Probability is used to make decisions about future outcomes and to understand past outcomes. Explore the different types of probability in this video.
- Whenever uncertainty looms, probability is there. What are the chances of rain today? What's the probability I'll roll a four? What are the chances my plane will leave on time? Every one of these questions is begging for a probability, a percent chance of something happening. And when people are making decisions, they consider the probabilities. But what is a probability? I think we all know that the probability of flipping heads with say a US quarter is 50%. But how is it calculated? It's calculated by using this formula. We divide the desired outcome or outcomes by the total number of possible outcomes. So, if I want to flip heads, one outcome, heads and tails are possible outcomes, two outcomes, 0.50 or 50%. And if I wanted to know the chances of drawing a queen from a deck of cards, I divide four, the number of queens in the deck, one for each suit, by 52, the total number of cards in the deck. 0.077 or 7.7%. These are both examples of classical probability. We know all the possible outcomes. 52 cards, two sides of one coin. And every outcome is equally likely. I'm just as likely to flip heads as tails, and I'm just as likely to pull the two of hearts from a shuffled deck as I am to pull the nine of diamonds. Another form of probability is empirical probability. Empirical probability is based on experimental data or historical data. For example, a basketball player has taken 60 free throws so far this season. The basketball player made 48 free throws and missed 12. The empirical probability of this player making a free throw would be 80%. So, maybe in the next game, she's going to make four out of five free throws. Obviously this isn't an exact science so it should be treated as an estimate. Any fantasy sports players out there have used these types of statistics to make projections for upcoming games and for the rest of the season. And so you all know they are definitely not an exact science. Yet another form of probability is subjective probability. This probability is not based on statistics, but rather on personal belief. If a CEO says there's a 75% probability that the company will launch a new product by the end of the year, this would be subjective probability based on the CEO's knowledge of the company and CEO's work experience. It's not statistical, but it shows that the CEO is relatively confident in their statement. Understanding probability is essential to deciphering predictions. If the probability is based in concrete numbers, such as it is in card games, you can make pretty good guesses. If the probability is based around someone's experience or singular knowledge, well, take it with a grain of salt. In this chapter, we'll discover some of the basic terms, rules, and tools that can help you both calculate probabilities and to use them in your daily life.
Eddie explains that probability is used to make decisions about future outcomes and to understand past outcomes. He covers permutations, combinations, and percentiles, and goes into how to describe and calculate them. Eddie introduces multiple event probabilities and discusses when to add and subtract probabilities. He describes probability trees, Bayes’ Theorem, binomials, and so much more. You can learn to understand your data, prove theories, and save valuable resources—all by understanding the numbers.