The purpose of this blog is to combat our innate human bias of misunderstanding key statistical concepts from having dire impacts on our lives. Fear not: I am not going to derive the Poisson Distribution.
The crux of my hypothesis is this, we are very good at understanding the implications of likely negative scenarios and how they impact us financially. For example, you know your home air conditioner has a reasonably high chance of breakdown. Fearing an expensive repair bill, you opt for the home warranty plan so you won’t get caught flat footed next summer.
Where we are less adept is understanding and planning for the implications of more seemingly remote negative scenarios. For example, you suffer a home accident falling off a ladder while working a DIY project and become disabled. This presents a problem because now you can no longer perform the duties at that great job and provide for your family. You do have disability insurance, right? Lower probability (hopefully) than your air conditioner breaking, order of magnitude(s) higher impact.
The goal of these posts is to explore low probability, high negative financial impact events, and outline a comprehensive strategy for how to mitigate the ill effects. This way you will be less likely to undergo all the tribulations if the universe chooses you as one of the ‘lucky few’.
The crux of my hypothesis is this, we are very good at understanding the implications of likely negative scenarios and how they impact us financially. For example, you know your home air conditioner has a reasonably high chance of breakdown. Fearing an expensive repair bill, you opt for the home warranty plan so you won’t get caught flat footed next summer.
Where we are less adept is understanding and planning for the implications of more seemingly remote negative scenarios. For example, you suffer a home accident falling off a ladder while working a DIY project and become disabled. This presents a problem because now you can no longer perform the duties at that great job and provide for your family. You do have disability insurance, right? Lower probability (hopefully) than your air conditioner breaking, order of magnitude(s) higher impact.
The goal of these posts is to explore low probability, high negative financial impact events, and outline a comprehensive strategy for how to mitigate the ill effects. This way you will be less likely to undergo all the tribulations if the universe chooses you as one of the ‘lucky few’.
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