The Book Review

File under Understanding the Problem

Last post I gave a quote from a favorite book of mine – The Drunkard’s Walk: How Randomness Rules Our Lives by Leonard Mlodinow.

Mlodinow, a professor of Randomness (that’s right…it’s actually a specialty) at Caltech, eloquently describes how random events pervade our lives and more importantly how we interpret random events as having statistical significance and thus importance.

He provides evidence that historic sporting achievements such as Roger Maris’ home run record, and Joe Dimaggio’s hit streak were entirely expected, and if they didn’t do it, someone else would have. He also shows that top Wall Street fund managers have no more expertise than Atlantic City craps players; that the game show “Let’s Make a Deal” is an intellectual puzzle; and that OJ Simpson’s defense attorney’s used statistical misdirection to achieve acquittal.

As I sit here and watch game 2 of the NBA Finals between the Dallas Mavericks and the Miami Heat (Go Mavs), I’m reminded of a paragraph from Mlodinow’s Wall Street Journal Column:

“In sports, the championship contenders are usually pretty evenly matched. But in baseball, even if one assumes that the better team has a lopsided 55/45 edge over the inferior one, the lesser team will win the seven-game World Series 40% of the time. That might seem counterintuitive, but you can look at it as follows. If you play a best-of-one game series, then, by our assumption, the lesser team will win 45% of the time. Playing a longer series will cut down that probability. The problem is that playing a seven-game series only cuts it down to 40%, which isn’t cutting it down by much. What if you demand that the lesser team win no more than 5% of the time—a constraint called statistical significance? The World Series would have to be the best of 269 games, and probably draw an audience the size of that for Olympic curling. Swap baseball for marketing, and you find a mistake often made by marketing departments: assuming that the results of small focus groups reflect a trend in the general population.”

In other words, the sample size has to be so large as to make any inference on significance relevant. How often do we tie importance or make decisions based on little to no information or understanding of a situation?

A lot, and we’ll talk about that next.

Song of the Day
I heard this song for the first time yesterday and I think I have a new favorite band. So sit back, throw on your over-the-ear headphones, and watch a sunset. In honor of the Mavs’ improbable come-from-behind win in game 2, the song of the day is Hudson Bell’s Slow Burn.