Probabilistic Thinking

The next mental model I’m digging into is the idea of Probabilistic Thinking. This is the effort to try to determine the likelihood of any particular outcome ahead of time. With most things in life there are an infinite set of factors to consider, but you can focus on the big ones and get a fairly good idea of what the odds look like for any situation.

According to the Farnam Street blog, there are three good tools you can use to help estimate outcomes.

Bayesian thinking

Given that we have limited but useful information about the world, and are constantly encountering new information, we should probably take into account what we already know when we learn something new. As much of it as possible. Bayesian thinking allows us to use all relevant prior information in making decisions. Statisticians might call it a base rate, taking in outside information about past situations like the one you’re in.

Fat-tailed curves

A “fat-tailed curve” is similar to the normal bell curves that you’ve seen before, but it’s more flattened out, meaning a wider variety of possibilities exist. Farnam explains it like this:

In a bell curve type of situation, like displaying the distribution of height or weight in a human population, there are outliers on the spectrum of possibility, but the outliers…