By contrast, in fat-tailed distributions, the median is extremely small compared to the mean, meaning that the probability of infrequent events is enormous.
In this we see the genius of the entire book: Silver is able to appeal to those who are both mathematically and non-mathematically inclined, building a compelling story as to why both types of reader should be interested in the better quantification and understanding of the probability of the events that surround us every day.
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The probability of any one of the above-mentioned events (and many more that could be added to a list of potential triggers) may be small in a given year, but the combined probability of at least one or more of these events happening in the next three years is high.
And if we have more events, there's more probability of higher-magnitude events.
One might reasonably conclude from this sequence of events that the probability of an SEC civil case is slightly higher.
The question of how to prepare for low-probability, high-consequence events is one of the most difficult in government and business.
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Here is how to think of it mathematically: If the events are not associated, the probability of this coincidence comes from multiplying the individual probabilities.
And there are the so-called "black swans, " events of low probability and high impact.
It has also held that materiality of contingent or speculative events or information depends on balancing the probability that the event will occur and the expected magnitude of the event.
From an investor's perspective, the idea of planning for low-probability, high-consequence events is well treated in Nassim Nicholas Taleb's book The Black Swan: The Impact of the Highly Improbable.
The goal is to list events which investors believe are nearly impossible, but which have a higher probability of occurring than they think.
While lying in a functional magnetic resonance imaging (fMRI) scanner, 19 volunteers were presented with a series of negative life events, such as being robbed or developing cancer, and asked to estimate the probability that this event would happen to them in the future.
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