorithms on several classification and image recognition tasks and that could probably explain the findings (at least partly). However, would the results have been the same had the researchers used more sophisticated simulations (to mimic stylized facts of financial markets)?

p.s. A link to the test can be found here

## “High frequency traders do ‘risk’ better”

Some recent findings by Dobrislav P. Dobrev and Pawel J. Szerszen.

## Ames’ Window: A magnificent visual illusion

This perspective window by Adelbert Ames upsets size-shape scaling to produce remarkable effects.”

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