#SOTD 75: Is the world going nuts (or is it just probability)?

1. Make me Understand / 2. Make me Engaged / 5. General

#SOTD 75: Is the world going nuts (or is it just probability)?

Humans have an ability to overemphasise the impact of recent events – especially if they are adverse ones.

This year its the Russia Ukraine war and runaway inflation. The two years before that… well no one needs a reminder…

It seems like we are in a period of constant calamities, coming one after the other.

Or perhaps there is a different explanation.

Here’s Morgan Housel in his latest post:

Think about 100-year events. One-hundred-year floods, hurricanes, earthquakes, financial crises, frauds, pandemics, political meltdowns, economic recessions, and so on endlessly. Lots of terrible things can be called “100-year events”.

A 100-year event doesn’t mean it happens every 100 years. It means there’s about a 1% chance of it occurring on any given year. That seems low. But when there are hundreds of different independent 100-year events, what are the odds that one of them will occur in a given year?

Pretty good.

If next year there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something bad will happen next year – or any year – are … not bad.

Housel is a smart thinker and a lucid writer.

In this piece, he:

  • Introduces the premise, and immediately dives into a human story (of someone who won the lottery – twice!)
  • Offers several examples to distil his main point:

The world breaks about once every ten years, on average. For your country, state, town, or business, once every one to three years is probably more common.

Sometimes it feels like terrible luck, or that bad news has new momentum. More often it’s just raw math at work.

#SOTD 75

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